Some Things To Note When Making Housing Loan Comparison

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Some Things to Note When Making Housing Loan
Comparison
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• There are numerous forms of housing loan packages
  available in the market. When you make housing
  loan comparison, it is imperative that a fair
  comparison is made. Being negligent to this can
  result in comparing mortgages that does not make
  sense. Sort of like comparing an apple to an
  orange.

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• For example, it cannot be realistic comparing a
  15 year mortgage to a 30 year mortgage. It also
  does not make sense to compare housing loans with
  fixed interest rate to those with floating
  interest rates. Make comparison between different
  mortgage lenders with near similar structure on
  lock-in period and interest rates. This can also
  vary especially if the mortgage lender is one
  that is willing to be flexible on their housing
  loan packages. You might even get into a
  situation where you have to choose between
  favorable prepayment penalties and favorable
  interest rates and vice-versa.

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• Adding up the total fees and charges at closing
  will give you a good picture of which offers are
  the most attractive on signing up. There can be a
  varying number of charges and fees carrying
  different labels. Mortgage lenders may treat
  these fees differently. One may give subsidies
  but charge higher processing fees. Another may
  waive processing fees provided you take up their
  in-house home insurance package. So it is best
  that you figure out these details on closing
  costs before making your choice on an offer. Add
  up all the fees involved to make a fair and
  proper housing loan comparison.

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• Note that lower interest rates will not
  necessarily mean a better deal for you. Look
  carefully into the terms of the deal. It can be
  low rate for only an initial first year of the
  loan, and much higher rates after that. Remember
  to question the details of closing costs before
  giving your commitment to accept a housing loan
  offer from a lender.

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• When you are fully aware that you are going to
  switch mortgage lenders after the lock-in period,
  you should take greater care in your offer
  selection. This is because the redemption penalty
  will be of meticulous concern to you. However, if
  you are willing to pay higher interest rates and
  obtain favorable penalty terms, tell your
  mortgage lender. You wouldn't know how flexible
  they can be if you don't ask.

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• For example, when you are looking at housing loan
  offers with a floating rate in Singapore, it is
  most commonly bench-marked to the publicly
  available Singapore Interbank Offered Rate
  (SIBOR) or Swap Offered Rate (SOR). A margin is
  added on top of the available rates, and that
  becomes your interest rate.

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• Generally, SIBOR is more stable while the SOR is
  more volatile in fluctuation. So an individual
  with an appetite for calculated risk may choose a
  housing loan bench-marked to the SOR when it is
  low. Do ask questions on current outlooks when
  deciding offers between these 2 benchmark rates.
  Because rates can change daily, the lenders are
  in the best position to provide you timely
  information on interest rates.

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• The most widespread deciding factor that
  influences an individual on a housing loan
  decision is the loan-to-value (LTV). The LTV is
  the amount that a mortgage lender is willing to
  offer the borrower for the housing loan. The
  common practice is to finance an amount based on
  the market valuation or purchase price of the
  property in question, whichever is lower. It
  simply means that a house has a current market
  valuation of 400,000 and you bought it for
  500,000, the mortgage lender will only be
  comfortable to finance a portion of the valuation
  price at the lower value of the 2 - 400,000.

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• Don't assume that a lender will finance 80 of a
  property purchase just because you heard of it
  from a friend. Be careful on this and check with
  a lender on how much they are willing to finance.
  This is because different properties in different
  categories can be treated differently by a
  lender. They may be willing to finance 80 of
  properties in category A while only 60 of
  properties deemed to be in category B. whereas a
  different lender may have an internal policy that
  is the other way around.

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• Different mortgage lenders can have differing
  lending policies. Factors like proposed
  redevelopment, location, etc, can be determining
  factors. So be careful when comparing housing
  loans. Decisions from one lender do not
  necessarily serve as a reflection of the whole
  market.

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