10 questions to ask yourself before getting a home loan

You’ve got your savings, you’ve selected a house, you’ve selected a bank to get the mortage from… so you think you’re ready to apply for a home loan? We suggest not. At least, not until you’ve answered these 10 questions that every new house owner must ask themselves:

Q 1. Do I have any pending debts?

Your home loan is a huge amount. Even if you choose a long tenure, you may end up paying a large amount as equated monthly instalment (EMI). More importantly, the amount of loan the bank offers you will depend on the Total Debt Servicing Ratio (TDSR), which is the percentage of your income that goes in repayment of existing loans, including credit card bills. The maximum TDSR you can have is 60% - so if your monthly repayments are more than 40% of your total income, you will not be able to get the home loan amount you desire. So ensure that you clear off as many debts as you can, before applying for a home loan. 

Q 2. How’s that credit score looking?

Having little or no existing debts also help you with your credit score. Credit score is a number released by the Credit Bureau of Singapore (CBS), indicating your risk level and creditworthiness. This is based on your current debt level, the number of defaults, late payments and bankruptcy filings you’ve made, among other things. If you have a good credit score, that is, at least above 1844 with a risk level of BB or AA, you have a better chance of being sanctioned the loan. Check your score at least a year before you plan to get the housing finance and understand where you need to improve. 

Q 3. Have I done proper research on loans?

Many people don’t check loan offers from various banks and explore all options before deciding on which loan plan to take up. This is a mistake purely because there is always a possibility that there might be a better interest rate or special offers or a more convenient bank suitable to your case. You need to read up more about the requirements for a house loan, documentation, loan terms, interest rates and other fees, etc. BankBazaar.sg is among the best research spots for home loans and other products provided by banks in Singapore. 

Q 4. Can I afford the house I’ve shortlisted?

If you’re currently debt-free and your credit score looks great, it’s easy for the bank to offer you a huge amount as home loan. But you have to be a little more thoughtful before deciding how big a loan you want to take. Consider this – never buy a house that costs more than 4 times your annual household income. So if you are the sole earner in the house and your annual income is S$80,000, then you should not take a loan of more than S$320,000. 

Q 5. Have I planned my finances well?

From down payment to emergency funds to savings, you need to ensure that you have enough money for a variety of things before taking a house loan. Your home loan is a long-term commitment, so if you are unable to plan your finances well, it will be difficult for you to cater to all your needs in the future. 
And once these important questions are asked and answered favourably, you may get to the nitty-gritties such as: 
  • What kind of loan should I take? Floating, fixed or variable-interest housing finance?
  • How long do I want to remain in debt? What tenure should I take the home loan for? 
  • Is this going to be my first and last home, or will I sell the place sometime? 
  • Does my loan have pre-payment charges? 
  • Have I saved enough for the down payment? 
If you are able to answer these questions well and without fumbling, you are ready to apply for a home loan. Get, set, go!

Comments

Post a Comment

Popular posts from this blog

Best petrol credit cards in Singapore

Image
Benefits of Using Petrol Credit Card for Reward and Cashback in Singapore When it comes to expenditures for Singaporeans, fuel is one of the biggest expenditure. Living in a small island like ours, it’s surprising how much we spend on fuel. The rising petrol prices does not help our cause. The best way to cut down on fuel costs is through fuel cards or petrol cards in this case. There are more than 50 petrol cards in Singapore, each very different from the other. In this article, we will discuss the top petrol cards in Singapore that will cater to the different fuel card requirements of Singaporeans. OCBC 365 credit card OCBC 365 credit card is one of the best credit cards out there that will not only help you save up on petrol but will also help you save up in different categories. The card not only lets you save up to 22.2% on petrol but will also help you save up to 6% on dining and 3% on online shopping. What more can you want when you have a credit card like this?
Read more

Understanding APR in Credit Card Singapore

Image
There are several things that you need pay attention to when you are getting a credit card in Singapore such as the rate of interest, the annual fee of the card, charges that would decide how expensive or inexpensive our credit card is going to be. But there is one major charge that most of us ignore when studying a credit card and that is APR. APR or Annual Percentage Rate is the rate of interest one has to pay for borrowing on their credit card. Different types of APR There are different types of APR that we don’t know about. Let’s learn more about the different types of APR: Purchase APR: Purchase APR is applicable on all the purchases made on the credit card. This is very different from the rate of interest charged. Balance Transfer APR: Balance Transfer APR is charges applied when one transfers a balance to their new credit card. Cash advance APR: Cash Advance APR is the interest rate charged whenever the cardholder makes a withdrawal with the card. APR grace
Read more

How to Apply for a UOB Car Loan in Singapore

Image
If you are looking to finance your dream car through a car loan, UOB’s car loan options might just as well be the ideal choice for you. With attractive interest rates and extended loan tenors, you can repay your car loan with convenience and ease. Let us look at some salient features of the UOB Card Loan and the options available to you if you wish to apply for your car loan with UOB . Key features of the UOB Car Loan UOB finances 70% of the price of the car (as determined by the bank –the bank considers prevailing market value). So if you are ready to purchase your dream ride, make sure you make a down payment of not less than 30% of the car’s prevailing market price. UOB is particularly known to process and subsequently approve the application in quick time. Approval of the application is subject to satisfying required eligibility criteria.  The bank offers accommodating interest rates on car loans. If you already have an existing loan with UOB, you are certain to get a
Read more