My comments:supernova wrote:Dennis,
3. Preliminary findings seem to suggest that loans to a Company for residential property purchase is about 1% higher than loans to a individual.
Now, my first wave of questions (pls bear with me, I am an inquisitive person) :
Q1 : Is it true that rates are about 1% higher ? Fact or fallacy, half truths ?
Q2 : If yes to Q1, why then ? I thought from a Risk perspective, a Company will have a better debt servicing ability than an individual.
Q3 : If yes to Q1, is there anything creative workaround to bring down the interest rate ? For example, would the following help :
- have myself (individual) as guarantor of the loan
- Q3 is my key question, really is there any "tricks" to bring down the interest rate. I am keen to hear out-of-the-box solutions.
Q4 : Typically, how much will the bank lend ? (in terms of % of property value, and in terms of loan amount vs net worth of company). In one of your earlier article, you mention that the ratio of loan amount to net worth of company is less than 1 (of course that article talks about generic commercial loan).
I look forward to your valuable input and feedback. Happy New Year !
thanks for your compliments. As mentioned in our Mission and Core Values, "helping to raise Financial Literacy in Singapore" is one of our core values and that's why we have this FREE Discussion Forum and I contribute actively writing articles, conducting talks etc.
1. It all depends on the financial institution. Some banks do charge higher interest rate for companies buying properties compared to individuals. While some other banks might not.
2. A Private Limited company has LIMITED liability. Companies buy properties for investment purposes. From past experiences by banks, if an individual if buying properties for OWNER OCCUPATION, typically the "default rate" is MUCH lower than when people/companies buy properties for investment purposes.
3. Typically banks would require ALL directors of company to provide Personal Guarantee (due to the fact that Private Limited companies have limited liability). Thus, if you're a director of the company, typically you have to provide Personal Guarantee anyway.
Banks treat COMPANIES on a case by case basis. I used to work in Corporate Banking department of banks, thus I know what Banks "look for" and thus might be able to help you INCREASE your chance of getting a BETTER deal than if you approach bank yourself.
4. For property financing, if a company is the owner, most banks would limit percentage of financing to up to maximum of 80%. However, there are banks willing to consider up to 90% financing (on a case to case basis).
We hope the above helps. Please feel free to call us at 6737 8801 or email us at info@HousingLoanSG.com for any further discussion or clarification.