Most homeowners in Singapore got their homes from mortgage loans through licensed money lenders and banks across the country. There are also some Singaporeans that haven’t tried getting a mortgage loan that is why they are curious with how this kind of loan works.
Understanding mortgage loans may seem difficult for some but just like with other loans, a mortgage loan is also about interest rates. When talking about mortgage loan interest rates, many reasons could affect your mortgage rate.
How is the loan priced?
This is the top question for those first time mortgage loan borrowers who don’t have any idea about the mortgage loan. Mortgage rate depends on the licensed moneylender or bank where you applied for a loan.
Interest rates from various institutions vary thus a lot of borrowers opt to have a canvass first and compare interest rates from these institutions such as the licensed moneylenders and banks, but aside from the interest rate, they also have other factors that may affect your mortgage rate.
Factors that affect a mortgage loan
● Borrower’s credit score
Before you are granted for a mortgage loan, the money lender or bank still have to check your credit history thus if you are not paying your loans on time or still has many outstanding loans, you will be given with a negative credit score.
If you have a low credit score, lenders would have a hard time trusting you that you are going to follow your repayment schedule with them that is why it is very important that before you are going to apply for a mortgage loan, you should fix first your old loans so that you can make sure that your loan will be granted fast.
● Risk-based pricing
One of the matters that would determine how much your interest rate is your risk factors that the lender will check upon your loan application; if you are a high-risk borrower, you should expect for a higher interest rate, but if you are a low-risk borrower, you can have a lower interest rate.
There are several reasons why a borrower can be qualified as a high-risk borrower such as having many unpaid loans or paying debts late. With this, some borrowers would choose to fix their unpaid loans first before they would apply for a mortgage loan.
Through this risk-based pricing, lenders will somehow be at ease that their business won’t be jeopardized. Having a lending business isn’t easy where they are going to invest a big amount of money hence it is relatively standard for lenders in Singapore that they charge big with their mortgage rates if they can see that there are possibilities that you can’t repay your mortgage loan based on your repayment terms.
● Types of Home
Some may think that all kinds of home have the same mortgage rate, but it is not. If you are going to get a property for a primary residence, lenders will consider that as a low-risk while if you are going to buy a property that will serve as a vacation house, they consider that as a high-risk loan that is why it has a higher interest rate.
● Down payment
One thing with down payments is that there are borrowers who would choose to pay the down payments with its minimum amount. Well, it might be alluring to stick with the minimum down payment, but there are several benefits if you are going to pay a bigger down payment.
The amount of the down payment depends on the price of the property that is usually around 5% to 10% of the property’s price that is why if you are going to buy a bigger house, you will be required to pay a higher down payment and if you are going to pay a higher down payment, you can now have a lower monthly repayment thus it would be easier for you to manage your expenses.
● The amount you are borrowing
The amount of your loan you are borrowing also affects your mortgage rate. Since mortgage loans would take several years to be paid, you have to pay its interest for the next years to come, and with these, it is not just the loan amount that you are going to compute, but you have to include the interest as well.
● Getting loan points
There are some who are not familiar with loan points. You can buy loan points from your moneylender – moneylender.loan where one point is already equal to 1% of your loan amount. Getting a loan might require you to spend more money after purchasing your house, but it will also give you benefits in the long run.
● Mortgage loan survey
It might be inconvenient for some to do a loan survey where they have to check the entire licensed money lenders in their area, but it could help you find the best mortgage loan deal and save money. You can get loan quotations and offers from different lenders and see which one fits your budget.