If you are a Singaporean planning to buy a home, it is important to be well versed with the process of securing mortgage loans. As you are probably aware, a mortgage is simply a loan that you apply for in order to finance the purchase of a home. It usually comes with a fixed interest rate and a specified repayment period. In this kind of loan, the borrower gives some collateral as security for the loan, which most of the times is the house intended for purchase. In case you default in payments or are unable to pay off the mortgage, your lender can seize your property through a legal process known as foreclosure.
The terms and conditions that apply in the process of acquiring mortgage loans vary depending on the country in which one resides. However, the basic requirements are often quite similar, and in this article we shall try to discuss the various requirements that you need to fulfill in order to qualify for a mortgage in Singapore.
Essential documents required when applying for a mortgage
There are several important documents that have to be presented to the financial institution that you intend to borrow mortgage funds from. A typical mortgage application form should be filled completely, dully signed and attached with copies of your latest tax documents, recent pay slips and a CPF statement showing a history of up to 12-15 months. The documents presented for acquisition of mortgage loans might vary depending on whether you are self employed or working for an employer.
Criteria used for assessing mortgage borrowers
Financial institutions in Singapore have different policies that regulate the process of determining whether mortgage loans from applicants will be approved. Basically, mortgage lenders simply assess your ability to make monthly payments on time while paying back the loan.
During this assessment, your bank or preferred lender will take into account factors such as your citizenship, income level, credit history, additional financial commitments and a guarantor’s signature. Keep in mind that most mortgage lenders require serious borrowers to make a down payment which ranges between 15-20% of the value of the home. Generally the more money you put down, the lower the mortgage balance that will be secured.
Upon receiving your loan request the financial institution will then go ahead to review the presented documents. If the request is approved the bank or lender will determine the tenure of the loan and the amount that can granted. The proposed terms are then drafted in a document called a ‘Letter of Offer’, which is given to you within three to seven days for your approval.
It is important to negotiate the terms that mortgage loans come with before accepting to sign up for any loan package. If possible, make a point to consult the services of mortgage brokers and financial experts as they will advice you on the best package according to your income level.
