ABS

Association of Banks in Singapore

Accrued Interest

It is an interest that has been incurred but not paid.

Adjustable Rate Mortgage (ARM)

A mortgage where the interest rate is not fixed for the life of the loan. These mortgages adjust periodically based on an index that changes with market conditions. The rate of interest is the sum of the index plus a margin ( the margin remains fixed for the life of the loan). Most ARMs have periodic interest rate and payment caps, as well as a life cap.

Amortization

Gradual payment of a debt through regular installments that cover both interest and principal.

Amortization Methodology

Refer to interest calculation

Annual Value

Annual Value (AV) of a property is the estimated annual rent of the property, excluding the rent for furniture, fittings and service charge. The Income Revenue Authority of Singapore (IRAS) determines the AV of the property by analyzing rents of comparable properties.

Borrower

Borrower(s) refers to the person(s) that is/are taking the home loan from the Bank. All owner(s) of the pledged property (mortgage) is/are borrowers. However, not every borrower is a mortgagor. A non-owner may be included in the loan application as a co-borrower to fulfill the loan requirements.

Bridging Loan

An interest servicing short term loan (up to 6 months) to help bridge over the period between the completion of purchase of a new property and the receipt of proceeds from the sale of an existing property.

Cancellation Fees

The amount that mortgage lenders charge, usually a percentage of the loan amount, if you were to cancel your housing loan after you have accepted the Letter of Offer but before the housing loan is disbursed.

Capital and Interest Housing Loan

Part of each monthly payment you make goes towards repaying the capital amount you owe and part goes towards paying interest charged on the loan. At the end of the loan tenure, the entire debt will be repaid. In the early years, payments consist largely of interest; as time goes on the capital repayment proportion increases.

Cashback Housing Loan

The lender refunds a percentage of the housing loan the cashback and you are usually tied by way of an early redemption penalty for a set number of years.

Caveat

It is a notice of a claim in interest to the property. Once the buyer has paid the deposit for the property, his/ her lawyer will lodge a caveat with the Singapore Land Authority (SLA). On occasions where there is more than one claim to the same property, the time when the caveat is lodged is crucial because it shows who the first claimant to the property is.

Claw-Back Period

If you are to fully redeem your mortgage within the claw-back period, the lender will reclaim the cost of freebies they gave to you when you sign with them. These would usually be the legal subsidy and may include valuation fees, fire insurance premiums et cetera

Collateral

It is the property you secure against your home loan.

Combo Housing Loan

A combo or hybrid housing loan can be sub-divided into different parts. Each part can be treated as a separate housing loan so you can choose a package for each division. In other words, your loan, if you were to sub-divide it into two parts, can consist of a floating rate component and a fixed rate component.

Construction Loan

It is a short term loan for financing the construction of a new property, reconstruction, addition or alteration of your existing property.

Conversion

It refers to the act of transferring your existing loan package to another within the same Bank.

Credit Limit

The maximum amount of credit that a bank will extend to a borrower.

Credit Record

This can be established through a search with the Credit Bureau (Singapore) Pte Ltd (CBS), which maintains a record of an individual's credit history with participating financial institutions.

Daily-Rest

Also known as daily-reducing, the interest will be calculated on the outstanding principal at the start of each day.

Debt Servicing Ability

Financial institutions will look at the Debt Servicing Ratio (DSR) of the customer - the ratio of affordable repayment based on gross financial commitments.

Default

It refers to the failure of the borrower to meet the requirements of the home loan or to repay the monthly installments on time for more than a few months (depending on the conditions of the loan). Once a Notice of Default is issued, the property that was pledged as collateral may be repossessed by the Bank.

Deferred Payment Scheme

This is a scheme where the purchaser makes the initial payment, normally up to 20% of the purchase price within 8 weeks and the balance amount would only be due upon Temporary Occupation Permit (TOP) being obtained from the relevant authorities.

Delinquent

It refers to the failure of the borrower to make payments by the due date. The Bank may issue a Notice of Default after the borrower is delinquent for a few months.

Down-payment

It refers to the upfront lump sum payment that is paid when you purchase the property.

Early Redemption (Partial or Full)

It refers to the repayment of the loan (principal and interest) before the maturity of the loan. There are two main types of loan redemption, partial redemption and full redemption.

Equity Loan

It is a second loan taken on your existing private property that has appreciated in value. There are no restrictions on how you use the funds. CPF monies cannot be used for repayment and the loan will only be released after the mortgage has been registered (i.e. it will not be released together with your home loan).

Exercise of Option

Should the purchaser decide to proceed with the purchase, the purchaser would be required to exercise the option granted by placing an additional deposit which would constitute a legally binding agreement on both parties for the sale and purchase of the subject property.

Fixed Rate Housing Loan

Packages offering a fixed interest rate for a set period, during which there will almost certainly be early repayment charges. You are protected from interest rate increases and allows for easy monthly budgeting. However, if rates were to fall during the fixed interest period, you would be left paying a relatively high rate.

Floating Rate Housing Loan

The interest rate can rise or fall throughout the tenure of the loan. Lenders usually give at least one months notice when adjustments are made to the interest rate. Most lenders allow partial prepayments for this type of loan, making this a good package if you intend to repay a significant portion of your housing loan in the initial few years.

Full Redemption/ Repayment Penalty

The amount that mortgage lenders charge, usually a percentage of the loan amount, if you were to fully repay your housing loan within a specified period of time.

Gear Up

See Equity Loan

Guarantor

Guarantor refers to the person who agrees to be responsible for another person’s mortgage in case of default.

Home Loan/Mortgage Loan

Home Loan / Mortgage Loan is a loan secured by the borrower’s property. Failure to make repayments on the loan could result in losing the property that is secured against the loan.

Hybrid Housing Loan

Refer to Combo Housing Loan

In-Principle Approval

Loan approval from a mortgage lender based on the credit standing of borrower(s). Approval is normally valid for around a month and subject to the property valuation being higher or equal to the property purchase price.

Interest Calculation

The frequency with which lenders calculate the outstanding balance on mortgages (e.g. annually, monthly or daily) is an important consideration for capital and interest housing loans.

Interest-Offset Accounts

Some deals come with an account whereby cash deposited into this account will offset the interest that you pay on your housing loan quantum. For every dollar that you deposit into the account, the interest may be offset fully or by a fraction. For example, your deal may offer you an account that offsets 2/3 of your interest rate for cash that you deposit into it. When you deposit S$100,000 into the account, assuming your interest rate is 3% and loan quantum is S$500,000 at the time of deposit, you will be paying interest of 3% for S$400,000 and 2% (2/3 of 3%) for S$100,000. This type of account is useful when you have access to substantial liquid funds but have no intention of using the funds to reduce your loan quantum.

Interest-Only Payment Scheme

It is one of the flexible repayment schemes that allows the borrower(s) to pay the interest on the home loan for a specified period, instead of the full monthly installment, which is inclusive of the principal and interest. Upon the expiry of the scheme, the outstanding loan will be re-amortized over the remaining loan tenor and the new monthly installment will include the principal and interest.

Joint Tenancy

The equal holding of property by two or more persons where they hold the property jointly and severally. Right of survivorship applies in joint tenancies.

Late Charge

It is a fee payable when the monthly installment is not received by due date.

Letter of Offer (LO)

A contract between the borrower(s) and the mortgage lender stating the terms of the housing loan package.

Loan Quantum

The loan quantum or principal is the amount of money that you borrow.

Loan Tenure

The period of time that you will take to fully repay your loan.

Loan To Value (LTV)

A percentage figure indicating the size of the housing loan on a property in relation to its value. Thus, a house worth S$500,000 with a mortgage of S$250,000 would have a loan to value of 50%. Most banks and financial institutions have better housing loan deals for LTV 80% and below. The maximum LTV that lenders can legally go to in Singapore is 90%.

Lock-In Period

The number of years that you are tied to your lender. If you fully redeem your loan within this period, there will be a full redemption penalty that is equal to a percentage of your loan quantum. Lenders may also charge a penalty for making partial payments within this period.

Monthly-Rest

Also known as monthly-reducing, the interest will be calculated on the outstanding principal at the start of each month.

Mortgage

A pledge of a property by a borrower (also called mortgagor) to the financial institution (also called the mortgagee) as security against the loan. The mortgagee, has the right to take the property if the mortgagor fails to repay the loan.

Mortgagee

Mortgagee refers to the lender (the Bank).

Mortgage Broker

An organization like who is marketing numerous loan packages from a panel of financial institutions. Mortgage brokers offer a service where they will recommend and select the best loan or loans for borrowers.

Negative Amortization

An increase in principal balance which occurs when the monthly payments do not cover all of the interest cost. The interest cost which is not covered by the payment is added to the unpaid principal balance.

Negative Gearing

When the investment return is not sufficient to meet the interest costs of the loan that was used to fund the investment.

Option To Purchase

A legal agreement offered by the vendor to the purchaser detailing the terms and conditions of the sale of property. If accepted by the purchaser with an option deposit also known as consideration, the vendor is legally bound by the contract to give the purchaser a further cooling off period to reconsider the purchase.

Overdraft

Is a credit facility on a revolving basis which may be secured by the mortgage of a property.

Partial/ Prepayment Redemption Penalty

The amount that mortgage lenders charge, usually a percentage of the loan amount, if you were to prepay your housing loan within a specified period of time.

Payment Holiday Housing Loan

A relatively new type of mortgage in the Singapore market. You take a break towards paying of your interest or monthly installment at certain periods during your loan tenure.

Payment

Payments that you make in addition to the monthly installments.

Principal

Refer to Loan Quantum.

Principal and Interest Housing Loan

Refer to Capital and Interest Housing Loan.

Progressive Payment Scheme

This scheme is based on the developer's predetermined schedule of payment (payments are normally called for in percentages). This schedule is set out based on the different stages of development; as such payments made for the purchase would be spread out throughout the course of the development process.

Property Tax

A tax levied by the local municipality or county on real and personal property.

Quest Line Search

This search reveals litigation suits lodged against an individual, including those by other organizations like telephone companies, power supply, etc.

Quit Claim Deed

A deed operating as a release; intended to pass any title, interest or claim which the grantor may have in the property.

Redemption Costs

Costs incurred when a loan is paid off or redeemed whether in part or in full before the end of its term.

Refinancing

Switching from one housing loan package to another, usually better, deal.

Repricing

Switching from one housing loan package to another deal with the same lender.

Residential Investment Loan

A loan granted to purchase a property intended for investment purposes (for example, to be rented out) as opposed to owner-occupied purposes.

Security

Generally, property which is pledged as collateral/security for a loan.

Singapore Interbank Offered Rate (SIBOR)

Singapore Interbank Offered Rate is fixed by the Association of Banks in Singapore. It represents the rate that banks and financial institutions lend unsecured funds to each other in Singapore. Local housing loan interest rates track movements in the SIBOR.

Singapore Swap Offer Rate (SOR)

Swap offer rate is fixed by the Association of Banks in Singapore. It represents the average cost of funds used by banks in Singapore for commercial lending.

Stamp Duty

A form of government tax on certain legal documents and financial contracts which validates the documents or contract legally. For property related transactions, 2 different types of stamp duty is payable, namely purchase stamp duty and mortgage stamp duty.

Temporary Occupancy Permit (TOP)

The Commissioner of Building Control will issue the Temporary Occupancy Permit to a building project when it is completed.

Tenancy-in-Common

Tenancy-in-Common refers to the manner of ownership in a property. The property will form part of the deceased owner’s estate when he/she passes away. In other words, unlike a joint-tenancy, the deceased's interest does not pass automatically to the remaining co-owners.

Title Deed

Title Deed is document that contains evidence of a person's legal right or title to the property.

Underwriting

The process of evaluating a loan application to determine the risk involved for the lender. Underwriting involves an analysis of the borrower's creditworthiness and the quality of the property itself.

Unsecured Loan

A loan that is not backed by collateral.

Valuation

A report as required by the CPF Board and financial institutions, detailing a professional opinion of the property's value so as to determine the amount of CPF withdrawal and bank financing.

Variable Interest rate

Variable-rate also known as the floating rate is where the interest rates are constantly changing and financial institutions are guided by the Singapore Inter-Bank Offer Rate (SIBOR) to determine the rate to charge for their loans.

Wraparound Mortgage

A mortgage that includes the remaining balance on an existing first mortgage plus an additional amount requested by the mortgagor. Full payments on both mortgages are made to the wraparound mortgagee, who then forwards the payments on the first mortgage to the first mortgagee.