“Learn from the mistakes of others.
You can’t live long enough to make them all yourself.”
Thank goodness, right? But if no one ever made mistakes, we’d never improve our knowledge. We believe that sharing some of our clients’ experiences will help others who may be caught in a similar situation. Do any of these stories sound familiar to you?
- A Foreign Expat’s First Property Purchase Experience in Singapore
- How a Mortgage Analysis helped this client save big on interest rate payments
- Exploring the refinancing options
A Foreign Expat’s First Property Purchase Experience in Singapore
About two years ago, Mr. Krishnan arrived in Singapore with his family as a foreign expat. He first rented his home, but was later encouraged by a property agent to buy a private property instead. Very soon, he saw a property unit he and his family fell in love with. On an impulse, and because the property was in high demand and sure to be swooped up by someone else, he made the hasty decision to place a 1% option fee to secure the unit. Based on some bad advice, he expected to secure a 90% loan to valuation based his income, which was high and stable. But he soon realised that, as a foreigner, he could not secure the required 90% loan quantum from most of the banks at that time. After a time-consuming and difficult search, he finally found one bank willing to offer him a maximum of 85% loan quantum. However, he was forced to settle for a higher interest rate package which also came with a 2-year lock-in period. Mr. Krishnan was left wondering if the home was really worth the headache and added expenses he had incurred.
Fortunately, Mr. Krishnan met with a SMP Mortgage Consultant a year later, and successfully refinanced his mortgage loan to an “80% package” with a different bank. The new bank also helped to pay off the 1.5% penalty which Mr. Krishnan incurred for doing a full redemption within his lock-in period. Not only was he able to cut down on high interest payments, his monthly instalment was significantly reduced as well.
SMP’s Tip: It’s always wise to apply for an In-Principle Loan Approval (IPA) before beginning your property hunt. In Mr. Krishnan’s case, if he had done so, he would have learned earlier about the restrictions in the required loan quantum and may not have committed to the property purchase at that time. Also, just because your loan package has a lock-in period, this doesn’t mean that you can’t explore refinancing options. The savings in interest payments may outweigh any penalties incurred by a loan redemption – and some banks will even help offset those penalties. If the valuation of your property has gone up and you are able to find a loan package that can help to offset the penalty fee and offer a lower interest rate, it may be worth making the switch. Contact us – we can help!
How a Mortgage Analysis helped this client save big on interest rate payments
Mr. and Mrs. Tan have owned two properties for many years, one of which is the landed property their family lives in and the other is a commercial property. The Tans have been paying more than 3% interest for their private property loan and more than 4% interest for their commercial property loan. After meeting with a SMP Mortgage Consultant and doing a full mortgage analysis on both of the properties, they learned that they could do an equity loan from their private property. Why take out an equity loan, when the Tans had no major purchases to make or debt to pay? Because, as their Mortgage Consultant explained, the amount of equity loan they could take on the residential property was adequate to pay off the commercial loan! Today the Tans only pays one mortgage payment, and are saving money by eliminating the over 4% interest rate payments they were making on the commercial property loan, which was higher than the cost of the home equity loan. With the new equity loan charging the lower residential interest rate, Mr. and Mrs. Tan’s overall savings for the first three years alone was about $40,000.
SMP’s Tip: Not only can you reduce your residential housing loan interest but at the same time, you can reduce other loan costs or pay off outstanding high-interest debt by exploring home equity loans. In the Tans’s case, they were able to eliminate a commercial loan interest payment (typically about 1.5% - 2% higher interest than residential housing loan) and save a substantial amount of money. Maybe you can too – talk to a SMP Mortgage Consultant today.
Exploring the refinancing options
A few years ago, Mr. Shawn purchased a private property and took up a 90% loan package with a 25-year loan tenure. The interest package he signed up for is now charging him a 4.5% interest rate and the monthly instalment had risen substantially since when he first took on the loan. Mr. Shawn is finding it harder to pay his monthly instalment since he recently suffered a pay cut. Given the recent spike in property prices, Mr. Shawn considered trying to do a re-pricing with his existing bank, but the re-pricing terms weren’t attractive enough.
He then thought of exploring the services of a mortgage broker to see if he could find a lower interest package in the market. He did an online search and found the SMP Website. After a quickly-arranged appointment with a SMP Mortgage Consultant, Mr. Shawn managed to refinance his loan to an 80% LTV package with a significantly lower interest rate. He also was able to extend his loan duration in order to lessen his financial burden for the near future, until his financial situation could improve.
SMP’s Tip: Financial setbacks can happen, and bank rates can and do increase over time. Furthermore, the real estate market can wreak havoc on property valuations. But don’t despair – with some diligent research and expert guidance, it’s possible to find more favourable terms with a different loan package and refinance your existing high-interest loan. It just takes some leg work and industry know-how – let us help.
Disclaimer: Names quoted in these case studies are not the actual names of the clients, and they are used solely for illustration purposes only.