How to Choose a Housing Loan Wisely?

[Dennis Ng]

Hi Candy_chia,

what I posted still applies. Not sure why your list only 5 categories of people who need to apply for Bank Housing Loan.

Cheers!

Dennis Ng

Hi Dennis, do correct me if I am wrong.

Update of the latest requirement for those need to apply for BANK Housing LOAN:

1. people buying private property
2. PRs (Permanent Residents) buying resale HDB flats
3. Singaporeans with monthly household income exceeding S$8,000
4. Singaporeans who had two bites of the "cherry" (who had enjoyed 2 HDB concessionary rate loans.
5. anyone buying commercial properties, including HDB shophouses

I belong to 6th group, enjoy 1 hdb concessionary rate loan (as I took a CPF housing grant) but elect to take bank loan.

Decision to take bank loan is not because of low interest rate from bank(0.88% for 1st year, 2% for 2nd year) but I don't want to utilise 50% of sale proceed from flat disposed to finance for next flat purchased.

However, there are many other people who need to apply a Bank Housing Loan instead, these include:

1. people buying private property
2. PRs (Permanent Residents) buying resale HDB flats
3. Singaporeans with monthly household income exceeding S$8,000
4. Singaporeans who downgrade (sell bigger house, and buy a smaller HDB Flat).
5. Singaporeans who move "laterally" eg. sell 4 room flat, and buy another 4 room flat.
6. Singaporeans who had two bites of the "cherry" (who had enjoyed 2 HDB concessionary rate loans.
7. anyone buying commercial properties, including HDB shophouses.

For all the above people, they have to get a Bank Housing Loan.

[candy_chia]

Hi Dennis,

Your earlier categories 4 & 5 don't apply anymore as ALL Singaporeans are entitled to 2 HDB concessionary rate loan effective 5 March 2010, whether they downgrade or move laterally (move to same flat type).

The only difference is that to qualify for 2nd HDB concessionary rate loan, up to 50% cash proceeds from the sale of the immediate past HDB flat will be used to finance the purchase of the next flat.

That is the reason why I elect to take bank loan despite I qualify for 2nd HDB concessionary rate loan.

Hi Candy_chia,

what I posted still applies. Not sure why your list only 5 categories of people who need to apply for Bank Housing Loan.

Cheers!

Dennis Ng

Hi Dennis, do correct me if I am wrong.

Update of the latest requirement for those need to apply for BANK Housing LOAN:

1. people buying private property
2. PRs (Permanent Residents) buying resale HDB flats
3. Singaporeans with monthly household income exceeding S$8,000
4. Singaporeans who had two bites of the "cherry" (who had enjoyed 2 HDB concessionary rate loans.
5. anyone buying commercial properties, including HDB shophouses

I belong to 6th group, enjoy 1 hdb concessionary rate loan (as I took a CPF housing grant) but elect to take bank loan.

Decision to take bank loan is not because of low interest rate from bank(0.88% for 1st year, 2% for 2nd year) but I don't want to utilise 50% of sale proceed from flat disposed to finance for next flat purchased.

However, there are many other people who need to apply a Bank Housing Loan instead, these include:

1. people buying private property
2. PRs (Permanent Residents) buying resale HDB flats
3. Singaporeans with monthly household income exceeding S$8,000
4. Singaporeans who downgrade (sell bigger house, and buy a smaller HDB Flat).
5. Singaporeans who move "laterally" eg. sell 4 room flat, and buy another 4 room flat.
6. Singaporeans who had two bites of the "cherry" (who had enjoyed 2 HDB concessionary rate loans.
7. anyone buying commercial properties, including HDB shophouses.

For all the above people, they have to get a Bank Housing Loan.

[Dennis Ng]

Hi Dennis,

Your earlier categories 4 & 5 don't apply anymore as ALL Singaporeans are entitled to 2 HDB concessionary rate loan effective 5 March 2010, whether they downgrade or move laterally (move to same flat type).

The only difference is that to qualify for 2nd HDB concessionary rate loan, up to 50% cash proceeds from the sale of the immediate past HDB flat will be used to finance the purchase of the next flat.

That is the reason why I elect to take bank loan despite I qualify for 2nd HDB concessionary rate loan.

Hi candy_chia,
yes, it is obvious that it does NOT make sense to take HDB Housing Loan for 2nd time becos need to use 50% cash proceeds of sale of flat to finance purchase or next flat.

I would make the same decision as you if I were you.

[candy_chia]

Hi Dennis, unless no or low profit generated from sale of flat, will I even consider taking 2nd HDB concessionary loan.

Likely to apply for 2nd HDB concessionary loan 4.5 years when I meet the minimum occupation period to sell current 5-room flat as don't think possible to sell at higher price than $750k!

[Ching Kwang Weh]

Hi Dennis,


Does that means that only if I apply for a 2nd HDB concessionary rate, then I need to use 50% of cash proceeds from sales of immediate past HDB flat to finance the purchase of the next flat. If I use a bank loan, then I need not to use 50% of cash from previous buy to finance the purchase.

[Dennis Ng]

Hi Dennis,


Does that means that only if I apply for a 2nd HDB concessionary rate, then I need to use 50% of cash proceeds from sales of immediate past HDB flat to finance the purchase of the next flat. If I use a bank loan, then I need not to use 50% of cash from previous buy to finance the purchase.

that is correct.

[Ching Kwang Weh]

Thanks much

[Dennis Ng]

Business Times Property Supplement Year 2012
Published February 23, 2012

Get smart on property financing
By DENNIS NG
JUST mention 'property financing' and some people start to get a headache, especially those who do not like to look at or crunch numbers. Fret not, we share with you some tips in this article that will help you get savvy on property financing, including the latest rules and finer details.


Property cooling measures - how do they affect your housing loan?
If you have an existing housing loan, for the next property you purchase, you can get a maximum of only 60 per cent financing, which means you will need to come up with at least 40 per cent of the purchase price yourself including at least 10 per cent cash.

If you have an existing property which uses Central Provident Fund (CPF) savings, when you purchase a second property and wish to use your CPF, you need to set aside the CPF Minimum Sum Cash Component, which currently stands at $65,500. This CPF Minimum Sum Cash Component is made up of balances in your CPF Ordinary Account and CPF Special Account.

Here's an example.
If you have $50,000 in your CPF Ordinary Account and $30,000 in your CPF Special Account totalling $80,000, how much CPF savings can you use to purchase your second property? You need to deduct the CPF Minimum Sum Cash Component (currently at $65,500 and revised upwards annually on July 1 of each year). In this example, the maximum CPF savings you can use for the purchase of your second property is $14,500, not the full $50,000 balance in your CPF Ordinary Account.

However, if you have an existing property which is fully paid up, you can still get the maximum 80 per cent financing on your next property purchase. This is regardless of how many properties you currently own, as the maximum 60 per cent financing applies only to people with at least one existing property loan. Thus, some clients with a very low housing loan outstanding on their existing home will choose to pay off the existing loan in order to qualify for the 80 per cent financing for their next property purchase.

If you are looking at property as an investment and are in no hurry to invest, do not rush to pay off your existing property loan because there is a possibility that this maximum 60 per cent financing rule might be abolished when the property market turns sluggish. If history serves as any guide, in May 1996, a slew of property cooling measures were announced, but these were removed when the property market corrected significantly a few years later.

Taking housing loans on home purchase vs property investment: any difference?

If you ask most people, they will probably tell you that they want to borrow as little money as possible for property purchase, and if they can afford it, they will pay off their housing loan as soon as possible. Is there a difference in taking housing loan on home purchase vs property investment?

For a home purchase, I would suggest taking the maximum financing approved by the bank, which is currently 80 per cent for the first property purchase, even if you can afford to borrow less. Why? Because to me, I see a housing loan instalment as a form of 'rental replacement', because if you decide not to buy a property for own use, you would have to pay rent. So taking a lower loan, in a way, is similar to paying rent in advance, which does not make sense.

Furthermore, a housing loan is the cheapest loan you can ever get; currently the interest rates are about 1.2 per cent - less than half of the 2.5 per cent that CPF pays you.

So for a home purchase, it is okay to take the maximum 80 per cent financing and as for the loan period, this should tie in with your intended retirement age. If you intend to retire at age 60, then the loan should be fully paid off by age 60 and not 70, for example.

You should also only buy a home that you can comfortably afford by making sure that your housing loan instalment does not exceed 35 per cent of your gross income. For a home purchase, you can consider using two thirds of your CPF Ordinary Account contribution and top up in cash payment any excess amount. Why not use up all of your CPF Ordinary Account contribution? The reason is we must remember that the primary objective of our CPF is to build a retirement nest egg and thus, we should try not to use up all of our CPF Ordinary Account savings for property financing.

For property investment, even prior to the current loan-to-value limits taking effect and when you could take 80 per cent financing, for prudence's sake, you might want to limit maximum financing to 70 per cent of the property price.

By doing so, even if property prices fall, you minimise the risk that the bank would ask you to top up money. For instance, if you take 80 per cent financing and if property prices fall by 30 per cent, the bank might ask you to top up 10 per cent. However, if you take 70 per cent loan, this is unlikely to happen.
Should you apply for a loan for a property that will receive Temporary Occupation Permit (TOP) three years from now?

If you buy a property under construction, you can choose to apply for a housing loan later rather than at the point of purchase. However, you should consider applying for a loan now because firstly, property prices can move up or down and banks would only grant financing based on latest valuation figures. In the event that property prices fall when the property is completed and the valuation falls, you might fail to get the quantum of financing you need. Furthermore, there might also be changes to your income and financial situation, which might affect loan approval. Thus, it is advisable for you to apply for a housing loan at the point of property purchase rather than to wait.

Would interest rates remain low for housing loans?
Singapore Interbank Offered Rate (Sibor) is the average market interest rate banks pay when they borrow from or lend to one another in the interbank market. The three-month Sibor is used by banks as a gauge of interest rate trends. Thus, If you want to know the trend of interest rates on housing loans, you should keep a close watch on the movement of the three-month Sibor.

Currently, the three-month Sibor is at about 0.39 per cent and may remain low for the next six to 12 months if US interest rates stay low. However, interest rates do not stay at low levels forever. Thus, if you are worried about the possibility of interest rates moving up in 2013 and beyond, you might want to choose a housing loan package with fixed interest rates for the next three years, or a Sibor-pegged package that has a 'cap' on interest rates for the next few years.

If you plan to sell your property within the next two to three years, then you might want to consider home loan packages with a shorter penalty period or with zero penalty period instead. There are frequent changes to packages offered by banks and at any one time, there might be over 113 different packages offered by 16 major financial institutions in Singapore. Thus, you may wish to consider engaging the services of an independent mortgage broker who can provide you with unbiased analysis and comparison of all home loan packages from all banks. Typically, the service is provided to you free as banks would pay them a fee separately.

The writer is an accountant by training and has 19 years of bank lending experience.
He founded http://www.HousingLoanSG.com, a mortgage consultancy in Singapore, in 2003 and also set up http://www.MasterYourFinance.com, a financial education portal, in 2009

[Dennis Ng]

Hi all,

actually, this is already a well-known fact. In year 2007, while Goldman Sachs was actively re-packing sub-prime mortgages to be sold as AAA rated Mortgage-backed securities (something similar is Lehman Brothers min-bond), Goldman Sachs was also busy in the market 'shorting" mortgage-backed securities!

Imagine on one hand they sell you something, and tell you this is good and you should buy, yet behind your back, they are selling SHORT the very thing they ask you to buy!

For me, I always tell my staff that our business Philosophy is to take care of clients, to put clients' Interest First, even before company's interest. I let them know the truth that I'm NOT paying them their salary and feeding their families, it's our clients. Without our clients, the company will have no revenue and have to close business and all of them will lose their jobs. So I remind them to always remember this fact and this is also why we must put clients' interests first.

And this is probably why for the last 12 years since I started out on my own, my business just grew and grew, even during recessions, my business grew as satisfied clients refer their families, friends and colleagues to us, knowing that we will take care of their interest.

So it's so sad to read that a Big institution such as Goldman Sachs is acting against clients' interests.

Cheers!

Dennis Ng


Op-Ed Contributor
Why I Am Leaving Goldman Sachs
By GREG SMITH
Published: March 14, 2012


TODAY is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.
Enlarge This Image
Victor Kerlow

To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.

It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust for 143 years. It wasn’t just about making money; this alone will not sustain a firm for so long. It had something to do with pride and belief in the organization. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief.

But this was not always the case. For more than a decade I recruited and mentored candidates through our grueling interview process. I was selected as one of 10 people (out of a firm of more than 30,000) to appear on our recruiting video, which is played on every college campus we visit around the world. In 2006 I managed the summer intern program in sales and trading in New York for the 80 college students who made the cut, out of the thousands who applied.

I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work.

When the history books are written about Goldman Sachs, they may reflect that the current chief executive officer, Lloyd C. Blankfein, and the president, Gary D. Cohn, lost hold of the firm’s culture on their watch. I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival.

Over the course of my career I have had the privilege of advising two of the largest hedge funds on the planet, five of the largest asset managers in the United States, and three of the most prominent sovereign wealth funds in the Middle East and Asia. My clients have a total asset base of more than a trillion dollars. I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly unpopular at Goldman Sachs. Another sign that it was time to leave.

How did we get here? The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence.

What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.

[Dennis Ng]

As usual, I gave them so much more information yet they only published a fraction of what I provided.

The lady (home loan customer) in Channel News Asia yesterday is our customer and seminar graduate Serene Loong, ironically, her time on TV is much more than me...and they only telecast 1 sentence of the many things I said...my worry is that what I want to warn the public was not given chance to be aired...and home buyers might take up 50 years loan without much thinking of the possible consequences.

http://www.todayonline.com/Business/EDC ... term-loans

a longer report on Channelnewsasia.com
http://www.channelnewsasia.com/stories/ ... 58/1/.html

S'pore homebuyers likely to opt for shorter term mortgage
By Millet Enriquez | Posted: 23 July 2012 2343 hrs

SINGAPORE: Homebuyers in Singapore will likely opt for mortgage loans with shorter repayment periods.

That's despite the availability of new home loans that offer up to 50-year tenors.

Experts said more are taking into account their retirement age and interest costs when servicing their loans.

Serene Loong and her husband took a S$760,000 home loan when they upgraded to a two-storey, three-room private apartment at Upper Serangoon in 2005.

With a 35-year home loan they got from DBS Bank, the couple was paying S$2,000 in monthly repayments.

That loan has since been refinanced to 28 years with another bank, and monthly payments have come down to S$1,800 at a lower interest rate of 1.88 per cent.

"I definitely was taking into account the affordability, as well as when I would retire," said Loong, who is the founder of website www.reallifetheory.com.

She added: "I wouldn't want to be servicing a home loan after retirement because I think there will be other expenses that I might have to take care of like medical expenses, etc."

So far, Singapore banks are offering home loans with a maximum term of 35 to 40 years with age capped at 70 to 75.

UOB has come up with a first by offering home loans that stretches repayment to 50 years and a maximum age of 80.

UOB said that for the maximum tenor of 50 years, the requirement is to have at least 35 years remaining on the lease for leasehold property and no more than 80 years of age at end of loan tenor.

Still, some market players said such loans may be more suited for investors.

Dennis Ng, who is the founder of mortgage consulting firm HousingLoansSG.com, said: "A longer loan repayment period may make sense for investors because the investor is always looking for return on investment. So the less capital they put into the property, the higher their return."

For ordinary home buyers, experts said they should tailor their loan repayment period to the age they want to retire.

DBS Bank's head of deposits and secured lending, Ms Lui Su Kian, said: "The average loan period we are seeing now for customers is about 30 years. In general, I think, especially in Asia, we do see that our customers are prudent when it comes to managing their mortgage, so most of them do not stretch out to the maximum period."

While a 50-year tenor may reduce monthly repayments, experts said interest could push the loan's amount by up by 15 to 20 per cent.

For example, a S$1 million loan at 50 year tenor will total to S$1.45 million by the end of its term - much higher compared to the S$1.3 million principal and interest if the loan was taken up at a 35-year tenor, according to DBS.

And comments from Channel NewsAsia's Facebook page show most buyers are averse to half a decade loans, with some saying 25 to 30 years is their threshold.

HousingLoansSG.com, which sees 20 to 30 enquiries a day, said around 70 per cent of its clients opt for 25 to 30-year loans, while 15 per cent go for the 30 to 35 year loans. The rest prefer terms of less than 25 years.

"If you have problems paying the installment right now when you are much younger and your income is much higher, I think you will have a bigger problem as you age," said Mr Ng.

Ms Lui said: "In this current interest rate environment, where interest rate is relatively low, we actually encourage our customers to try to shorten the loan period based on their affordability. Because rates are low, you can actually pay down as much as you can."

Ms Phang Lah Hwa, Head of Consumer Secured Lending at OCBC Bank said customers generally take up to the maximum loan tenor as they can repay or make capital repayment along the loan tenor.

"Shorter loan tenors are typically taken up due to the age of borrowers or by those who have the funds to service a higher monthly commitment," she added.

Mr Harmander Mahal, Head of Customer Value Management at HSBC Singapore, said: "We observe that customers who take up housing loans with longer tenor (30 to 35 years) tend to be younger in the age group of 35 years old and below.

"They are usually financing the purchase of their first homes and therefore, prefer to stretch their repayments over a longer period so that they can pay lower and more affordable monthly instalments."

HSBC said its housing loan portfolio has seen double-digit growth over the last five years with an increase in market share.

In its 2011 annual results, residential mortgages have increased 21 per cent in value year-on-year for 2011 compared to 2010.

- CNA/fa

[candy_chia]

Why Mortgage Brokers Get You The Cheapest Loans
By Ryan Ong | MoneySmart – Wed, Jul 18, 2012

’m a little tired of people who listen to bankers or property agents, then complain to me about how bad their loan situation is. That’s like getting life advice from a convicted felon, then acting all surprised when you’re eating baked beans in the Changi Prison canteen. I’ll say it again: Property agents and bankers do not have your best interests at heart. Most lack the compassion to nurture bacteria, let alone your well being. In this article, I look at why it’s mortgage brokers who get you the best deal:

Why did you go to that bank? I mean, you didn’t check “moron” for your background.

Why Do Bankers Give You Bad Deals?

Let’s start with the obvious.

(1) Bankers get a commission when they sell you a home loan.

(2) A percentage of your loan value goes toward their bonus; because apparently, being paid $4000 – $5000 to sit on their asses and answer phones all day isn’t enough.

So let’s say I work for the International Bank of Rip-Offs. My bank’s home loan interest rates are astronomical; maybe the worst in the country. But if you come to me and ask for a home loan, would I turn you down? Am I going to say “I must be honest. DBS or HSBC has a better rate”?
Yeah, when cows crap gold I will.

(3) Every banker will tell you she’s offering the best rates.

Even if she’s not interested in her commission (in which case she’s the Mother Theresa of finance or something). Her boss would chew her out. Employees, as a general rule, are discouraged from telling customers that “Our company’s financial product is crap, go somewhere else”.

(4) Now, of the 12 local banks offering loans, just one or two will have the cheapest rates.

And every month or so, the situation changes.

So this month DBS may be the cheapest, next month it could be Bank of China. But the banker is not going to explain this to you.

Okay, How Does My Property Agent Come In?

Banks pay a referral fee to property agents. When your property agent refers you to a banker, and you agree to go through that banker, your agent gets paid.

As such, property agents and bankers work hand-in-hand. Your agent has a vested interest in having you use “his” banker, because it means extra money for him.

If you find your own home loan, or go through a mortgage broker, your property agent won’t get the referral fee.

Since loan repayments don’t affect the price of your house, your agent has little interest in finding you the best deal. He just wants to get his referral fee asap; that involves pointing at the first banker in his phone book.

In short, your property agent may not care that you get the cheapest loan.

It takes time and effort to compare loan rates, and the agent has little reason to bother.

Whether he gets you a cheap or expensive loan, he still gets the same referral fee and commission.
And maybe you can empathize with your agent. There can be over 100 home loan packages on the market at any one time. To make sense of it all, you need to…

Get A Mortgage Broker

A Mortgage Broker’s sole job is to compare home loan packages. He just stares at the changing rates all day, until alcohol or boredom drives him to an early death. Even then it could be weeks before his colleagues notice.

If you go to a loan comparison site, these brokers are the people who’ll call you. And they’ll find you the better deal because:
~~ Information is their sole product
~~~ They have a wider view of the market
~~~~ They are not biased toward any bank

[candy_chia]

I had benefited tremendously from the independent mortgage advices via HousingLoanSG.com when acquiring bank loan for my 2nd & 3rd HDB flat (1st flat was utilising HDB loan).

HousingLoanSG.com really saves me the hassle of contacting numerous banks to compare what is the best rate in town & the ambiguous bank referral from the property agents who have vested interest.

However, not sure whether all graduates are aware of this "FREE" mortgage advices dispensed by HousingLoanSG.com (independent Mortgage consulting firm by our late sifu, Dennis Ng)

Suggest that the logo of HousingLoanSG.com (or contact detail) be displayed in the MasterYourFinance forum, since this forum is after all a brainchild of our late sifu & it’s a way of inculcating financial literacy.

I believe we should share the favourable deeds, rather than wrong values (or sensational gossip) spread by media.

28.道人善，即是善

说别人的善行，就是善行。 SPEAKING of Others’ GOOD DEEDS is in itself a good deed.

http://www.masteryourfinance.com/forum/ ... 6&start=45

Business Times has a Property Special Supplement once a year. This years' Property Special Supplement is published on 27 Sep 2007 (Thursday). I've been invited by Business Times to write an article to share with readers on the things to look out for to ensure you choose a Housing Loan wisely.

Cheers!

Dennis Ng, http://www.HousingLoanSG.com

How to choose a housing loan?
DENNIS NG lists some criteria to look out for to ensure your package makes the most financial sense for you

Most consumers want to know which housing loan is the best in town. Unfortunately, that is the wrong question to ask.

There are more than 100 housing loan packages in the market and what is best for one person might not necessarily be the best for you. Each package has different features that are suitable for different needs.


Why better to apply loan through a Competent Mortgage Broker?
In the past, when consumers shopped for home loans, they had to contact each bank individually to gather information. This a tedious process that takes up a lot of time. In the last few years, with the emergence of independent mortgage brokers in Singapore, home loan shopping and comparison have been made easier.

Basically, an independent mortgage broker who knows your requirements can help you zoom in on the most attractive home loan packages.

You typically do not have to pay for the service of a mortgage broker as banks pay them a fee as they also help banks save on staff costs and resources.

In more advanced countries such as the US and Australia, people usually apply for home loans through a mortgage broker rather than go to the bank directly.

In Singapore, many people are still unaware of the services and benefits of engaging a mortgage broker, but things are likely to change with public education and increasing awareness.

The writer is a spokesman for Independent Mortgage Consultancy Portal http://www.HousingLoanSG.com