If one is in search for a property to buy, the buyer must be cautious of the possible pitfalls as well as those associated to acquiring a residential loan.
Previously, most residential buyers would disburse the 1 percent option in order to make sure of the property before finding for a residential loan.
It has been evident for the past several months that the prices of property in Singapore have declined. As the economy is expected to continuously weaken all throughout the world, the trend for prices of property will likely to remain down in coming months.
Therefore, buyers are advised to check first with the property’s market valuation before laying out their money.
When someone bought a property worth $2 million and found out after several months that the property valuation had gone down by almost 10 percent to $1.8 million. Otherwise, the buyer needed to fork out $160,000 additional payment as the bank is only willing to give $1.44 million worth of loan, or 80 percent of the altered $1.8 million property valuation, instead of the $1.6 million original loan.
The purchaser could have prevented this pitfall if he was able to posses a mortgage agent to evaluate the most recent indicative valuation a few days before the purchase of the property.
Another problem is the deferred payments. Last 2007, there was a great sale of properties and numerous people had purchased them from the real estate developers under a deferred payment scheme. In this scheme, 10 to 20 percent of the purchase price is required for buyers. About three years later, buyers do not have anything to pay until the property acquires a temporary occupation permit (TOP).
Based on estimates, over half of the buyers who acquired properties under a deferred payment scheme were yet to go for a residential loan. Many years ago, several property values decreased by 10 to 30 percent, so when buyers apply for a housing loan, they were likely to reluctantly give an additional 10 to 25 percent of the selling price.
With worldwide stock markets declining further in the past weeks as the condition of the economy continue to deteriorate, valuations of property might also continue to fall down.
A lot of housing loan packages are out that can provide free loan conversions. If a person applies for a residential loan at this time and a good loan package is offered when the property achieves TOP, one can always change to a new attractive package with no penalty.
To lessen the risks of deteriorating the value of collateral, banks should become more careful in granting property finances. There are only few banks that are willing to provide 90 percent financing, and if they do offer, it would first and foremost be for first-time residential buyers.
Banks are stringent in considering the ability of a borrower to work and settle up debt. There are some instances where estate speculators may only get financing of 70 percent for properties purchased for the purpose of investment. For several borrowers who have somewhat a weak credit profile, financing may even be limited at 60 percent of the valuation or the selling price, whichever is lower.