Want to buy a new home but fretting over how to pay for it?
You need a home loan.
With so many loans out there, here are some tips to help you pick the right home loan for you.
But before you start comparing for the ‘right’ home loan, here are 3 things to keep in mind:
- Home loans are different from personal loans such as car or renovation loan. The interest rate is calculated based on diminishing balance each month, which makes it lower.
- What are your priorities based on your financial and family situation? Do you have kids or expecting any? Do you have sufficient cash?
- Your loan eligibility based on the total gross monthly income spent on debt repayments.
Now, let’s explore the different loans.
Main difference between HDB Loan and Bank Loan:
- HDB lending rate is higher than the bank lending rates.
- HDB loan offers a larger financing quantum of up to 90%of the purchase price or current market value of the flat, whichever is lower, as compared to bank loans which are usually only able to finance up to 80%.
- HDB loans do not require any form of cash down payment, whereas bank loans require a minimum of 5% cash down payment.
- When taking up a HDB loan, applicants are not subjected to early repayment penalties. On the other hand, bank loan applicants are subjected to early repayment penalties.
- Banks impose a late payment fee that is roughly 3.5 times that of HDB, subject to a minimum amount of $50.
- Refinancing the housing loan from a HDB loan to a bank loan is a irreversible process.
- A Singaporean permanent resident is required to take a bank loan when purchasing a property. If he/she subsequently obtains the Singapore Citizenship, they will not be allowed to refinance to a HDB housing loan.
Ultimately, due to our different priorities, there is no “one size fits all loan package” that will be able to suit everyone. As such, between choosing a HDB or a bank loan, one should weigh the pros and cons, in addition to considering the loan eligibility.
To find out more about taking up a bank loan vs. a HDB loan, refer to the full guide at http://www.redbrick.sg/blog/home-loan-singapore-ultimate-guide/
The team at Redbrick Mortgage Advisory has more than 60 years of banking experience and is proficient in structuring and sourcing for the best financing terms for both residential and commercial real estate in Singapore, Malaysia, USA, UK, Japan, Thailand and Australia.