Frequently Asked Questions

General Home Loan 101

What is Home Loan Whiz?

Home loan Whiz is a FREE mortgage consultancy service based in Singapore that aims to help you find the best mortgage home loan in the market, saving you time and up to thousands of dollars$$$ in the process.

We pride ourselves by our 3R guiding principle.

Reliable – Always putting ourselves in your shoes, we will handhold and guide you through the entire loan process, resulting in unbiased recommendations and a satisfied client.

Resourceful – We are constantly up to date with the latest rates and market news to provide you with the optimal solution

Responsive – We respond promptly to all your queries and our closely forged relationship with quality bankers enables us to get things done effectively

What makes Home Loan Whiz Unique?

Loans can be complex and confusing. At Home loan Whiz, we strive to educate and guide you along so that you will be able to make the best informed choice.
Most people finance their home loans by referrals from their agents or directly with the bankers. These people, being commission driven, would sometimes be biased toward certain products they are representing, which might not be in your best interest.

Home loan Whiz works with almost all banks in Singapore. The banks pay us a small fee for referring cases to them. This is why we are able to provide you with free and unbiased views.

Shopping around the banks for the lowest rate is a very time-consuming activity, Our close ties with the banks enable us to have access to all the latest rates at our fingertips, saving you many hours of your precious time. Being the experts in this field, we also keep ourselves updated with the latest market news and regulations to be able to better advise you.

Do I need to pay to use Home Loan Whiz

No, it is absolutely free of charge. The banks will remunerate us directly for every successful referral.

Infact, if you refer someone to us and that person signs a loan package, we will pay you a referral fee as well. Contact us for more details

Why should I go to Home Loan Whiz when I can go to the banks myself?

When you walk into a bank, the banker will only be able to recommend you the products from his bank, even though there might be cheaper alternatives around with better terms. At home loan whiz, we can tell you which banks are offering the lowest rates. However, if you have decided on a certain bank, we can put you in touch directly with a banker from that bank. Our bankers are carefully selected over the years and have proven track record of providing excellent service to our clients.

How do the banks determine my eligibility for a house loan?

Each Bank has their own assessment system.

In general, the factors below will determine whether you are eligible to loan and how much you can loan.

Common factors they take into consideration are

  • Monthly income
  • CPF contribution
  • Financial Commitments (Car loans,?study?loans)
  • Credit Rating from Credit?Burea?Singapore (Yes 1 late credit card payment will be flagged out)
  • Bankruptcy search
  • Employment
  • Age
  • Nationality
  • Debt Servicing abilities
What are the stages of processing a loan?

Once you have decided on the package, an application form for housing loan, together with all the relevant documents are submitted to the banker for processing. The bank will then decide on how much loan and loan tenure to grant you and come up with a Letter of Offer(LO). This letter usually takes about 1 week to generate, depending on bank and complexity of case. The banker will explain all the terms and conditions of the loan and the document will be signed by you if agreeable. Once signed, it is legally binding. The bank will then issue a Letter of Instruction and get an appointed law firm to act on their behalf. Some lawyers on the banks panel can act for both the bank and you, the buyer. Saving double legal fees. Do consult us for this group of panel lawyers.

What documents are required for a home loan application?
  • NRIC or Passport
  • Loan Application Form
  • Latest income documents (3 months pay slip or Notice of Tax Assessment)
  • Latest 12 months CPF statement
  • Option to Purchase Document

If applying for Refinancing, additional documents required are

  • Current CPF Property withdrawal statement
  • Latest 12 months house loan repayment statement
Should I take up a longer or shorter home loan for my home?

Should I take up a longer or shorter home loan for my home?

When most people choose their home loan package, they often ask themselves whether they want to go with a longer or shorter loan term. A shorter tenure would mean lesser interest paid and also the idea that you get to finish the repayment earlier in life sounds great. Meanwhile, a longer loan tenure means lower monthly installments and better cash flow for your everyday life.

So which do you think is better? In this article, let us explore the pros and cons of the different loan tenures.

 

To illustrate, let us first take a look at an example below.

In general, people refinance their mortgage every 3 years to make sure they are on the best rates. Most people also have plans to sell/upgrade their property after 3-5 years once their family size and income grow. Therefore, the calculations below are based on a 3-year period

For a loan of $1 million @ 2% interest rates. Let’s look at the difference in the monthly installments between a 15-year and 30-year loan tenure

Monthly Instalments

Let us first look at the monthly repayment amount from this example. Certainly, when you double the time of the loan tenure, the monthly installment is lowered by almost half. As we can see from the table above, the 30-year loan tenure will save you $2,739/mth extra compared to the 15 years tenure. After 3 years, you will have $2739X 36 months = $99,684 extra in terms of cashflow.

So how much extra interest did we have to pay to enjoy $99,684 extra cash flow for the 30-year loan?

 

Total Interest payable over 3 years


After 3 years, the total additional Interest you have to pay between the 30-year and 15-year tenure is $2,931, which works out to be an extra $81 interest a month.

Does this calculation shock you? You accumulate an extra $99,684 in cash flow over 3 years, and the extra interest works out to be only $81 extra a month for the 30-year loan.

So, you might be wondering why is this the case?

 

Why is the difference in interest so small between the 30 and 15-year loan tenure, when the installment is almost doubled?

First of all, you need to know that interest on your home loan is charged on the outstanding loan amount. The outstanding loan amount in the first few years of the loan term is very similar between a 15-year loan or a 30-year loan. As seen in the example above, the difference is marginal.

The main difference will come in if the loan is held till the end of the tenure. However, most people tend to sell or upgrade after a few years. Otherwise, one can also arrange a prepayment to the loan when necessary. So what will all this mean to a property owner? Here are the 3 benefits of getting the maximum tenure:

 

  1. Cash Flow

Now that we are aware that the additional interest is minimal, the question is, what are you going to be doing with that extra cash flow if you go for the longer loan tenure? Are you going to end up splurging it on that branded bag or toy? Or will you be investing it at a higher rate of return than your home loan? Perhaps you will be saving it for a rainy day fund as covered in the next point. Well, at least with a lower monthly repayment, you have the flexibility to decide! Even better, if your loan comes with prepayment option, you can still choose to use that additional cash flow to pay down your loan at a faster pace.

 

  1. Safety Net and Flexibility

Along the same line as point 1, the flexibility that comes with a lower fixed monthly commitment allows you to prepare for unforeseen circumstances. Whether it is to deal with a temporary loss of income, unplanned large expenses, or an interest rate hike, having a buffer will put more control in your hands in such situations.

 

  1. TDSR

To further touch on the impact of government regulations, TDSR (Total Debt Servicing Ratio) is something that a savvy property owner should be familiar with. TDSR was implemented in 2013 and has changed the way in which people can take up loans. Not only does it affect how much home loan you can take up, it also takes into consideration all the different types of loan.

That being said, TDSR calculation involves the monthly loan commitment over monthly income. Having a lower monthly loan commitment will give you the ability to get a higher loan quantum for the next loan, should there be regulatory changes. As for property investors, this will play a crucial part when you wish to buy subsequent properties.

 

So there you have it; there are many benefits to having a longer loan tenure. However, if you happen to fall into the category where you have too much money sitting around and you won’t need to worry about cash flow issues and you also do not believe in investing, you can consider fully paying off your mortgage

Having said all these, there is no one right answer when it comes to how long the loan tenure should be. Hopefully, these pointers will be useful for homeowners to assess their own standing and preferences. If you have any personalized questions, feel free to speak to one of our expert mortgage advisors by visiting us at (+65) 6631 8980 (main line).

Should I use my CPF for my property purchase?

Should I use my CPF for property purchase?

When purchasing a Residential Property in Singapore, the CPF board allows you to utilize funds in your ordinary account for your down payment and also the monthly installments. In Singapore, most home purchasers will choose to utilize as much CPF as they can, thinking that they cannot see, smell, and touch this money until they grow very old. However, things are not as simple as they seem; here are some points for you to consider.

1.Let your money work for you

One thing to note is that when you utilize CPF to pay for the house or monthly installments, you need to return all the CPF you have utilized, plus 2.5% per annum interest owed when you sell the property. On the other hand, if you had left this amount sitting in the CPF account, it would be earning you 2.5% interest per year. This is compounding interest, hence you will see the snowball effect after a period of time. What exactly does this translate to?

Let us take a look at the scenario below.

For simple illustration purposes, we will take a rounded figure of $100,000 CPF usage for the initial deposit for the property purchase and $1000 monthly CPF usage for loan repayment, over a period of 10 years.

In this example, Mr. A uses CPF to pay for both the deposit and monthly installments of the mortgage loan, whereas Mr. B uses cash for both. The total amount for monthly installments and deposits will be $220,000 after 10 years.

By then, when both property owners sell their house, Mr. B would have gained an additional $45,000 worth of interest in the CPF account, whereas Mr. A will need to return the $220,000 taken from CPF plus an additional $45,000 from the sales proceed.

The net result for Mr. B, who has not utilized CPF, will be that he gets $45,000 more cash from the sales proceeds, plus an additional $45,000 interest from the CPF funds. This makes him $90,000 richer in terms of cash flow.

Scenario 2

Some home purchasers may wonder if they should use up all their OA savings or take up more bank loan. To illustrate this, we will use an example of taking up an additional $100,000 Bank loan and leaving this $100,000 inside of CPF.

If this $100,000 home loan is being charged at a rate of 1.9% per annum, the total interest payable after 10 years would be $9900, whereas a total of $28,100 worth of interest has been earned from the $100,000 inside of CPF.

So to borrow this additional amount of home loan and leave your CPF money inside CPF will net you $18,200 over 10 years.  This strategy will make sense, assuming that the bank loan interest rates are lower than the interest rates that CPF is offering you.

Of course, in the event that Bank loan interest rate rises above the CPF rate, you can always utilize your CPF savings in addition to the accrued interest and pay down the loan.

2.Safety Net and Flexibility

The world we live in is every changing and always unpredictable. What happens if there is another financial market meltdown and you become unemployed? Imagine if you had left $100,000 inside your CPF; you can always use the amount plus the interest earned in order to pay you monthly instalments.

How many months’ installments can you pay with that buffer amount?

This will reduce the stress and financial strain in such hard times, enabling you to weather difficult times.

Another point to note is that you can choose to pay down with your CPF at any time when circumstances change (after the lock-in period, if there is one) so there is no need to hurry when you can simply let your money work for you.

Lastly, how much you utilise from CPF for your property will affect how much you can borrow in the event that you wish to do a cash out on your property. For example, when a person wishes to take an additional equity or term loan, the maximum amount will be affected by the CPF usage.

3.CPF for retirement

The interest rates that the CPF gives are relatively stable with no lock-in times or fees involved. Up to the first $20,000, CPF gives out an additional 1%, making it 3.5%. This is considered quite a good rate in Singapore, given that there are no other criteria and at such low risk. The original purpose of the CPF account is to help one grow their retirement fund in a disciplined manner. We often neglect planning for the future while we work hard and spend on our current lifestyle.

Conclusion

To sum up, in most cases it will be wiser to leave the CPF in its account for the 3 reasons above. However, in the scenario where you need the cash flow and would like to utilize the CPF for the monthly installments, there is nothing wrong with that either. Likewise, if you are a savvy investor and would prefer to use your cash on other investments that can earn a better rate than the CPF, it will be great to do so too.

For more personalized info, feel free to speak to one of our expert home loan experts by contacting us at (+65) 6631 8980 (main line).

Government regulations

Is HDB Mortgage Insurance compulsory?

HDB Mortgage Insurance, also known as Home Protection Scheme (HPS) is compulsory if you are using CPF monies for your HDB Flat. A waiver can be granted if you have alternative mortgage insurance provided by other private insurers. Mortgage Insurance for private property mortgage are not compulsory but comes highly recommended for you and your love ones in the event of unforeseen circumstances.

If you require assistance on this, our consultants are happy to point you in the right direction.

Can CPF monies be used to pay for stamp duty when purchasing a property / EC property?

Yes. However, as it may take a while for CPF Board to release your money to pay for your stamp duty, you may need to pay first using cash to avoid any late penalty charges.

I have a private property that is fully paid up, how much can i remortgage it for a loan?

You can remortgage and take out up to 80% of the valuation amount whether you have an existing loan or it is fully paid up. This will depend on a few factors.

The bank, whether it is your 1st or 2nd mortgage, CPF monies owed, your income level. Do contact us and we can better advise you.

My HDB property is fully paid up. Can i remortgage it back to the banks for a loan?

No the government does not allow this

What can I use my CPF monies to pay?

CPF monies from your ordinary account can be used for partial payment for the property, including land and construction cost of the house. It can also be used to pay for stamp duty, mortgage fees, legal fees, monthly mortgage instalments, HDB upgrading fees.

However, it cannot be used to pay for Conservancy charges, repair and renovation works, and also the cash portion of the property purchase. CPF ordinary account funds can be used to pay up to the withdrawal limit. ?The withdrawal limit calculator can be found on the CPF website http://www.cpf.gov.sg/cpf_info/calculator/vl/vl_input.asp

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