Mortgages can take up a huge bulk of your budget. After all, you’re not dealing with a very small amount. The good news is with proper planning and good tips you will find you repayments comfortable to your pocket.
Boost your mortgage repayments with these handy tips:
1. Find a good mortgage broker. Mortgage brokers deal with various banks. It should be that they don’t limit your options to only a handful, worst to only one bank. You should have at least 3 to 4 mortgage packages to choose from, each explained thoroughly. Also, brokers receive their fees from the banks, not from you. Remember that.
There are no rules or laws that govern the actions of mortgage brokers. However, before they can do business, they should receive a letter of agreement from banks. These banks, moreover, should be registered and approved by the Monetary Authority of Singapore.
2. Check the subsidies. A lot of the Singapore loans come with subsidies. This means the bank pays a portion of the fees. But they do come with caps. For instance, with legal fees, the maximum subsidy can be $2,000. In this case, you have to pay for whatever difference. The higher the cap, the more advantageous to you since you pay less from your own bank account.
3. Be mindful of your lock-in period. During the lock-in period, you’re not allowed to change the terms and conditions of your mortgage contract. Otherwise, you will have to pay for penalties. It should be one of your considerations. First do you have a lock-in period? How long is it going to be? Does it match to the time you’re planning to sell your home? How much will be the penalty. At most, you pay 1.5 percent, which is already huge.
4. Increase your deposit. The mortgage doesn’t cover the entire cost of the property. The highest will just be 80 percent of the total loan amount. This means you have to find 20 percent elsewhere. Nevertheless, if you wish to reduce your repayments in the coming years, increase your deposit from 10 to around 25 to 40 percent. It will also be easy for you to get a mortgage since banks don’t have to fear about taking a huge risk on you.
5. Lower your debts. Your debts can affect how much loan you can apply from the bank. This is because they implement the so-called debt servicing ratio. They take into account your long-term loans, such as car loans or educational loans, then divide the number by your monthly salary. Target 35 to 50 percent to obtain good loans from banks.
6. Pay off on time. Like credit cards there are corresponding charges if you don’t pay off your monthly repayments on time. To reduce the chances of paying more than you should, as well as to prevent damaging your credit rating, pay your mortgages at the right time.
You can actually tie your mortgages to your bank account. When it’s time to make a repayment, the money will automatically be deducted from your savings or current account. This way, you don’t forget about it. Just monitor your bank balance to ensure you have sufficient funds to support the repayment. If you don’t and you have a current account, you may have to pay for the overdraft fee.
7. Don’t settle for the minimum. If you have extra money, you better use it to pay off your large debts such as your mortgages than for something else. The purpose here is to speed up your repayments. By cutting the payment period, you can save a lot of money from your interest repayments.
8. Know when to apply for refinancing. There are instances where refinancing is not a good idea, but you may still want to keep it an option. Refinancing is good especially if you like to reduce your interest rates. You could be in a fixed interest rate, and you wish to go for variable interest rate since the prevailing SIBOR (Singapore interbank offered rate) has gone down.
You may also like to apply if you want to speed up the repayments through a loan with shorter payment period.
9. Be careful with interest-only loans.
Some lenders may offer with interest-only loans. At first it sounds great since you can save a huge chunk of money every month. Principal is not included in the calculation. However, by the time you have paid all the interest, your debt is still there, which means more repayments from you. It’s also common for lenders to give you very high interest rates.
Be mindful of your mortgages. Banks can repossess the property, leaving you with no home and a lot of debt. If you want to know how to manage your funds more effectively, you can participate in a debt management program.