Taking up a mortgage loan for your property but feeling uncertain as to which rate to opt for? Read on to find out about the different types of mortgage rates. Here’s an overview:

HDB loan

The HDB loan is only applicable for HDB flats and is pegged to our CPF Ordinary Account interest rate + 0.1%. 

As the CPF Ordinary Account interest rate is 2.5%, the HDB Loan Interest Rate is currently 2.6%. In fact, the HDB Loan Interest Rate has been at the same interest rate for the past 16 years.

Read more about HDB loan vs bank loan here.

Bank loan

If you’re purchasing a private property, you have to take a bank loan. You’ll thus have to face the dilemma of deciding between fixed-rate and floating rates.

Fixed rates

As the word ‘fixed’ suggests, fixed rates are very stable. Regardless of fluctuations in interest rates, you’ll still be paying the same amount. 

This means that you wouldn’t need to break into a sweat should interest rates in Singapore suddenly rise rapidly. Of course, the trade-off for this extra stability is that fixed-rate mortgage rates are usually higher than floating rates. 

Some people are risk-averse and don’t mind paying higher mortgage interest rates for peace of mind. If you belong to this group of consumers, you should definitely pick fixed rates over floating rates.

Floating rates

If you prefer to go for floating rates, you’ll be stuck in another predicament. Should you go for SIBOR-pegged rates? Fixed deposit-pegged rates? Or board rates?

SIBOR-pegged rates

SIBOR (Singapore Interbank Offered Rate) determines the interest rates in Singapore, which follows closely  with the United States’ interest rates. 

This means that it’s volatile and highly dependent on interest rate movements in the United States.

Under the 3-month SIBOR rate, the rate that you pay will be ‘locked in’ for 3 months and renewed at the end of 3 months. 

The same goes for the 1-month SIBOR rate — the rate you pay will be ‘locked in’ for 1 month and renewed at the end of the month.

Nonetheless, as SIBOR pegged rates are published for all to see, it’s the most transparent of all mortgage rates.

Here’s a comparison between the SIBOR rates in 2019 and 2020: 

2019

Month	1M SIBOR	3M SIBOR	12M SIBOR
Jan 2019	1.765	1.886	2.124
Feb 2019	1.771	1.891	2.124
Mar 2019	1.823	1.949	2.154
Apr 2019	1.826	1.944	2.125
May 2019	1.823	1.944	2.125
Jun 2019	1.886	2.005	2.186
Jul 2019	1.884	2.001	2.186
Aug 2019	1.882	1.886	2.126
Sep 2019	1.876	1.879	2.124
Oct 2019	1.872	1.877	2.122
Nov 2019	1.797	1.803	2.092
Dec 2019	1.746	1.769	1.965

2020

Month	1M SIBOR	3M SIBOR	12M SIBOR
Jan 2020	1.749	1.774	1.967
Feb 2020	1.686	1.714	1.963
Mar 2020	1.582	1.630	1.874
Apr 2020	0.988	0.999	1.261
May 2020	0.568	0.828	1.208
Jun 2020	0.248	0.559	1.029
Jul 2020	0.254	0.553	0.967
Aug 2020	0.250	0.438	0.875
Sep 2020	0.250	0.406	0.812
Oct 2020	0.250	0.406	0.812
Nov 2020	0.250	0.406	0.812
Dec 2020	0.250	0.406	0.812

SORA

SORA is the volume-weighted average rate of unsecured overnight interbank SGD transactions brokered in Singapore. 

While Singapore has transitioned from SOR to SORA, the transition phase for SIBOR to SORA will be spread over 3 to 4 years until the end of 2024.

Find out more about SORA replacing SIBOR here. 

Fixed deposit-pegged rates

Fixed deposit pegged rates are pegged against the fixed deposit rates of the bank. 

With the introduction of investment options such as the Singapore Savings Bond, consumers are shying away from depositing cash with the banks. Instead, they’re putting their money in these bonds.

As the banks’ pool of money diminishes, the banks will naturally increase their fixed deposit rates to incentivise consumers to park their money with them. 

This would inadvertently hurt your mortgage rates.

Furthermore, fixed deposit pegged rates offer little transparency as the banks can change their rates as they deem fit.

Board rates

Board rates fare the worst in terms of transparency. 

These rates are internally determined by the banks and are not pegged against any reference rates. Banks can have multiple board rates within their portfolio

Consumers have no indication of how rates are decided or how rates will change — the perfect illustration of imperfect information.

Having gone through the various types of mortgage rates, the question remains. Which is the best? We can say that it all boils down to what you want and which suits you best. 

See how you can optimise your home loan refinance in a low-home interest rate environment here.

Learn more about loan jargons in this article here. 

Got your Letter of Offer? We breakdown the terms in this article. 

If you have any further queries, 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. 

Cash Ou

In the eyes of many Singaporeans, the ownership of private property may symbolise prestige that elevates one’s social standing. Yet, beyond the intangible aspects, owning private property in Singapore offers a key advantage — Cash out / Equity loan. 

Read on to find out whether the costs outweigh the benefits.

What does Cash Out / Equity Loan mean?

Cash out / Equity Loan, also known as reverse mortgage, allows you to use your private property as collateral to take out a loan from the bank. 

This enables you to make the most out of your property’s value and secure return-on-capital gains without having to put your home up for sale.

Singaporeans who opt for cash out refi do it for diverse reasons. They may use the money borrowed to generate wealth through investments, to start a business, to build their retirement nest eggs or simply to fund their children’s expenses. It could even be used to conquer any debt mountains.

Considering between a bank loan or an HDB loan for your property? We compare the differences in this article.

How much loan can you take out under cash out refinancing?

While you can borrow up to 75% of the value of your property, you’ll have to deduct any outstanding loans on your property, as well as the funds used from the CPF Account.

Here’s an example:

Ms Lin has a condominium valued at $2 million with an outstanding loan amount of $200,000 on the condominium. She has used $650,000 of CPF monies to finance the condominium.

She’s eligible to take out a bank loan of (75% of $2,000,000) – $200,000 – $650,000 = $650,000. 

If not for a cash out refi, taking out such a big loan via other means would most likely be improbable.

However, it’s necessary to note that some banks may have their own set of regulations when it comes to cash out refi. Conditions such as your financial portfolio and your job history may affect your application for a cash out refi. 

You’ll also have to factor in the payment for administrative fees (legal fees, valuation fees, etc.) that can go up to $3,000. 

What are the advantages of Cash Out Refinancing? 

Cash out refi is a great tool that can grant you a big bank loan at the lowest interest rates. 

With interest rates ranging between 1.3% to 1.6% p.a., it’s notably lower than that of other loans. Personal loans and business loans have interest rates that can go as high as 6% p.a.

Furthermore, due to the low-interest rates of cash out refi, should you have a mountain of debt, you can use the money borrowed through cash out refi to repay it. 

By doing so, you can pay off all your different debts with a single loan and thereafter concentrate your efforts on paying back that one loan.

Learn more about interest-offset mortgage here. 

What are the drawbacks of Cash Out Refinancing?

Your house is at stake. When you use your property as collateral, you’re pledging it as security to repay a loan. 

In the event of a default, your house will be repossessed by the bank, and you’ll no longer have a roof over your head.

Even though cash out refi may be attractive, this scheme has high risks involved. It’s one that could have severe consequences. Additionally, people who take up cash out refi need to have a certain level of self-discipline. This is because cash out refi presents them with a financial bonanza. 

Those who do not know how to manage their money well may end up spending the extra cash they have on hand extravagantly.

When should you use Cash Out Refinancing? 

There are several situations where cash out refi is applicable and advantageous:

When	How
Debt consolidation	If you own an expensive condominium but are knee-deep in high-interest debt (personal loans, credit card debt etc.), cash out refi helps to prevent you from having to sell your property.
Low-cost capital	As new businesses may have difficulty getting a bank loan, cash out refi can help you obtain capital to start or expand a business. Using your flat as collateral for your business is only advisable if you have more than 1 home.
Medical emergencies	If your Medisave is depleted, or your insurance is insufficient, cash out refi is a cheaper option than a personal loan or credit lines.
Overseas studies	Cash out refi is a sizable alternative to education loans, but note that you’re risking your home to do this.

While you can use cash out refi to fund non-essential, personal needs like buying a car or paying for a wedding, it’s unadvisable as your home can  be foreclosed on if you can’t pay up. 

Looking to avoid paying ABSD on your second property? Check out this article. 

Thinking of buying a resale private property? We cover the steps here.

If you have any further queries, 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. 

Planning to own a second property but feeling conflicted? Are the hefty costs of Additional Buyer’s Stamp Duty (ABSD) deterring you from going ahead with the purchase? Fret not, for we may have a solution on how to avoid ABSD — decoupling.

Learn more other home loan terms here. 

How to avoid ABSD: What is decoupling?

Decoupling involves the sale of one’s shares from one co-owner to the other. This part-sale will result in the other co-owner as the sole owner. 

When you no longer have a property under your name, you’ll not have to pay ABSD when you buy a second one. This is because it is deemed as your first property purchase.

Given the ABSD rates, this scheme can save you quite a significant sum of money. If you’re a Singapore Citizen and the purchase price of your second property is $2 million, you’ll have to pay an ABSD of 0.12(2,000,000) = $240,000. 

Evidently, decoupling can help you achieve your savings goals and avoid absd.

	1st Property	2nd Property	3rd Property
Singapore Citizen	–	12%	15%
PR	5%	15%	15%
Foreigner	20%	20%	20%

However, it’s not a guaranteed formula for success. When the costs exceed the savings, decoupling no longer serves its initial purpose. Therefore, it’s crucial to evaluate all the factors involved.

The costs of decoupling to avoid ABSD

Although decoupling allows you to avoid paying ABSD, it generates other costs – including Buyer’s Stamp Duty and legal fees. 

Buyer’s Stamp Duty (BSD) is a levy paid when you acquire property in Singapore. Since the transfer of property ownership from one co-owner to the other is regarded as a transaction, BSD will be incurred on the share transfer value. 

ABSD will also be applicable if the receiving party already owns a property. In addition, you’ll also incur the Seller’s Stamp Duty (SSD) if the property you’re selling is within the 3-year hold period (number of years that you own a property). To avoid the SSD, you’ll have to wait out the minimum holding period. 

Additionally, legal fees that range from $5,600 to $6,500 minimally are charged for the transaction.

If there is an outstanding loan on your property, there is a need to restructure it. If the loan is within lock-in period, there will be penalty fees involved.

What is the Transfer of Ownership?

The transfer of property ownership from one co-owner to the other can be done through selling the property or gifting it. 

If it’s settled through a sale, the party taking over the property will be required to take over the financing responsibility and the CPF plus the accrued interest of the selling party is to be refunded.

If it’s given as a gift, there must not be any existing loans, and the CPF plus the accrued interest of the selling party is to be refunded.

Here’s an example: 

Mr and Mrs Lim purchased a condominium when they first got married, and it’s now valued at $1.5 million. The couple wishes to buy another property as an investment. This property costs $1 million.

If the couple were to buy the second property without decoupling first, they’d have to pay an ABSD of 12%(1,000,000) = $120,000

If the couple were to buy the second property after decoupling, they’d have to pay a BSD of $17,100 and legal fees of $6,500, which amount to $23,600 on the decoupled property.

This is calculated on the basis that they can redeem their loan without incurring any penalty fees because the validity of their loan’s lock-in period has ended.

By choosing to decouple, they can save $120,000 – $23,600 = $96,400.

We cover 5 common mistakes to avoid when shopping for a mortgage loan here. 

How to avoid ABSD: Does ABSD apply when buying a property for your child? 

Parents can set up a property trust for their child who is below 21 years of age. 

After purchasing a property under the child’s name, the parent becomes the trustee while the child becomes the beneficiary. 

This means although the child legally owns the property, the parent remains in charge of paying the necessary levies. 

As the property is recognised as the child’s first property, no ABSD is payable. Yet, a point to note is that loans are not granted for property trusts, so the levies have to be paid out of your own pocket in cold, hard cash.

Is ABSD applicable for industrial/overseas property?

Industrial/overseas properties have been gaining traction amongst Singapore’s property owners in the past few years. As ABSD only applies when you purchase a residential property in Singapore, no ABSD is payable for these types of purchases. 

The above recommendations can help you and your spouse to fulfil the dream of owning one property each. Nonetheless, before jumping on this property bandwagon, it’s essential to work out the numbers and figure out if the solutions are to your interests. 

Thinking of getting a resale private property? Read our 10-step guide here.

If you have any further queries, 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. 

While jargons like TDSR and MSR have been around for almost a decade, there are still many misconceptions about the two terms. In this article, we dive into explaining TDSR and MSR and how they would affect your mortgage loan. 

What is TDSR?

The Total Debt Servicing Ratio (TDSR) framework was introduced by the Monetary Authority of Singapore (MAS) on 28 June 2013 to ensure that Singaporeans borrow responsibly and within their means.

In essence, TDSR limits the amount you can spend on your monthly debt repayments to 60% of your gross monthly income. It considers all your debt obligations, such as student loans, car loans, credit cards, etc. 

Failure to meet the 60% TDSR threshold would render your mortgage loan unqualified.

Find out what you can do if you fail your TDSR here. 

How does TDSR affect you?

With TDSR being implemented, you may have to stretch out your repayment period to keep within the TDSR limits. The more debt obligations you have, the less you might be able to borrow from the bank for your home loan. 

Additionally, according to TDSR guidelines, guarantors are no longer allowed. This means that you’ll not be able to depend on the guarantor’s income to secure your property loan, thus making it more difficult to purchase the property.

How to calculate your TDSR

The TDSR is calculated by dividing your total monthly debt obligations by your gross monthly income. 

TDSR = (Total monthly debt obligations) / (Gross monthly income)

Depending on whether you have a fixed or variable income, the calculation differs.

Fixed income

Here’s a table illustrating the TDSR calculation for monthly fixed income of $10,000:

	Monthly income	Monthly debt obligations	TDSR calculation	TDSR threshold
Scenario 1	$10,000	–	$0/$10,000 = 0%	60%
Scenario 2	$10,000	$1,000 (car loan)	$1,000/$10,000 = 10%	50% (60% – 10%)

In Scenario 1, Clement’s TDSR threshold is $6,000 monthly. He can apply for a home loan with a maximum repayment of $6,000 monthly. 

In Scenario 2, Clement’s TDSR threshold is $5,000 monthly. He can apply for a home loan with a maximum repayment of $5,000 monthly. 

Variable income

If you’re self-employed and draw a variable monthly income, you’re subjected to a 30% ‘haircut’. This means that only 70% of your income will be recognised.

For example:

Nicole is self-employed and earns a monthly income of $10,000. The income recognised is 70% of the monthly income = 0.7($10,000) = $7,000.

• Scenario 1: If Nicole has no other financial obligations, Nicole’s TDSR threshold is $4,200 monthly (0.6(7,000) = $4,200). She can apply for a home loan with a maximum repayment of $4,200 monthly.

• Scenario 2: If Nicole has an additional study loan of $1,000, her TDSR threshold will be $3,200 ($4,200 – $1,000 = $3,200). She can apply for a home loan with a maximum repayment of $3,200 monthly.

What is MSR?

The Mortgage Servicing Ratio (MSR) was introduced by the Monetary Authority of Singapore (MAS) on 12 January 2013 with the same aim – to ensure that Singaporeans borrow within their means to finance their property loans. It also prevents the overheating of the real estate market. 

MSR limits the amount you can spend on your mortgage repayments to 30% of your gross monthly income.

While TDSR applies to all properties, MSR only applies to HDB flats and Executive Condominiums (ECs) directly purchased from the developer.

How does MSR affect you?

If your property loan is subjected to both MSR and TDSR, your monthly mortgage repayment instalment would be the lower of the 2 calculated loan amounts.

Here’s an example based on the following information: 

• Vincent is drawing a fixed salary of $2,000.
• Vicky is drawing a fixed salary of $2,500.
• Vincent and Vicky have no other commitments.

	Threshold	Maximum amount spent on mortgage repayment
Mortgage Servicing Ratio(MSR)	(Amount spend on mortgage repayments / Gross monthly income) = ≤30%	0.3 ($2,000 + $2,500) = $1,350
Total Debt Servicing Ratio(TDSR)	(Total monthly debt obligations) / (Gross monthly income) = ≤60%	0.6 ($2,000 + $2,500) = $2,700

Taking the lower of the 2 calculated loan amounts, Vincent and Vicky’s maximum monthly mortgage repayment instalment would be $1,350.

Comparing TDSR and MSR

	Total Debt Servicing Ratio(TDSR)	Mortgage Servicing Ratio(MSR)
Introduced on	28 June 2013	12 January 2013
What is it?	Limits monthly housing loan to 60% of an individual’s gross monthly income, taking into account an individual’s other financial commitments	Limits monthly housing loan to 30% of an individual’s gross monthly income
Formula	(Total monthly debt obligations) / (Gross monthly income)	(Amount spent on mortgage repayments) / (Gross monthly income)
To qualify	≤60%	≤30%
Applicable to	All properties	– HDB flats – ECs directly purchased from the developer

When taking out a mortgage loan, TDSR and MSR are financial jargons that you should wrap your head around. Learn about other home loan terms in our glossary here. 

We cover some jargons in the Letter of Offer here.

Have further queries on your mortgage? 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. 

The Total Debt Servicing Ratio (TDSR) is essential in determining whether you’re eligible for the mortgage loan. Failure to meet the 60% TDSR threshold would render your mortgage application loan unqualified.

Find out the difference between TDSR and MSR here.

TDSR restricts the amount you can borrow to finance your property loan to 60% of your gross monthly income. This takes into account your other financial commitments. 

TDSR = (total commitments) / (total income) = ≤ 60%.

How to meet the 60% TDSR threshold

If you failed your TDSR, it could be that your financial commitments are too high, or your income is insufficient to support your financial commitments. 

To boost your TDSR to meet the 60% threshold, you can choose to reduce your financial commitments or increase your income.

Reducing your financial commitments

First, let’s talk about how you can reduce your financial commitments. 

You can pay off any outstanding personal loans, car loans and credit card bills etc. Though these may seem to amount to a hefty sum, offloading these debt obligations will increase the maximum amount of housing loan you can borrow significantly. 

This will make it a beneficial trade-off in the long run.

Increasing your income

Next, let’s discuss how you can increase your income. 

Under the MAS Notice 645, you may include your Eligible Financial Assets’ value to be recognised as part of your gross monthly income. 

Eligible Financial Assets include cash, structured deposits, shares, stocks, debentures, unit trusts, business trusts, gold, foreign currency notes and coins. 

You may also include any monthly rental income you receive as your additional income. However, not the full value of the above-mentioned sources of income will be recognised.

The breakdown of income recognition is as follows:

Source of Income	Percentage Recognised
Cash / Fixed Deposits (pledged)	100%
Cash / Fixed Deposits (unpledged)	30%
Unit Trusts (pledged)	70 – 100%
Unit Trusts (unpledged)	30%
Shares	30%
Rental	70%

If the liquid assets are pledged with the bank, the liquid assets have to:

• Be with the same bank that you’re obtaining the mortgage loan from
• Be pledged with the bank for 4 years (48 months)

If the liquid assets are unpledged, the liquid assets have to:

• Be with the same bank that you’re obtaining the loan from
• Be shown to the bank twice – during the loan application and before loan disbursement

Here’s an example

Caleb, aged 40, draws a fixed salary of $4,000 and has a personal loan of $500 per month.

Claire, aged 38, draws a fixed salary of $10,000 and has a car loan of $1,500 per month.

Caleb and Claire are jointly purchasing their first private property for $2,000,000 and are taking up a 75% loan. They’ll have to pay a monthly instalment of $7,329 for the housing loan based on the calculation below: 

TDSR = (total commitments) / (total income) 

= ($500 + $1,500 + $7,329) / ($4,000 + 10,000)

 = $9,329 / $14,000 

= 66.636% 

= 67%

Since their TDSR exceeds the 60% threshold, Caleb and Claire fail TDSR.

Thinking of getting a resale private property? Check out our 10-step guide here.

What to do when you fail your TDSR?

Based on the above example, Caleb and Claire can choose to pledge cash with the bank to qualify for the mortgage loan.  

To calculate the amount of cash the couple needs to pledge, we shall work backwards:

Income required to pass TDSR = $9,329 / 0.6 = $15,549

Income shortfall = $15,549 – $14,000 = $1,549

Cash (Pledged) = $1,549 x 48 = $74,352 = $75,000

Therefore, Caleb and Claire would need to pledge a minimum amount of $75,000 to qualify for the mortgage loan. On the other hand, the unpledged method will amount at $75,000 / 0.3 = $250,000, and will need to be shown to the bank twice — during the loan application and before loan disbursement.

TDSR exemptions for refinancing

If you’re refinancing your owner-occupied property loans, you’re exempted from the 60% TDSR threshold if you pass your financial institution’s credit assessment.

If you’re refinancing your investment property loans, you’re exempted from the 60% TDSR threshold if you pass your financial institution’s credit assessment. You also have to pay down 3% of the outstanding loan in cash.

In fact, you may be granted up to an 80% – 100% TDSR threshold for both owner-occupied and investment property loans if you meet the above-stated stipulated conditions.

Learn more about other home loan terms in our glossary here. 

We simplified jargons in the Letter of Offer in this article. Read more about it here. 

Have further queries on your mortgage? 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. 

Owning your own home is a huge milestone in life. Yet, it’s also a significant financial commitment. In deciding your loan repayment plan, a determining factor would be the loan tenure. 

A common misconception is that a longer loan tenure would prolong the loan repayment period and greatly increase the number of interest payments. 

However, that’s an inaccurate assumption. The absolute interest that you pay is not necessarily substantially higher under a longer tenure. This is because the computation of monthly housing loan instalments is different from that of monthly car loan instalments.

For car loans, the interest payable is based on the original loan amount. The interest rates remain constant throughout the loan tenure, i.e. car loan monthly instalment = [loan amount + (loan amount x interest rate per annum x no. of years)]/no. of months in loan tenure. 

On the other hand, mortgage loans are amortised. The interest payable is dependent on the outstanding loan balance, which diminishes over time.

Having cleared this misconception, here are 4 reasons for why you should opt for a longer loan tenure for your mortgage loan.

1. A longer loan tenure helps you to manage your cash flow better

Some property owners may choose a shorter loan tenure as they’re eager to pay off their loans as soon as they can. 

However, this would mean higher monthly repayments. Many homeowners often fail to account for other costs associated with homeownership, such as property taxes, utility bills, etc.

Hence, paying higher monthly housing loan instalments may result in them having to stretch their monthly expenditure to the limit.

Conversely, opting for a longer loan tenure reduces your monthly housing loan instalments. 

This, in turn, grants you more disposable income and lightens your financial burden. 

Should there be an unexpected turn of events such as income loss or a cash flow crisis, a longer loan tenure can cushion the impact.

2. A longer loan tenure helps you to reap more benefits from your investment

If you’re investing in a property, your main objective would be to reap the benefits of capital-appreciation – the increase in the value of your property. 

As property prices do not soar overnight very often, another way to make money from your property, in the long run, is through rental income. It would be best if the rental income you collect exceeds the monthly instalment you have to pay for the housing loan. 

One strategy to achieve this would be to keep the monthly repayment costs as low as possible. To do that, you have to opt for a longer loan tenure.

3. A longer loan tenure serves as a safety net

Repaying your loan is a long-term plan. Given the uncertainty of the global economy today, the market is volatile and interest rates are expected to fluctuate. 

A longer loan tenure thus serves as a useful buffer. You’ll not be rendered vulnerable to any sharp increases in interest rates.

4. A longer loan tenure benefits your TDSR

The Total Debt Servicing Ratio (TDSR) was introduced by the Monetary Authority of Singapore (MAS) on 28 June 2013. It ensures that Singaporeans borrow within their means to finance their property loans, thus maintaining financial prudence. It also prevents the overheating of the real estate market.

TDSR restricts the amount an individual can borrow to finance their property loan to 60% of their gross monthly income. This takes into account their other financial commitments, including personal loans, car loans, study loans, equity loans and credit card bills.

Here’s a quick look at how TDSR is calculated using fixed income:

Fixed monthly income	$10,000
Total debt obligation per month (car loan, personal loan, credit card)	$4,500
TDSR threshold per month	60% of $10,000 = $6,000
Maximum repayment for mortgage loan per month	$6,000 – $4,500 = $1,500

Read more about TDSR here.

By having a longer loan tenure, the monthly mortgage loan instalment will be lesser. This benefits your TDSR when you are planning to buy your 2nd, 3rd and subsequent properties.

Learn more about how you can own a second property without paying ABSD here.

Overall, a longer loan tenure offers several benefits for your mortgage loan. So the next time you take out a mortgage loan, don’t rush to opt for a shorter loan tenure in a bid to save on the interest. 

Have further queries on 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. 

In Singapore, property owners are regularly in quest of the lowest home loan rates. Yet, they often gloss over a very crucial aspect of mortgage packages — the product features. Did you know that the interest offset mortgage package in Singapore can reduce your monthly mortgage repayments? 

Interest offset packages help reduce your mortgage interest payment and increase your savings. This package serves as a savings account that earns you an interest rate similar to that of your housing loan when you maintain a good balance of deposit with the bank.

There’s no minimum sum required, and you do not need to park your funds in the account for a fixed period (i.e. the bank does not lock in your deposit). 

However, a small catch is that the interest rate granted does not apply to the entire deposit, but only to a certain fraction of it, depending on the banks. There could also be a minimum housing loan amount required to enjoy the package.

Read about the common mistakes to avoid when shopping for a mortgage in Singapore here.

Who is it for? What are the benefits?

As there’s no minimum deposit required, the market for interest offset packages in Singapore has relatively low barriers to entry. 

This means that any property owner can enter the market as long as they sign up for a housing loan with the bank. 

Once a deposit is placed, a borrower can utilise the matching interest rate earned on the deposit to make up for the mortgage loan’s interest rate. The interest ‘earned’ will be first used to offset the interest of the loan. The remaining balance will be used to paydown the principal. In the long run, the loan can be redeemed within a shorter repayment period. 

This allows the borrower to reap cost savings. Furthermore, since the funds don’t have to be “locked up” in the account, liquidity is enjoyed. 

You can withdraw the funds at any point of time to tide through rainy days. Additional funds can also be paid into the account as and when you have any spare cash.

Which banks offer interest offset mortgage packages in Singapore?

In this table, we compare the interest offset packages offered by 3 banks, using the following figures: 

• Home loan amount: $800,000
• Deposit: $50,000
• Interest rate: 2%

Bank Package	Fraction of Deposit	Interest rate	Interest offset	Other requirements
HSBC: SmartMortgage	70% capped at Outstanding loan	Same as mortgage loan	2% (0.7×50,000) = $700	– Minimum loan amount of $500,000
Standard Chartered:MortgageOne	Capped at Outstanding loan	⅔ will enjoy the same interest as per the mortgage loan 1/3 will earn 0.25%	2% (⅔ x 50,000) + 0.25% (⅓ x 50,000) = $702	– Minimum loan amount of $100,000
Citibank: Home Saver	100%	50% of mortgage loan	(½ x 2%) 50,000=$500	– Minimum loan amount of $100,000

An interest offset package is an extraordinary feature that can allow you to reap substantial cost savings. Borrowers should take on a comprehensive approach in evaluating which interest offset package suits them best. 

If you have any further queries and would like to be furnished with more information, feel free to contact us for a chat.

Learn more about getting a home loan with our guide 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. 

Piermont Grand, a tranquil oasis nestled in the heart of Punggol, made a majestic entrance into the property market last year. It received a great deal of attention from both homeowners and investors alike. With the successful launches of other executive condominiums such as the Parc Canberra, you may be enticed to upgrade your HDB flat to an EC.

What is an EC?

An HDB executive condominium (EC) is an amalgam of public and private housing. 

It’s a housing option that’s very well received amongst the ‘sandwiched’ class. Nonetheless, this does not mean that an HDB EC falls short of a private condominium. 

If anything, an HDB EC offers the full suite of condominium facilities, at a more affordable price.

Why upgrade to an HDB EC?

Many homeowners who have worked their way up the corporate ladder wish to reward themselves with a lifestyle upgrade. 

What better way to enhance one’s way of living than by purchasing a more ‘luxurious’ yet affordable home that’s guarded by security and comes with its own pool and gym facilities?

When to upgrade to an HDB EC?

No matter how attractive upgrading from an HDB flat to an EC sounds, you cannot upgrade as and when you wish. According to HDB’s regulations, you can only do so after fulfilling the Minimum Occupation Period (MOP), which is 5 years.

The Minimum Occupation Period is a period which homeowners are obliged to physically live in the flat before putting it up for sale. 

The day when you collect your keys marks the start of the MOP. The MOP does not include any period where the homeowners do not live in the flat, such as when the entire flat is rented out.

The table below outlines the MOP for each flat type: 

Flat type	Minimum Occupation Period
Flat purchased directly from HDB	5 years
Design, Build, and Sell Scheme (DBSS) flat purchased from a developer	5 years
Flat bought under Selective En bloc Redevelopment Scheme (SERS) with portable SERS rehousing benefits	5 years
Flat bought under SERS	Either: – 7 years from the date of selection of the replacement flat – Or 5 years from the date of occupationWhichever is earlier
Resale flat bought from the open market with CPF Housing Grant	5 years
Resale flat bought from the open market without CPF Housing Grant	1-room flat: No MOP2-room flat or bigger: 5 years
Flats bought under Fresh Start Housing Scheme	20 years

How to upgrade to an HDB EC?

Essentially, this process involves 10 simple steps.

Step 1: Visit the HDB EC showroom and submit an e-Application

This e-Application is necessary for you to join the ballot for an EC unit. 

In the e-Application, you’ll have to state your personal particulars, household status, employment status, income, as well as declare any housing subsidies you’ve received in your previous property purchase. 

After signing the e-Application, a queue number will be issued to you. This queue number will be used on the balloting day.

Step 2: Go through the HDB EC’s price list

A few days before the balloting day, the EC’s price list will be issued to all buyers who have indicated their interest to join the ballot. 

Take some time to thoroughly analyse the various options (the layout of the unit, the floor area, the floor level, etc.) and think through which unit(s) you prefer.

Step 3: Secure the unit that you fancy

On the balloting day, your queue number will be called at random. 

When your turn arrives, this will be when you find out whether that particular unit you have set eyes on is still available. 

If it is, and you want to commit to the purchase, pay the 5% booking fee, sign the Option to Purchase (OTP), and that unit is reserved for you!

Step 4: Submit all necessary documents to HDB

The required documents will include the registration form, the buyers’ payslips, etc.

Step 5: Take out a bank loan

Unfortunately, you won’t have the option of an HDB loan if you’re getting an EC. Instead, you can secure a housing loan from a bank. 

Compare the rates offered across the different banks to secure the best ones. Your bank loan can cover up to 75% of your purchase price. You’ll have to pay the downpayment of at least 25% using either cash, CPF savings or both. 

Confused with all the loan packages available in the market? Unsure which is suitable for you? Chat with a professional mortgage broker and get a non-obligatory assessment and loan product recommendations here. 

Learn more about the differences between an HDB loan and a bank loan here.

Step 6: HDB approval

HDB will appraise your application and determine whether you’re eligible to purchase the EC. 

Once HDB has approved your application, the developer will be notified. The developer will then send your appointed lawyer the Sales and Purchase (S&P) Agreement.

Step 7: Exercise the OTP

You have to exercise the Option to Purchase (OTP) within 3 weeks of receiving the Sales and Purchase Agreement. This includes paying a 5% Option Fee and 15% Exercise Fee. 

Step 8: Pay stamp duty

Beyond the purchase price, you’ll need to pay legal fees of about $2,000 and valuation fees of about $200 for the new EC. You’ll also need to pay the Buyer’s Stamp Duty which is 3% of the purchase price, or 4% of the purchase price is above $1 million.

Read: 14 bank jargons for Offer Letter made easy

Step 9: Choose between Normal Payment Scheme and Deferred Payment Scheme

If you have not sold your existing HDB flat, you could opt for the Deferred Payment Scheme. Under this scheme, you’re only required to repay your monthly mortgage loan instalments for the EC after you have collected your keys.

With the Normal Payment Scheme, you’ll have to pay both your current HDB loan for your existing HDB flat, as well as the bank loan that you’ve taken out for the purchase of the EC. 

This may put a strain on your finances.

Step 10: Collect your keys

Congratulations on your new home! Before you move in, inspect your home thoroughly and look out for any defects. 

Note that you’re entitled to having the defects rectified for free by the developer if you notify them within the defects liability period.

We hope that this guide has served you well. If you wish to know more about the nitty-gritty details involved in upgrading from an HDB flat to an EC, feel free to contact us for a chat. 

Looking to purchase a resale private property? Read our 10-step guide 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. 

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. 

Stage	Notice period	Fees
Outside the lock-in period	1-month notice given	No fee payable
Outside the lock-in period	1-month notice not given	Fees payable – 1-month interest-in-lieu
During the lock-in period	1-month notice given	Fees payable – 1.5% penalty fee on the repayment amount
During the lock-in period	1-month notice not given	Fees payable – 1-month interest-in-lieu + 1.5% penalty fee on the repayment amount

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. 

Stage	period	Fees
Outside the lock-in period	3-month notice given	No fee payable
Outside the lock-in period	3-month notice not given	Fees payable – 3-month or prorated interest-in-lieu
During the lock-in period	3-month notice given	Fees payable – 1.5% penalty fee on the outstanding loan  amount
During the lock-in period	3-Month notice not given	Fees payable – 3-month or prorated interest-in-lieu + 1.5% penalty fee on the outstanding loan  amount

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: 

HDB loan	Bank loan
Need a valid HDB Loan Eligibility (HLE) letter before you can get an OTP from the seller	Need a valid Letter of Offer (LO) before you can exercise the OTP.
Interest rate pegged to CPF OA interest rate +0.1%	Choose between fixed and floating rates
Loan up to 90% of the remaining lease	Loan up to 75%

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.