Housing Loan Planning Advices

HDB?s HLE Scheme and Prudent Planning

• l^sf Jan 2007 - HDB implemented the Housing Loan Eligibility scheme (HIE) for both direct and secondary market purchases.
• All home buyers must ensure that they have the financial ability to make the purchase.
• Private property buyers should seek comprehensive housing loan planning assistance prior to any purchase.
• Buyers should not make hasty decision to purchase in the hope of making a quick investment return.
• It is not only the initial 5% cash deposit that the buyer should be concern with.
• Financial institutions today have very thorough and stringent credit approval processes.
• Familiarize yourselves with CPF's latest guidelines and policies pertaining to property purchases.

A Prudent Mortgage Plan

• Before you start your house hunt, a proper budget must be set and a detailed mortgage calculation done.
• Do not clean out your cash and CPF reserves at the initial stage.
• You must know the stability of your job and future income.
• Sufficient insurance coverage to protect your investment.
• CPF Minimum Sum Scheme
• Familiarize yourself with the latest housing loan packages.
• Good to know:

•  
  • monthly cash and CPF repayments,
  • principal vs interest payments,
  • breakeven point to turn over a profit,
  • rental returns vs interest payments,
  • investment return and yield,
  • cash and CPF breakdown,
  • cash proceeds,
  • and insurance required.

• Speak to your existing financier or to an experienced mortgage planner.
• Some features to look out for:
  • Fixed interest rate
  • Variable interest rate
  • Blended rates
  • Pegged rates
  • Interest servicing only
  • Linked account
  • Loan tenure
  • Lock in period
  • Claw back
  • Progressive payment scheme
    • Different payment scheme
    • Types of loans offered: housing loan, bridging loan, construction loan, OD and 5^th charge term loan

Factors That Financial Institutions Take Into Consideration When Approving A Loan

• Monthly income
• Monthly CPF contributions
• Existing funds in the CPF Ordinary Account
• Other existing financial commitments
• Employment profile
• Age of borrower
• Nationality
• Debt Servicing Ratio (the ratio of affordable repayment based on gross financial commitments)
• Bankruptcy
• Credit History
• Financial strength of joint borrowers (if any)