Today I will be continuing the procedure 2 on Property Financing after the earlier article on Finding Property. I hope to complete all these procedures one day so they could be consolidated as one REAL ESTATE PURCHASE and INVESTMENT 101 one day, for every reader’s easy reference.

Property financing is an important step that all buyers should do their homework

Other than buyers who are cash-rich requiring no financing, most of us will be looking at bank loan (mortgage)  to purchase a property. The amount you can borrow will depend on your own personal financial circumstances plus the bank’s valuation of the property or the actual transaction price (whichever is lower). Singaporeans can usually borrow up to 90% of the value and foreigners usually up to 80%. The bank will take into account your capacity to pay the monthly instalments – for this they will evaluate your income, assets, employment history and your age, and they will also check your credit history for any previous payment problems.

If you are selling your current house to support the purchase, do a quick count on the market value of the current house that you are able to fetch minus away the CPF utilized with interest to be returned to CPF in addition with outstanding loan. You are then able to establish the balance of cash you have on hand.

 Approach and seek advice from bankers or mortgage broker to understand your financial stand, i.e. how much you are able to borrow based on your income. You should be able to get an in-principal approval on the loan amount you entitle to borrow

Basically, investment properties are viewed to be more high risk since if the buyer is not occupying the property; they are more likely to walk away if the property value drops below the loan amount. Therefore a higher interest rate and shorter repayment periods are usually imposed in comparison to house loans for personal use.

 There are some rules that you must keep in mind in drawing up your budget after the reality check on financial stand:

• Don’t borrow more than you can afford
• Don’t be afraid to ask about fees and charges
• Be aware of credit card balances and limits and ensure you can afford your repayments
• Repay extra when you can
• Make your payments on time to keep your credit history clean
• Include all hidden cost like government fees, stamp duty, legal cost, insurance, utility connections and etc