Time to bust some myths! There are a couple of misunderstandings surrounding home loans and once you get them right, you're well on your way to enjoy your new home to the fullest!
1. "It's better to use CPF savings to pay off loans."
Using your CPF savings to pay for your home loan can have a ripple effect on your retirement fund. Your CPF savings could have worked harder by earning the 2.5% - 3.5% p.a. interest rate paid on the CPF OA. For a home loan which can stretch for many years, the compounding effect on your CPF savings is huge.
2. "Banks loans are more expensive than
HDB Concessionary Home Loans."
With a 2.6% interest p.a., the HDB concessionary home loan seems hard to beat. But for the past decade, banks have been offering home loans with interest rates below HDB’s 2.6% p.a. Even if you expect interest rates to rise, there are banks that offer fixed-rate home loans with interests that can rival HDB’s.
3. "All First-Time Homeowners MUST Take a
HDB Concessionary Home Loan."
A HDB concessionary home loan requires a smaller down payment, which makes it easier on your pocket. But if your wallet allows it, a bank loan can be a wiser choice in the long run as some banks are now offering interest rates lower than the HDB concessionary home loan rate of 2.6% p.a.
4. "Home loan interest rates are the only thing
you need to consider."
Here are some other things to think about:
Does the home loan offer free legal and valuation subsidies?
That's right, you need to engage a lawyer to assist you with the application and these costs might not be stated upfront. Hence, you should always check with the bankers if your preferred package offers any subsidies or rebates to help offset the cost.
Can your home loan give your savings account a boost?
With many high yield savings accounts (i.e. UOB One, OCBC 360) offering multi layer requirements to hit certain level of interests rates, you can check if your home loan repayment would give your savings accounts a boost. Every cent counts!
How empathetic is your lender?
We are living in uncertain times. No one knows how long the COVID-19 situation would last and how long we get to keep our rice bowl. Should you be retrenched, are you able to keep up with the home loan payments and if not, are there any penalty fees incurred?
Amidst such uncertain times, we understand that making any major financial decisions can prove daunting. Hence, we hope to help you make the most informed choice by ensuring a smooth and fuss free process.
Please head on over here to find out more about our Mortgage Calculator.
If you would like to start on your journey to refinance your home loan, please feel free to use our Mortgage Calculator to compare the different loan packages offered by the banks to help you come to the most cost effective decision.