Home Financing Strategies For Managing Cash Flow Amidst COVID-19 Pandemic

PropertyGuru Editorial Team
Home Financing Strategies For Managing Cash Flow Amidst COVID-19 Pandemic
Have you been thinking about the best home financing strategies to manage your cash flow during COVID-19?
On Thursday evening (28 May 2020), over 350 guests attended PropertyGuru’s webinar entitled "Home Financing Strategies For Managing Your Cash Flow" to hear Paul Wee (Managing Director, FinTech – PropertyGuru) provide expert advice on this important topic, particularly during this challenging period.
Harnessing more than 20 years in banking, Paul is a veteran in the banking industry, starting in wealth management before moving to Retail Mortgages. In his career, Paul has experienced and helped clients through the financial impact of the SARS epidemic and the Global Financial Crisis.
In this webinar, Paul discussed everything from refinancing strategies to the implications of the recent MAS measures to help you through the COVID-19 situation. He also shared more on determinants of interest and the strategies for interest management.

Webinar Recap: Home Financing Strategies For Managing Your Cash Flow

If you missed our live webinar, it’s not too late! You can catch it right here:

More questions on mortgages and refinancing home loans in Singapore

That’s not all. Aside from those Paul managed to cover during our 90-minute webinar, there were many great questions on mortgages and refinancing strategies that streamed in.
Paul has taken the time to answer each of your questions—here they are.

Q: Will a mortgage loan from PropertyGuru Finance reflect on the same Credit Bureau used by banks in Singapore?

PropertyGuru Finance is an online mortgage marketplace that offers home loan comparison rates and digital tools to help you pick the right home loan. If you get a home loan through PropertyGuru Finance, yes, the loan we helped you arrange will be reflected on your Credit Bureau Report.
However, it will be by the financial institution you take the loan from. PropertyGuru Finance is not a financial institution (i.e. we are not a bank!), and as such is not a member of the Credit Bureau of Singapore.

Q: Are there benefits taking an HDB housing loan instead of a bank loan?

Certainly! One of the main benefits of HDB housing loans is that of improved cash flow. The minimum amount of cash that home buyers need to cover for HDB loans is S$5,000.
For bank loans, buyers will need a minimum cash amount of 5% of the purchase price which is usually more. For example, even for an affordable HDB unit at $200,000, you will still need to fork out $10,000.
Do note, however, that HDB loans are only for HDB flats, so private home buyers don’t really have a choice.

Q: Singapore mortgage rates seem to be going down, especially with the US slashing rates. Does this mean SIBOR packages are the best choice now?

It is true that SIBOR-pegged mortgages are currently offering very attractive rates, but as mentioned in the webinar, an important factor to consider is your risk appetite.
For example, some home buyers may actually feel more comfortable choosing a fixed rate loan (featuring higher interest rates, but a fixed instalment for 3 years) if they cannot stand the thought of their instalment payments changing on a monthly basis.
There’s no saying which approach is the "best" or "right" one. As they say, hindsight is 20/20, and it is only with hindsight that we can truly tell if our financing decision was correct.

Q: Is there a minimum outstanding loan amount to refinance?

Banks typically look at a minimum loan amount of S$80,000 (though not all), but aside from the bank criterion, it is also important to work out if it makes financial sense for you to refinance.

Q: As the loan amount gets smaller through the years, are my refinancing options affected? Some banks offer better rates for large amounts, right?

Yes. The higher the loan amount, the more choices you have. That is why it is important to employ a flexible strategy where one can manage.

Q: What is the difference between lock-in period and clawback period?

For refinance loans, financial institutions may give customers some sort of subsidy to help lower the costs involved in switching banks. For this, the banks enforce a "clawback period" that typically requires clients to stay with them for at least 3 years, or refund the subsidies received.
The "lock-in period" is another stipulation (separate from the clawback period) which requires borrowers to stay with the banks, failing which a penalty is levied against the outstanding amount in the home loan.

Q: I currently have a home loan of $200,000 (not lock-in). I have the financial ability to pay it off, should I?

That’s a fantastic position to be in!
Before you decide, it is important to understand where the repayment of $200,000 will come from. Will it be from CPF or cash? If it is cash, what are the alternatives that the cash can be deployed to? Will these generate a higher return than the interest rate on your home loan?
Also, after repaying the S$200,000, would you have sufficient cash left as emergency funds or for other opportunities that may arise?

Q: I just started working, and can only show one month’s income for May 2020. Will the bank consider this income, or the bank will consider the amount declared in NOA 2020 (for 2019’s income)?

It is normal practice to have at least one payslip before banks will consider approving a home loan. As for the Notice of Assessment (NOA), a change of job means the reliance will likely shift to the payslips.
There are, however, instances where financial institutions may still rely on the NOAs. This is subject to approval.

Q: I am 46 years old and currently in the process of refinancing my loan. Should I keep to my remaining 19-year tenure or extend it to lower my monthly repayments?

It really depends on what circumstances you are currently in. Do you have sufficient savings? What is your current income? What is the current outstanding loan amount? These are just some of the questions you need to ask yourself.
As shared during the webinar, it is risky to employ a templated approach without first understanding the facts of your own unique situation.
Reach out to us via PropertyGuru Finance. If we could have a conversation to understand these factors, we can better guide you.
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