Singapore’s real estate market watchdogs consider 2021 to be a great year for real estate. With COVID19 having done significant but recoverable damage to Singapore’s property market, it did not fall below its Global Financial Crisis 2008/2009 figures.
However, even with deflated property prices, real estate watchdogs caution prospective homebuyers to avoid underestimating mortgage planning before buying a property. They mention that many Singaporeans and PRs often fail to consider numerous mortgage-application factors, leading the majority into deep debt.
Prospective homebuyers in Singapore have been cautioned against underestimating mortgage planning before buying a property, despite market watchdogs’ predictions that 2021 will be a great year for real estate.
Real estate market experts explained that Singapore’s property market showed good signs as it did not fall below figures recorded during the Global Financial Crisis of 2008, despite the COVID-19 pandemic dealing significant damage.
However, the same experts said that Singaporeans and permanent residents (PRs) often fail to consider numerous factors surrounding mortgage application, leading a lot of people into debt.
How Mortgages Work
Mortgages are financial offerings from lending institutions that allow homebuyers to purchase a property using the lender’s bank’s resources. To put it simply, it’s a specialized home acquisition loan with specific terms and conditions that suit long-term repayment options.
Borrowers cannot use a personal or bridging loan to pay for an entire property. However, they can use both financial products to pay and secure a property through reservation and downpayment if they’re short on cash.
Mortgage applications with banks and financial institutions can be tedious, discouraging numerous Singaporeans and PRs who have poor credit scores. For applicants with credit grades below DD down to HH, seeking a bank mortgage maybe an enormous challenge.
Credit scores are crucial to mortgage applications, similar to other loans from banks and financial institutions. Credit scores are the culmination of an applicant’s financing history, activities, investments, and money-borrowing-related activities the Credit Bureau Singapore has recorded.
9 Easy Ways to Help You Prepare for Mortgages
Experts reiterate that borrowers must make sure they’re prepared for anything. This list gives prospective property buyers the best courses of action to take on mortgages in the smoothest way possible.
- Make Sure You Have Good Credit
Cleaning up credit scores will take a while: applicants need to pay back existing debts, especially if they have spiraled deep in interest payments. Borrowers contending with bankruptcy will have a far more challenging time recovering their credit scores. Higher credit scores make it easy to access more mortgage options.
Borrowers must keep in mind that good credit scores aren’t an objective. It’s a lifestyle that borrowers adopt, allowing them to efficiently pay their loans, mortgages, and other financings.
- Review Your Income-To-Debt Ratio
A borrower’s income-to-debt ratio has the strongest potential to prevent their possible spiral into deep debt. Once again, borrowers with existing debts must pay them off first.
If a borrower’s income-to-debt ratio reaches beyond 40% of your income before their other expenses, they’ll have enormous trouble paying off their mortgages. Even if they don’t have existing debts, don’t attempt to go through a mortgage if your utilities take up ¾ of your monthly income.
- Make Sure You Have Full Income Stability
Applicants who recently submitted their 30-day notice would find out that’s never the best time to pass mortgage applications soon. Banks will automatically reject the loan application using income instability as a primary basis.
Realistically, if there is no have job stability, which guarantees a steady income stream to pay for mortgages, then the mortgage application approval chances are extremely low.
- Avoid Sending Numerous Mortgage Applications
It seems counterproductive, but the best way borrowers lose out on mortgage applications and future financing is because they send out multiple mortgage applications. Going for a “shotgun” approach to loan applications, including mortgages, negatively impacts your credit scores.
According to experts, many borrowers fail their mortgage applications because they’ve had numerous “hard inquiries.”
- Consider Paying a Higher Down Payment
The big initial investment into their mortgage payments will get borrowers lower payments in the near future. Experts highly advise paying an enormous downpayment chunk whenever possible.
They even add that early payment penalties can bring down future interest rates even if they seem initially troublesome. This benefit is especially true for SIBOR-locked mortgages after the average 5-year interest-lock period bank mortgage.
- Choose Between Bank or HDB Loans
Applicants securing an HDB flat should make sure to decide early between bank and HDB loan concessionaire service. Both financing services have an advantage. For example, interested parties can have their first five years with banks with zero interest rates, allowing you to adjust your budgets and finances accordingly.
On the other hand, lending firms may have a stable budget plan with HDB loans, but they’ll need to fulfill a set of requirements before applicants can use the in-house financing service.
- Create a Realistic Budget Including Your Mortgage Payments
Mortgages are an enormous financial commitment, and experts note that many Singaporeans fail to account for the tremendous mortgage expense. If borrowers currently pay for college tuition, and their current rental payments do not detrimentally affect their current financial stability, it’s best to put off their mortgage application and dreams of a home momentarily.
Even removing all the “wants” from a borrower’s household budget isn’t going to help because “wants” are part of a realistic budget.
- Understand Your Mortgage’s Terms and Conditions
It’s tempting to just skip the fine print and listen to mortgage agents explain everything to know about the new loan application. Truthfully, banks and financial institutions will try to explain everything borrowers need to know, and they wish they wouldn’t ask any more questions.
Applicants should ensure that they read their mortgage’s fine print because you’re going to pay for it in the next three decades. Plus, take note of certain terms, conditions, and other areas you need to contest with your lender.
- Don’t Be In a Rush
As mentioned earlier, many Singaporeans and PRs have trouble securing their own homes because of the COVID-19 pandemic’s economic paralyzation, leading to massive job losses. Experts say that people should not rush to secure their own home.
They also warn that even the best prices in the current estate market will become gateways towards deep debt without proper mortgage planning. Before submitting a mortgage application, applicants must exercise caution, review their finances, income-to-debt ratio, and job stability.
Mortgage applicants might find the economy attractive, but if they fail to follow the preparation guidelines from the country’s top real-estate watchdogs, people might find themselves in deep debt.
They must ensure that they have excellent credit scores, have paid their existing debts while keeping close tabs on income and job stability before submitting the mortgage application.
In case there is a need for bridging loans to serve as a down payment, applicants can always count on Fortune Credit’s convenient financial service. They can also check out the website or head down to a branch today to learn more about offers and the perfect financing for them.