Housing Loan Planning Advices
HDB’s HLE Scheme and Prudent Planning
- lst Jan 2007 - HDB implemented the Housing Loan Eligibility scheme (HIE) for both direct and secondary market purchases.
- All home buyers must ensure that they have the financial ability to make the purchase.
- Private property buyers should seek comprehensive housing loan planning assistance prior to any purchase.
- Buyers should not make hasty decision to purchase in the hope of making a quick investment return.
- It is not only the initial 5% cash deposit that the buyer should be concern with.
- Financial institutions today have very thorough and stringent credit approval processes.
- Familiarize yourselves with CPF's latest guidelines and policies pertaining to property purchases.
A Prudent Mortgage Plan
- Before you start your house hunt, a proper budget must be set and a detailed mortgage calculation done.
- Do not clean out your cash and CPF reserves at the initial stage.
- You must know the stability of your job and future income.
- Sufficient insurance coverage to protect your investment.
- CPF Minimum Sum Scheme
- Familiarize yourself with the latest housing loan packages.
- Good to know:
-monthly cash and CPF repayments
-principal vs interest payments,
-breakeven point to turn over a profit,
-rental returns vs interest payments,
-investment return and yield,
-cash and CPF breakdown,
-and insurance required.
- Speak to your existing financier or to an experienced mortgage planner.
- Some features to look out for:
-Fixed interest rate
-Variable interest rate
-Interest servicing only
-Lock in period
-Progressive payment scheme
-Different payment scheme
-Types of loans offered: housing loan, bridging loan, construction loan, OD and 5th charge term loan
Factors That Financial Institutions Take Into Consideration When Approving A Loan
- Monthly income
- Monthly CPF contributions
- Existing funds in the CPF Ordinary Account
- Other existing financial commitments
- Employment profile
- Age of borrower
- Debt Servicing Ratio (the ratio of affordable repayment based on gross financial commitments)
- Credit History
- Financial strength of joint borrowers (if any)