Housing Loan Planning Advices

HDB’s HLE Scheme and Prudent Planning

• l^sf 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,
• cash proceeds,
• and insurance required.

• Speak to your existing financier or to an experienced mortgage planner.
• Some features to look out for:

o       Fixed interest rate

o       Variable interest rate

o       Blended rates

o       Pegged rates

o       Interest servicing only

o       Linked account

o       Loan tenure

o       Lock in period

o       Claw back

o       Progressive payment scheme

o       Different payment scheme

o       Types of loans offered: housing loan, bridging loan, construction loan, OD and 5^th 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

·        Nationality

·        Debt Servicing Ratio (the ratio of affordable repayment based on gross financial commitments)

·        Bankruptcy

·        Credit History

·        Financial strength of joint borrowers (if any)

·        Liquidity