Author: fg_admin

Looking to buy a property with your spouse, a family member or a friend? Before committing yourself and putting money into the house, you’ve got to think carefully with your fellow co-buyers and decide wisely on the Manner of Holding. Manner of Holding refers to how your ownership of a property is registered on title. There are two key ownership options: 1) joint tenancy and 2) tenancy-in-common. 

Choosing either one is a crucial decision with potential consequences, so you and your co-buyers need to understand each type of ownership fully. In this comprehensive article, we share the details of Manner of Holding and which ownership type suits you best. 

Two types of holding: Joint tenancy and tenancy-in-common

1. Joint Tenancy

Under a joint tenancy, all the owners have an equal interest and rights in the property. No single owner can call the shots concerning any issues on the subject of the property (including the sale of it). This is regardless of who is making a more substantial financial contribution.

There’s also a right of survivorship. Upon the demise of any owner, regardless of whether they have a will, their share of the property would automatically be transferred to the other co-owners. 

For example, Person A, Person B and Person C own a property under joint tenancy. In the unfortunate event of Person A’s demise, their share of the property will automatically be given to Persons B and C.

2. Tenancy-in-Common

Under tenancy-in-common, each owner has a clear-cut share of the property. 

They have full autonomy over their cut of the property. This means that they’re solely responsible for any decision-making surrounding their ‘percentage’ of the house. 

Should they decide to put their portion of the house up for sale, they do not need to go through the other owners.

For tenancy-in-common, there’s no right of survivorship. Upon the demise of any owner, their share of the property would automatically be assigned according to their will. Otherwise, it would be transferred to the beneficiaries following the Intestate Succession Act. 

For example, Person A (50%), Person B (30%) and Person C (20%) own a property that is under tenancy-in-common. In the unfortunate event of Person A’s demise, their share of 50% will automatically be assigned according to their will, or the Intestate Succession Act’s provisions.

Which ownership option should you choose?

Both ownership options have their own pros and cons. Given that a joint tenancy is the default option, married couples opt for it without much consideration. 

However, some couples may find themselves stuck at a crossroads when they want to buy a second property later on. They may wish to decouple to save on the Additional Buyer’s Stamp Duty (ABSD). Having said that, under a joint tenancy, decoupling can only take place after a divorce. 

Conversely, all one has to do under the tenancy-in-common is to sell their portion to the other owners and the decoupling is completed.

It’s also important to note that certain requirements are necessary for a change of Manner of Holding. If you want to change the ownership from joint tenants to tenants-in-common, the property owners need to have a 50-50 share under the new ownership. 

On the other hand, switching from tenancy-in-common to a joint tenancy is viable only if the property owners currently have an equal stake in it.

Find out how you can own a second property without paying ABSD here.

Does the Manner of Holding affect your home loan approval?

No, it does not. Only TDSR and MSR are essential in determining your home loan eligibility.

Total Debt Servicing Ratio (TDSR) restricts the amount you can borrow to finance your property loan to 60% of your gross monthly income. Your financial commitments will also be taken into account. These commitments include personal loans, car loans, study loans, equity loans and credit card bills.

Mortgage Servicing Ratio (MSR) limits the amount you can spend on your mortgage repayments to 30% of your gross monthly income. MSR is only applicable to HDB flats and Executive Condominiums (ECs), directly purchased from the developer.

Learn more about the differences between TDSR and MSR here.

Looking for a home loan and unsure if you should take up an HDB loan or bank loan? Check out this article. 

If you’d like to be furnished with more information, feel free to contact us for a chat. Here at FinanceGuru, we seek to help you better prepare for your finances and the upcoming milestones in your life. Get a non-obligatory assessment and loan product recommendations here. 

Purchased your dream home and just received your home loan Letter of Offer (LO)? Do copious amounts of jargon in the LO confound you? Many times, different banks use different terms, but they mean the same thing. 

Explore our comprehensive glossary that will help you break down the various jargons in the Letter of Offer.

1. Letter of Offer

A Letter of Offer (LO) is a contract that states the terms of the loan package offered by the bank/financial institution after approval of the loan application. 

It includes the loan amount, the loan tenure, the interest rate, the repayment mode, etc.

2. Availability Period

The loan has to be disbursed within a specific period (I.e: 6 months from the Letter of Offer). 

The availability period is a set period which you may draw down the loan, be it for refinancing or new purchase of a property. Otherwise, a cancellation fee will be chargeable.

3. Partial Capital Repayment

Partial capital repayment refers to making the principal repayment before the maturity of the loan. 

While making partial repayments to your capital can shorten your repayment period, you’ll need to give your bank a heads up, and clarify any fees attached to the loan.

Here’s a table sharing the different stages, notice period and applicable fees for a partial capital repayment arrangement. 

4. Full Redemption

A full redemption means making the repayments before the loan’s maturity date. Similar to the partial capital repayment, you’ll have to notify your bank of the full redemption or risk paying a fee.

Here’s a table sharing the different stages, notice period and applicable fees for a full redemption arrangement. 

5. Cancellation Fees

If you have signed and agreed to take out the loan, but decided to cancel the loan right before loan disbursement, you’ll be charged a cancellation fee. 

Banks usually charge a cancellation fee ranging from 0.75% to 1.5% of the loan amount cancelled. You may also be charged a processing fee. 

6. CPF Usage

CPF Board has to approve the amount of CPF that can be used to fund the property purchase. This amount has to fall within the CPF Housing Withdrawal Limit. If a mortgage loan is taken up, a copy of the LO must be submitted to the CPF Board.

7. Contract Details

Contract details include the terms of the loan package such as the loan amount, the loan tenure, lock-in period, legal subsidy, cash rebate, clawback period.

8. Deed of Rental Assignment

The deed of rental assignment only pertains to properties that have been rented out. Should there be a loan default, the bank has the first right over the rental proceeds.

9. Interest Commencement Date

The interest rate will begin 3 months from the Letter of Offer’s date, or upon the first loan disbursement of the home loan.

If you’re taking a 24-month fixed-rate package, and your mortgage loan is disbursed after 3 months (in the 4th month), you will technically only enjoy 23 months of the fixed-rate package.

10. Interest Reset Date

Any early partial or full prepayment to the mortgage loan can only be made on a specific date – the interest reset date. Otherwise, a 1.5% penalty fee will be chargeable.

11. Legal Subsidy or Cash Rebate

Banks offer legal subsidies or cash rebates for property owners who are refinancing their home loans. However, the subsidy or cash rebate does not apply to those who are purchasing a new property. 

Typically, there’s a 3 years clawback. This means that the bank will take back the full legal subsidy or cash rebate if full repayment is completed within 3 years of the loan disbursement.

12. Lock-in Period

The lock-in period is a specific period that you have to commit to the bank for your mortgage loan. It can be anywhere between 1 to 5 years, differing from the various mortgage loan packages signed up. 

During this period, you’re not allowed to switch to another bank. If you’re forced to redeem your loan in full during the lock-in period (e.g. sale of the property), the bank will usually levy a penalty of 1.5% of the loan amount redeemed.

12. Reimbursement Fee

You’ll have to repay a sum of money should you wish to pay off the entire loan before the specified period. 

This sum of money would include subsidies that the bank has given when you take out the loan. These subsidies may comprise of legal, valuation, fire insurance subsidies and/or cash rebates.

13. Top up / Margin call

In the event of a recession or any unforeseen circumstances that may cause the property’s market value to decrease sharply, the banks have the authority to precipitate a margin call. 

This is because a decrease in valuation would result in a higher loan-to-value (LTV) ratio. The bank would thus order you to top up the difference in loan.

14. Valuation

Banks grant mortgage loans based on the market value of the property indicated by a licensed valuer. 

The borrower usually pays for the valuation fee. This applies to mortgage loans for both Purchase and Refinancing.

We hope that this glossary has helped you decipher the various jargons in the Letter of Offer. Want to learn more property jargons? Read them here.

Have more questions regarding your mortgage loan? Feel free to contact us for a chat. Here at FinanceGuru, we seek to help you better prepare for your finances and the upcoming milestones in your life. Get a non-obligatory assessment and loan product recommendations here. 

Buying a home is an essential commitment that holds great significance. It’s a financial milestone in life. It’s exciting, exuberating and perhaps even electrifying. Yet, the reality is that the purchasing process may not be as simple as you think. Here’s our straightforward 10-step guide to help you on your journey to buying an HDB resale flat.

Step 1: Register your Intent to Buy

Start your journey off by registering an Intent to Buy. Log into the HDB Resale Portal with your SingPass. This allows HDB to evaluate your eligibility to buy an HDB resale flat.

To be eligible, the applicant(s) will need to meet the following criteria:

• Be eligible to purchase resale flat under any one of these schemes:
  • Public Scheme
  • Fiancé/Fiancée Scheme
  • Single Singaporean Citizen Scheme
  • Joint Singles Scheme
  • Non-citizen Spouse Scheme
  • Orphans Scheme
  • Conversion Scheme
• Comply with the Ethnic Integration Policy (EIP) at the time of submitting Resale Application

If you’re purchasing a flat with other applicants like your family or partner, note that only one of you needs to register. 

Your registered Intent to Buy will be valid for only 12 months. You’ll have to re-apply again when it expires. 

Step 2: Get an Approval in Principle (AIP)

Next, get an AIP with a bank. An AIP is a negotiated arrangement that states the bank’s commitment to extend you a home loan when you intend to buy a house. The agreement will be valid for 30 days (varies among banks).

Getting the AIP helps you nail down your budget. For instance, you could have an AIP of $300,000 extended to you, and based on the loan-to-value limit of 75%; you can probably get a resale property of $400,000. 

Step 3: Go house shopping

Once you have your budget, start shopping for your dream home online. You can find property listings from various property portals.

You can even do it the old-school way — flipping through property ads in the newspapers! Found some listings that fit within your budget? Arrange for a viewing!

Alternatively, you may also choose to engage a property agent to help you find the right property.

Step 4: Choose between an HDB loan or a bank loan

Your next big step is to decide on how you want to finance your property purchase. There are 2 ways: 

Find out the differences between an HDB loan and bank loan here.

Step 5: Get an Option to Purchase (OTP)

After you’ve settled on your choice of loan, negotiate with the seller on the right price for the property. 

Upon reaching an agreement, you can make an offer, and the seller will extend to you an Option to Purchase (OTP).

The OTP is a legally binding contract between you and the seller. It guarantees your right to purchase the flat at the agreed price. The OTP disallows the seller to sell the property for the next 21 days.

Also, you’ll need to pay the option fee ranging from $1 to $1,000. This option fee lets you put in your ‘reservation’ for the flat. Once you’ve paid the option fee, you’re obliged to exercise your OTP within 21 days, or else the option fee will be forfeited. 

After 21 days, the seller is free to sell the flat if there is no action from you.

Step 6: Submit a Request For Value to HDB

You’ll need to submit a request for the value of the flat you’re buying on the HDB Resale Portal. Do this one day after the Option Date on your OTP.

The valuation process will take around 5 to 7 working days. Upon receiving the valuation report, you will need to submit it to the bank to complete the loan application so the letter of offer can be prepared.

Step 7: Exercise the OTP 

Once the valuation report is out, the next step is to sign on the OTP. Do note that you need to have the bank’s letter of offer or HLE approval prior to exercising the OTP,  and paying the balance of the option exercise fee. 

Step 8: Pay fees and the submit flat application to HDB

Leading up to the completion, you’ll have to make payments for fees such as Buyer’s Stamp Duty (BSD), Additional Buyer’s Stamp Duty (ABSD), and other legal fees if applicable.

In addition, both you and the seller will have to submit the respective parts of the resale application to HDB. Once either party submitted their portion, the other party will need to send the corresponding portion within 7 days. If not, the application will expire, and you’ll need to re-apply with HDB.

Step 9: Wait for HDB approval

Once you and the seller have submitted the resale application, HDB will process it. You may check the application progress on the HDB Resale Portal. 

If everything is in order, HDB will inform both of you by SMS or email within 10 working days. The transaction will be completed 8 weeks after the approval, and both parties will need to endorse all the documents and settle all the necessary fees within that time frame.

Step 10: Completion of Resale

After everything has been granted (including the API), HDB will arrange for a Resale Completion Appointment. Both you and the seller will need to be physically present to complete the resale transaction at the HDB Hub. 

We hope that this guide has served you well. If you want to know more about the nitty-gritty details involved in purchasing an HDB resale flat that we’ve not included here, feel free to contact us for a chat. 

Read our guide on purchasing a resale private property here.

Read our guide on buying a private BUC here.

Have some mortgage questions? Here at FinanceGuru, we seek to help you better prepare for your finances and the upcoming milestones in your life. Get a non-obligatory assessment and loan product recommendations here. 

Remember the 5Cs? The 5Cs used to serve as a yardstick of a successful Singaporean’s material standard of living. While some say that millennials no longer pursue these material assets, buying a private property in Singapore remains a dream for many. 

Here’s our simple 10-step guide to help you on your journey to purchasing a resale private property.

Step 1: Get an AIP

Start by getting an AIP with a bank. An AIP, or In-Principle Approval (IPA) is an agreement stating a bank’s commitment to extend you a home loan when you intend to buy a house. This agreement is usually valid for 30 days.

This helps you budget for your property purchase. For instance, you could have an AIP of $500,000 extended to you from Bank A, and you can probably buy a property of $700,000. This is based on the loan-to-value limit of 75%. 

Step 2: Go home shopping

Shop for your house online or flip through property ads in the newspapers. Spot a few listings that are to your liking and that fit within your budget? Check them out in person! 

Alternatively, you may also choose to engage a property agent to help you find the right property.

Step 3: Check the indicative valuation

Obtain an indicative value of the property that you’re interested in to find out its worth. You wouldn’t want to be paying more than the market rate.

As a buyer, you’ll have to fork out the valuation fee for the property appraisal to be done. 

This valuation fee ranges between $400 to $500 and could be higher depending on other factors. For example, the valuation fees for a landed property is usually more than an apartment or condominium.

Step 4: Get an Option to Purchase (OTP)

Did a resale private property catch your eye? Negotiate the right price, and if both you and the seller have reached a consensus, you can secure the rights to purchase the property by obtaining an OTP. 

To get the OTP, you’ll need to pay an option fee of 1% of the purchase price. This fee is payable in cash. OTP disallows the seller to sell the property for a specified duration so that you can coordinate the purchase. 

Step 5: Take out a bank loan

Next, you’ll need to apply for a housing loan with a bank to finance your property purchase. Compare the rates offered across the different banks to secure the most suitable one and it does not necessarily have to be the cheapest package.

Take note of the amount you have on hand and in your CPF account, so that you know how much you need to borrow from the bank. 

How much your bank can lend you also depends on your Total Debt Servicing Ratio (TDSR). The TDSR is a framework to ensure that you borrow responsibly. It limits the amount you can spend on debt repayments to 60% of your gross monthly income. 

Step 6: Exercise the OTP

You’ll need to exercise the OTP before the deadline by paying 4% of the purchase price. This will make you an official buyer of the property. 

This is different from the previous 1% option fee. In a sense, the 1% is an indication of your interest, while this 4% is a confirmation of your interest. 

You’re now one step closer to owning your dream home.

Step 7: Pay your Stamp Duty

In the lead up to the completion of your sale, you’ll have to make payments for fees such as Buyer’s Stamp Duty (BSD), Additional Buyer’s Stamp Duty (ABSD), and other legal fees if applicable.

Step 8: Pay 15% downpayment

It’s time for you to make the 15% private property downpayment. You can choose to pay off this amount using both cash and CPF.

Step 9: Sales completion

On the completion day, you’ll be registered as the new owner of the property.

Step 10: Key collection

Congratulations on your new home. Pick up the keys to your new home and get started on your renovation and furniture shopping!  

We hope that this guide has served you well. If you want to know more about the nitty-gritty details involved in purchasing a resale private property BUC that we’ve not included here, feel free to contact us for a chat. 

Read our guide on purchasing an HDB resale flat here.

Read our guide on buying a private BUC here.

Have some mortgage questions? Here at FinanceGuru, we seek to help you better prepare for your finances and the upcoming milestones in your life. Get a non-obligatory assessment and loan product recommendations here. 

A Building-Under-Construction (BUC) unit is a unit that is in the course of being constructed. 

This means that you’ll have to wait for the property to be fully built before you can truly call the place your home. Nonetheless, the good things in life are always worth the wait. 

Here’s our 10-step guide to help you on your journey to purchasing a private BUC.

Step 1: Get an Approval-in-Principle (AIP)

An AIP, sometimes known as In-Principle Approval (IPA) or pre-approval, is a negotiated arrangement with a bank. The bank would do a credit assessment to see  how much the bank can lend you when you intend to buy a house. 

This statement is usually valid for between two weeks to 30 days, varies among banks.

Step 2: Go house shopping

Visit the show-flats to gain a better understanding of what the apartment has to offer. 

This includes the general layout of the house, the range of amenities available in the neighbourhood and most importantly, the price tag.

Step 3: Get an OTP

If you come across a development that’s to your liking and fits within your budget, make a booking on the spot and pay the 5% booking fee.

Once you’ve paid the booking fee, you can take home the Option to Purchase (OTP) and wait for the Sales and Purchase Agreement. You’ll be on your way to becoming a house owner very soon.

Step 4: Receive the Sales and Purchase Agreement (S&P)

While waiting for your S&P to be delivered to you, start researching and applying for a bank loan. The bank will then issue you a Letter of Offer (LO) to forward to your conveyancing lawyer.

Not sure which bank is the right one for you? Let our mortgage brokers at FinanceGuru help you compare loans and interest rates. 

Step 5: Exercise the S&P

Once you’ve received your S&P, you’ll have 3 weeks to sign and submit all the documents and payments required to exercise the S&P successfully.  

You can choose to go through it on your own, or get your lawyer to go through it with you. It’s preferable to go through it on your own as your lawyer’s law firm may not be in the panel of the bank you’re taking a loan from. 

By doing it yourself, you need not restrict yourself to taking out a loan from only a certain number of banks, thus keeping your options open.

Step 6: Pay Stamp Duty

Next, you’ll have to pay the Buyer’s Stamp Duty (BSD), as well as any Additional Buyer’s Stamp Duty (ABSD) if necessary. If you’ve engaged a lawyer, you might also need to pay your legal fees. 

Step 7: Pay 15% downpayment

From the date of your OTP, you’ll have about 8 weeks to pay the downpayment of 15%. You can choose to pay off this amount using both cash and CPF.

Step 8: Begin your progressive payment scheme

Once you’ve paid your downpayment and all the necessary fees, and your OTP has been exercised, it’s time to wait while your property is being built. 

Your bank will be disbursing your home loan each time a progress payment is called for. This will depend on the stage of construction. The order of disbursement is as follows:

• Cash
• CPF
• Bank loan

Here’s a timeline of the order of disbursement based on the following example: 

• Ms Low purchases a BUC for $1,000,000. 
• She took a 50% loan, and her CPF Ordinary Account has $100,000. 

Step 9: House completion

After the long wait, your TOP will be issued, and it’s time for you to collect your keys and start shopping for your furniture!

Step 10: Inspect your home

Congratulations on your new home! Before you move in, inspect your home thoroughly and look out for any defects. You can get the developer to rectify any defects free of charge as long as it’s within the Defects Liability Period (12 months from the date of TOP).

We hope that this guide has served you well. If you want to know more about the nitty-gritty details involved in purchasing a private BUC that we have not included here, feel free to contact us for a chat. 

Read our guide on purchasing an HDB resale flat here.

Read our guide on buying a resale private property here. 

Have some mortgage questions? Here at FinanceGuru, we seek to help you better prepare for your finances and the upcoming milestones in your life. Get a non-obligatory assessment and loan product recommendations here.