Affordability
Amortization and Amortization Schedule
Appraisal (or Valuation)
Balance
Bank charges and fees
Bridge loan
Cancellation fees
Claw-back period
Collateral
Credit report
Default
Down payment
In-principle approval
Interest accrual period
Interest-only mortgage
Interest payment
Interest rate
Home insurance
Home Protection Scheme (HPS)
Legal fees
Letter of Offer (LO)
Loan amount
Loan-to-value ratio (LTV)
Loan term
Lock-in period (or loyalty period)
Monthly debt obligations
Mortgage
Mortgage insurance
Prepayment
Prepayment penalty
Primary residence
Principal
Property tax
Refinancing
Repricing
Required cash
Singapore Interbank Offered Rate (SIBOR)
Stamp duty
Underwriting
Affordabilityrefers to a person's capacity to afford a property. It is typicallyexpressed as the maximum price a person could pay for a property, andit is a function of two things : How much money the person hasavailable for the down payment? How much can the person borrow?
use our affordability calculator to see how much you can borrow
Amortizationrefers to the repayment of the loan principal from scheduled mortgagepayments above the interest paid. The loan balance declines by theamount of the amortization. Amortization schedule is a table showingall the monthly mortgage payments broken down by interest andamortization, and with the remaining loan balance.
get full amortization schedule from our mortgage calculator
Appraisalor valuation refers to the process of determining the market value ofthe property. The bank will require a valuation of the property tocalculate how much loan they can give out (see Loan-to-value ratio).
Balanceis the amount of original loan remaining to be paid. It is calculatedfrom the original loan amount less all the principal payments so far.
Bankstypically charge a fee for processing the loan. However, in some casesthe processing fees may be waived by the bank. Banks may also chargefees for late payments of monthly installments or early repayment ofthe loan.
Bridgeloan is a short-term loan that is taken for the period between theclosing date of a new property and the closing date of an existingproperty. It is then paid back from the money received by selling theexisting property.
Cancellationfee is the amount that the lender would charge if the borrower were tocancel the loan after accepting the loan (by accepting Letter ofOffer), but before the money is given to the borrower.
Claw-backperiod refers to the period that you cannot fully redeem you mortgage.Lenders typically offer discounts, subsidies and other perks, but theydefine a claw-back period during which you cannot redeem your loanwithout paying back the subsidies and perks.
Collateralrefers to the property that is used to get the mortgage. In case ofdefault of payments, the courts may hand over the collateral to thelender.
Creditreport is a report provided by Consumer Credit Bureau containinginformation about the credit-worthiness of the person based on theperson’s credit history.
Default refers to the failure by the borrower to repay the monthly payments on their due date.
Down payment is the difference between the purchase price of the property and the loan amount.
In-principleapproval is an approval from the lender based on the credit record andaffordability of the borrower. It is not a binding document, and it issubject to the property valuation and other checks in the applicationprocess. In principle approval is typically valid for a month.
Interestaccrual period is the period over which the interest due to the lenderis calculated. It can be typically a year, a month or daily.
For example, an interest rate of 5% and a $100,000 loan.
If interest accrues yearly, it is calculated as 5% x $100k = $5000/year.
If it is monthly, 5%/12 x $100k = $417/month.
And daily, 5%/365 x $100k = $13.7/day.
Thekey here is to notice what balance is used to calculate the interest,and are you paying interest on interest. Most loans accrue interestmonthly to match the payment schedule - in this case the interest iscalculated on the remaining balance on each month.
Asthe name implies, there are no principal payments during the loan termand the loan balance remains unchanged. The monthly payments are onlyto pay for the interest.
see how much your monthly payments are lower with our interest-only mortgage calculator
Theamount of interest paid every month. It is calculated for each monthseparately and depends on the remaining balance of the loan. In atypical mortgage, the interest payment portion is much larger at thebeginning of the loan term as the balance is still high.
get details of interest payments from our mortgage calculator
Interestrate is the rate charged by the bank to lend the money. It is quoted onan annual basis, but may be accrued more frequently (see Interestaccrual period above). In Singapore, mortgage interest rates may bebased on SIBOR or banks' own internal lending rates - and is offered asa base rate plus a margin (e.g. SIBOR 12-months + 0.8%). Both the baserate and the margin may vary during the loan period (floating rateloans).
see how your payments can vary with different interest rates
Homeinsurance covers damage and losses to the physical structure of theproperty. The lenders may require the property owner to keep a validhome insurance at all times during the term of mortgage.
Ifyou are using your CPF savings to pay the monthly instalments of an HDBflat, you have to be insured under the Home Protection Scheme. HPSCalculator - https://www.cpf.gov.sg/cpf_trans/ssl/bo/hps_inp.asp
Youneed to hire a lawyer to do all the legal paperwork for your propertypurchase and taking up a mortgage. Some banks offer to subsidize legalfees, if you take a loan from them.
Letterof Offer is given by the lender on acceptance of the loan application.It is a contract and states the terms of the loan package given to theborrower. The borrower will then accept the loan by signing the LO, andboth parties are bound by the contract from there on.
Theamount the borrower promises to repay according to the mortgagecontract. It may differ from the amount of the cash given by thelender, because the lender may include charges and fees to the loanamount.
LTVis calculated as the loan amount divided by the lesser of the sellingprice or the appraised value of the property. The maximum LTV thatlenders can do in Singapore is 90%. LTV therefore defines the maximummortgage loan the lender can give out against the property.
Loanterm refers to the number of years over the loan amount has to berepaid. You can get loan terms of up to 35 years in Singapore currently.
see how your payments can vary with different loan terms
Lock-inperiod refers to how long you are tied to the loan. If you make a fullor some times even partial prepayment of your loan during this period,you will be subject to prepayment penalties. Lock-in period is usuallyclearly stated when you take out a loan package and is typically 1, 2or 3 years.
Monthlypayments required at the time of loan application on credit cards,installment loans, home equity loans, and other debts but not includingpayments on the loan applied for.
use our affordability calculator to see how much you can borrow
Mortgageis a loan in which the borrower puts up the title to property as asecurity (collateral) for the loan. If the borrower doesn't pay backthe debt on time (defaults), the lender can foreclose on the propertyand have it sold to pay off the loan.
Ahome loan or mortgage insurance plan is designed to help repay the homeloan outstanding in the event of the loan-taker's untimely death,disability or terminal illness.
Prepaymentrefers to repayments of the loan made in excess of the scheduledpayments. If the additional payment pays off the entire balance it is a‘prepayment in full’; otherwise, it is a 'partial prepayment'.Prepayment may carry penalty fees (see below)
Prepaymentpenalty is a fee charged by the lender if the borrower pays off theloan early. The penalty can be a percentage of the loan balance orrepayment of the some of the benefits given by the bank at the signingof the loan.
Primaryresidence is the property in which the borrower will live most of thetime. As opposed to a second home or an investment property that willbe rented out. Lenders typically have different lending criteriadepending on what type of property the person is getting the mortgagefor.
Principal is the portion of the monthly payment (comprised of interest and principal) that is used to reduce the loan balance.
Propertytax is payable by the property owner. The amount of property tax youhave to pay per year is a percentage of the Annual Value (AV) of theproperty. AV is the estimated yearly rent the property can fetch if itwere rented out. The tax for residential property is 4% of the AV (e.g.$4000 monthly rental x 12 = $48,000 annual value x 4% = $1920 propertytax).
Refinancingrefers to taking a new mortgage to pay for the old mortgage.Refinancing is usually done after the lock-in period to lower themonthly payments by taking a lower interest rate package and/orreleasing cash from a property by increasing the loan amount.
use our refinancing calculator to see how much can you save / cash on
Repricingrefers to switching your mortgage to another package with the samelender. Typically after your lock-in period, you would re-negotiate anew package with your lender. Or refinance with another lender (seeabove).
Requiredcash refers to the total cash required to close the propertytransaction. It includes down payment, legal and agency fees, stampduties, etc. However, it can be reduced by using CPF savings to paypartially for the property.
SIBORis fixed by the Association of Banks in Singapore. It represents therate that banks and financial institutions lend unsecured funds to eachother in Singapore. Many local housing loan interest rates trackmovements in the SIBOR - the mostly commonly used SIBOR rates formortgages are 3-month and 12-month SIBOR. For example, if your loan isbased on 3-month SIBOR, your loan interest rate is reset every 3 months(SIBOR plus lender's margin).
Stampduty is a tax on commercial and legal documents which record and effecttransactions relating to immovable property. In other words, it is atax by government to record transactions and to keep record ofownerships of land and property.
Underwritingrefers to the process of examining all the data about the propertytransaction to determine whether the mortgage should be issued. This istypically done by the lender.