What to know before buying a new property, or refinancing your home loan

by Albert02

What to know before buying a new property, or refinancing your home loan

What to know before buying a new property, or refinancing your home loan? Home loan rates are rising, with three-year fixed rate packages offered by Singapore banks increasing by at least 1.6 percentage points from 1.15 percent per annum late last year. What can existing homeowners and prospective home buyers do now that interest rates are expected to rise further? Mr Lim Beng Hua, UOB’s head of secured loans, answers some of your burning questions about rising mortgage rates in this column. The 50-year-old expert has worked in finance for over 20 years. Secured loans, which include mortgages, are those that are backed by collateral.

Q: I’m going to buy a new house this year. What are some things I should think about when looking for a home loan?

A: For most of us, purchasing a home is the largest financial commitment we will make, so we must conduct appropriate research and planning. Determine how much you can afford to pay in upfront fees, including cash outlay, stamp duties, and legal fees, as well as your monthly mortgage payment. Global central bank policies have a significant impact on our local interest rates. You should consider using a higher rate when calculating your potential monthly payments because they have been rising. There are digital tools available, such as UOB Home Solution, that allow you to instantly calculate the home loan amount you can afford and obtain a valuation on the property you are interested in, ensuring that you do not overextend yourself.

Q: Should I get a fixed-rate loan or an adjustable-rate loan? Which is the better option in the long run?

A: This is entirely dependent on your specifications. If you prefer greater certainty in your mortgage payments to manage your cash flow, a fixed-rate mortgage package would be more appropriate. You may want to consider a floating-rate package if you are less sensitive to interest rate fluctuations. We also offer packages in which part of the money is fixed and the rest is linked to a floating rate, such as the Singapore Overnight Rate Average (Sora). If interest rates remain high, you can make prepayments, while the fixed-rate portion protects you from further rate increases.

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