How Large Should My Housing Loan Down Payment Be?

The moment you decided to purchase that house of yours, you will have to decide how much of a down payment to pay. Traditionally, most people go for the mainstream 20 - 80 payment, meaning that the payment consists of 20 percent cash or CPF and 80 percent of housing loan. However, there are always people who go for a 10 - 90 or even a 40 - 60 payment structure. How do you decide?
Are you stretched out financially?
If you have substantial amount of debts to service, it is best that you do not pay too large of a down payment. Leave some working cash in your savings or money market account to preserve that needed liquidity. Let's talk about Chris; He is an Army Officer who has about $250,000 in his savings account. When he bought the new HDB 5 room flat, he was determined to pay down his housing loan as soon as possible in order to be debt free. He then uses all the money in his savings account for that. Unfortunately, his wife got seriously ill and the insurance was unable to cover all the medical expenses. Most of his salary was used to service his car loans, student loan, personal loans and previous credit card loans. He then had to resort to using additional expensive credit cards to tide over the period. He thought of getting an equity loan but he is unable to do it with a HDB flat. He decided to sell off his flat and downgrade to a smaller apartment. Too bad he could not get a buyer fast enough and the interest from the credit cards are starting to hurt him financially. What is the lesson that can be learnt from Chris? Leave yourself some savings for emergency use, because you never know what is going to happen. Making that large payment by wiping out your savings cushion may not be a wise move when you are already highly leveraged in debts.
Are you planning to stay in the house for long?
This is an important factor when you have to determine that down payment. If you are planning to stay in your house for long time, it makes sense to pay more and to be housing loan free as soon as possible. By paying more, you have more equity in your property and certainly is a big step towards full ownership. Psychologically, it clears off the housing loan load off your mind. If you are not planning to stay in the house for long but look upon it as an investment, then it make sense to pay as little as possible. Instead of making a large down payment, free up that cash and invest in instruments that can beat the inflation rate. This strategy requires you to have strong cash flow, and if you are, then opting for a 10 - 90 payment may not be such a bad idea after all. Sophisticated investors might leverage on an interest only mortgage. Interest only mortgage can be structured with or without an expiry period. Talk to your mortgage advisor for more details.
How strong is your salary?
If your personal cash flow is not strong enough to purchase that dream house yet your bank officer recommends a 10 - 90 financing structure for you. Think about it. A 10 - 90 payment structure normally comes with higher interest rates. Let's just say your salary is really not strong enough, but you decide make a 10% down payment. After which you are charged with a higher interest rate than the traditional 20 - 80 housing loans. With that comes a higher installment, which means a larger portion of your salary has to be channeled to that housing loan every month. Throw in some unforeseen financial burdens and it could very well be the start of your debt nightmare. Prevent this from happening by talking to your mortgage advisor, and have him or her to advise you. Be careful when your bank officer tries pushing you to take up a housing loan that is beyond your means.
Determining that down payment can be very stressful but by making an informed decision, it certainly saves you a lot of potential problems that might surface in the future. Do not rush into a deal too quickly without considering its implications. Although lenders automatically limit your borrowing capacity, do take note that they are telling you the maximum amount of money you can borrow. Work with your mortgage advisor to determine the safe amount of money to borrow, not the maximum amount.

Can I Do a Prepayment For My Housing Loan?

There are many of us who wants to be debt free quickly. One of the biggest debts that anyone can have is a housing loan. Therefore I am sure many people want to pay down their housing loan as soon as possible.

In order to pay down your home loan quickly, you have to make additional payments in addition to your monthly mortgage payments. These additional payments are known as "prepayments". One thing that many people wonder about before making prepayments is "Will my bank charge me a penalty for making a prepayment?" The answer is "It depends".

It really depends on the particular housing loan package that you have taken up. Some housing loan contracts allow you to make prepayment on specific dates. Some require you to give them a one month to three month's worth of notice before you make that prepayment. Others do not allow you to make any prepayment unless you are out of the contractual lock in period.

You can try making a prepayment even if your bank does not allow you to do so. Do take note that doing so, can cause your bank to impose a penalty of 1% to 1.5% on the prepaid amount.

Read through the details carefully if you do not know how your contract runs. If you are unable to determine your current standing, try sending your contract to your bank officer or broker to see you are eligible to do a prepayment.

You can try to do as many prepayments as you want and many people do that. Prepayment can help you in building up equity in your house and accelerate full ownership at a faster rate of time. Different people have different ideas about prepayments. Some believes lengthening payments are better while others believe that paying off the housing loan takes away a huge burden. Try to understand if prepayments are for you and if you are able to make any early payments. If you are, then you definitely can do a prepayment.

Zeng Han Jun is the Business Financial Manager of Chan & Partners Consulting Group. He actively contributes articles about business and finance on a weekly basis, so as to share his knowledge with the financial consumers. He specializes in mortgage advisory and business brokering services in Singapore. He has been directly involved and plays a crucial role in marketing and sales of businesses in CPCG. He also provides advice on various kinds of mortgages and construction financing for private individuals.

The 3 Important Items Before Getting a House Loan

After 8 months of searching for a new home, you finally settled on a wonderful three bedroom condo with great views of the mountains. Your offer was accepted and now it is time to get the mortgage to pay for the property. Here is what you must consider before settling on a house loan.
If you have been pre-approved for a mortgage, which should be done before going into the negotiations on the property, then it is now a matter of locking in an interest rate that is acceptable in the long run. The mortgage application process can take as many as 90 days to complete. During that time, anything can happen including a change in the interest rates. So the first rule before locking in to a particular mortgage rate is follow the trends in the economy and in particular low interest rates. You don't want to lock into a rate that appears excellent at the time you lock only to have it drop further and re-negotiate the points when it's time to close. Most lenders will drop the rate to the low interest rate if you ask them. But you need to be informed to do so.
The second important item before getting a house loan is to not put all of your eggs in one basket. You can pre-qualify for a home loan at more than one institution. Pre-qualifying does not commit you to anything other than the lender committing to you that you qualify for a particular amount of money based on your income. It is easy to work with two or even three different lenders to see who offers the best house loan financing. You don't commit to a loan until you have to pay money for the application and appraisal fee. So it is important not only to see who has the best mortgage rates but also who is willing to work harder for your business.
The last item maybe more important than the other two, depending on the time of year you planning to close on your new property. The interest on the mortgage that you will be paying for your primary residence in this new condo that you found with the great mountain views is tax deductible. So, how much of a tax benefit do you need for this year is a major consideration. For instance, if you are buying a home late in the year because you are expecting a raise next year, then you may want to hold off on the closing until next year to take advantage of the tax. So the important last thing to do is check with your accountant to see where you stand.
These are just some of the considerations that you should look into when deciding on a house loan. There are many other tricks and tactics to use, so as not to get yourself into a long-term dilemma.

Banks Give Loans For Your Dream House

Today fulfilling a dream of owning a house is not difficult. In India there are many banks and house financing companies that are willing to come to your doorstep to give you a loan. Even if you apply online for home loans you will find your mailbox full of mail from different banks and house financing companies. All of them will claim to offer the cheapest rates along with other benefits on home loans.
Banks and financial companies offering home loans, although have their own terms and conditions, the interest rate they charge is more close to each other is more or less similar in number. Banks and housing finance companies ask for property papers for security reasons. In banking terminology it is called Collateral Securities. There are some banks and financial institutions who ask for deposit of lump some amount for the first time, commonly known as the down payment.
In case of property papers as security banks or finance companies scrutinize the papers and find out their real market value, their intrinsic value. After thoroughly checking property papers if they find them right and fair in nature they considered them as Collateral Securities.
Home loans can be taken for a number of purposes like for building a new house, renovation of existing house, for expansion of existing house, etc. Banks have fixed certain parameters for issuing home loan which should be taken care of while applying for home loan.
You can fill the form for a loan and submit it physically or you can also apply online. If you apply online then you will be asked to give some personal details like security number and driving license number. You might be asked to furnish your previous credit history also. The banks and companies giving loan make sure that you have an ability to pay back the loan on time. For this they ask for your income statement.
Usually there are two types of home loan floating and fixed. In floating rate, interest changes with time i.e. the interest is impacted by various other factors like inflation, RBI increasing repo rates and CRR. In fixed, the rate of interest will remain same throughout which was finalized at the time of signing up for loan. In fixed you might pay an extra amount. In case you want to pay a fixed-rate loan off early, you may have to pay extra for breaking the fixed-rate agreement.
Before signing on the dotted lines read the documents and the agreement carefully and make sure you are aware of all various terms, interest rates and installment dates. Take care of hidden charges also.

Fixed Rate Housing Loans

Fixed rate housing loans are the most traditional type of housing loan that a bank can offer. Its feature is just like its name, meaning that the rate that you are being offered is fixed.

Fixed for how long? Generally, as a rule of thumb, the longer you fix your loan, the higher interest rate you will be charged. When interest rates are low, it makes much sense to lock into that rate for a couple of years. Having a fixed rate home loan has its benefits. You do not have to worry about fluctuating interest rates. You do not have to bother about writing in to CPF to adjust your monthly payment just because the interest rate shot up.

Fixed rate is especially suitable for those who want to be sure and certain of the future. Some of the clients that I have worked with needs to have a grasp of the future so they can do the precise calculation on how much they have to fork out for a certain period. For these types of people, the financial security of having a fixed set of payment over a certain period greatly outweighs what other types of mortgages offers.

At any point in time, fixed rate home loans will have higher interest than floating rate home loans. If you are planning to stay in your house for a long period of time, a fixed rate housing loan is pretty sensible to you. Your kind of job plays an important factor in determining if a fixed rate is for you. If you work in a relatively safe job and are looking forward to a promotion every one to three years, it makes sense to go for a fixed rate housing loan as well. With the increase in your paycheck, the burden of paying off a fixed rate housing loan gets smaller each year.

A fixed rate housing loan is also suitable for a person who is going to retire soon. Unless you have a lot of cash waiting for you, retirement requires careful planning. To ensure your finances do not deviate too far from your planning, it is better to fix your rates and know the exact amount of installment to work with every month. It is no joke missing out on your installments when you are in your retirement age. You risk having the bank foreclosing on your house and even if you declare bankrupt, it is pretty useless too. A housing loan does not get wiped out when you declare as a bankrupt.

Some people do not mind paying slightly more on their monthly installment as long as they have the certainty of having a set payment. If you feel you belong to these group of people, consider a fixed rate housing loan.

Zeng Han Jun is the Business Financial Manager of Chan & Partners Consulting Group. He actively contributes articles about business and finance on a weekly basis, so as to share his knowledge with the financial consumers. He specializes in mortgage advisory and business brokering services in Singapore. He has been directly involved and plays a crucial role in marketing and sales of businesses in CPCG. He also provides advice on various kinds of mortgages and construction financing for private individuals.

Bootstrap and Handle Your Housing Loan Properly This Season

With the holiday season around, it is difficult to enjoy if you have your home loan payment issues lingering at the back of your brain. Worst yet is if you have an impending foreclosure on your house. Focus on what you can do to stop this problem from happening so you can enjoy your holidays in peace.
Here are a few tips which you can use to stop foreclosure on your house:
1) Stop blaming your banks, financial institutions or yourself for the problem that has arise. You cannot control what kind of solutions that they may be able to offer you so quit blaming them. Instead of quarreling with them, why not listen to their solutions in a calm manner and see what they can offer you. Their solutions may not be so bad after all. Quarreling with them will get you no where. By choosing to work with the people at the banks or financial institutions, you may have a far better chance of stopping the foreclosure on your house.
2) Opt for an interest only payment scheme. What this means is that you apply to pay only the interest of your monthly installments. Yes, the principal portion does not get paid down but remember, the priority right now is to secure your house. You can always go back to the normal paying scheme that pays down your principal amount when your financials get better. Call up or write in to your bank's credit department to discuss about this option.
3) Get some flexible timing jobs to earn some extra cash for your housing installments. A part time sales job may be a good idea and who knows; you might even quit your present job and make your part time sales job the main occupation. Get some real cash flowing into your pockets right now. No use trying to borrow money from friends, relatives, credit cards or personal loans. Your housing loan installment is a monthly thing, and how long can your friends and relatives lend you the money to clear your installments? Never borrow from a credit card or personal loan to pay off your housing loan. Credit cards and personal loans are more expensive than housing loans and if you decide to pay off housing loan using such facilities as a short term measures, you are setting yourself up for greater financial troubles.
4) Sell your house away and rent. You might have to sell off your house at a deeply discounted price, but it might be a good idea to sell your house and opt for renting. Renting frees you from many troubles that owning a house may have. Scout carefully and you can find a rent that is much lower than your present monthly installment.
Many people look for refinancing in the face of a pending foreclosure. It may be a little late for that. If you refinance constantly through your loan tenure, you would have save a huge some of money which you can put it in an interest bearing account or alternative investment. You would be able to draw upon it for rainy days. If you think that a foreclosure is impending, there must be several reasons for it; retrenched, bad investment, deep loan recalls and etc. And remember, refinancing requires you to bear some legal cost as well. There are many other types of solutions to stop that foreclosure and it really depends on the type of residence that you reside in.

Do You Think You Might Be Paying Too Much For Your Housing Loan?

You took up a housing loan package with a bank couple of years back. Just how many years has it been since the last refinance or that new purchase? Maybe you can not recall due to your heavy workload and various lifestyle commitments. Are you paying too much for your housing loan right now?

Many consumers often wonder if they are paying too much for their housing loan. This is especially so when consumers tries to refinance by themselves without the full knowledge of the mortgage market. After they signed that piece of paper called the "Letter of Offer", they start to think: "Hey, there might be a better housing loan package out there and I might be signing away with a sub standard loan right here!" This type of mentality is very common as everyone wants the best for themselves. There are some steps which you can undertake to prevent the above situation from happening.

Before I go on, there is one important point to clarify. There is nothing such as the best housing loan available. Everybody has different financial and credit profile. What your mortgage advisor can offer you is the best housing loan package according to your credit profile. To know if you are really paying too much for that housing loan also depends a lot on your mortgage advisor. Your bank officer can only offer you the packages from his bank. That can really limit your choice and increases the probability of you paying more for your housing loan. By working with the right advisor, you expose yourself to more choices and can greatly enhance your shopping experience.

Alternatively you can try to minimize your payment by making sure that you shop around extensively for your lender. If you are a busy professional, try using the service of a mortgage broker or consultant, they can help you shortcut the process by offering you the best rate for your financial profile.

Once you have decided on a specific housing, take note of the expiry date of the lock in period. Key in a reminder in your organizer scheduled approximately about six months before the expiry of your lock in period, asking you to fix an appointment with your mortgage advisor to explore refinancing options. Do not fall into the habit of comparing your housing loan to other packages right after you have signed the contract. Anyway, to try to change your housing loan right now might evoke several penalties from the bank. Although your mortgage broker can assist you in getting another bank to pay off those penalties, it is only worth considering for certain people in the right situation.

Zeng Han Jun is the Business Financial Manager of Chan & Partners Consulting Group. He actively contributes articles about business and finance on a weekly basis, so as to share his knowledge with the financial consumers. He specializes in mortgage advisory and business brokering services in Singapore. He has been directly involved and plays a crucial role in marketing and sales of businesses in CPCG. He also provides advice on various kinds of mortgages and construction financing for private individuals.

Housing Loans - Basics You Must Keep In Mind For Suitable Deal

You have ambitious plans for owning a home or you may be just thinking buying a piece of land to construct a home on it. This of course requires huge funds. In turn this means that you would be requiring housing loans. But before you apply for the loan, ensure that you have gone through all aspects of it so that you sign a suitable deal.

First know that these loans are given for purchasing house of flat, land with house or buying land for constructing house and so on. All those people who have a regular source of income are eligible for these loans.

The loan amount that one is capable of borrowing can go up to Rs 3 crore but depends on lots of factors. Usually lenders are willing to approve 85 percent of the project cost. In this cost stamp duty and registration charges are also included.

Note that you are required to make down payment which will be higher if you are buying an old house then the. However in case you are constructing a new home, the lender will take a lower down payment.

As far as the securities are concerned, housing loans lenders will take only the mortgage on housing property and no other collateral is required from the borrower. In case the borrower fails to offer security in time then alternate collateral will be required till time mortgage is given in favor of bank.

Interest rates on are either floating or adjustable. The advantage of fixed rate is that the borrower beforehand knows the monthly payments to be made for throughout the loan period and so one can plan budget. The borrower is saved from any rise in market rate of interest.

Another aspect that you must keep in mind is that you would be insuring house or property and it is mandatory. The cost towards the house insurance has to be borne by the borrower.

Before applying for housing loans, better first take rate quotes of the lenders. You should compare those, keeping rates and terms-conditions in mind. See which lender will approve a loan of your requirement without many additional costs. Keeping these basics in mind you can locate a suitable deal.

FHA House Loans

Are you without a house or home? Are you in the process of finding one but cannot really afford one? Are you losing hope? Do not be, because with the increasing efficiency and effectiveness of the FHA house loans, you will never be homeless again... Countless people search for the best home but still end up not getting because they do not seem to have the financial capability to do so but with this type of housing loans available for families and individuals who earn lower salaries and incomes, finding and buying a house that they could finally own is just a step away.

The FHA or Federal Housing Administration is an assistant federal mortgage loan based in the United States. They were the ones who established and spread the news and information about this type of housing loans. They said that this FHA loan was developed and promulgated in order to mainly provide homes for the homeless and less fortunate people who cannot afford to buy a quality house. That was the main focus of the project but it also catered to giving people with no jobs a job like carpentry and stuff thus reducing unemployment, also the FHA house loans serve as an output or vessel for the creation and building of more houses while increasing the productivity and sales of the various insurance companies and associations.

Getting such type of housing loan is fairly manageable. Basically, when aiming to apply for this type of housing loan it is important to consult and approach the lenders or mortgage brokers directly not the Federal Housing Administration itself This is because the federal housing administration or FHA does not give out loans. They are just there to supervise and manage. It is the mortgage brokers and lenders which define the different rates, prices, and availability of such housing loans. These aspects vary form one mortgage broker to another so it is best and highly recommended for the potential house buyer to make several visits to the different lenders or mortgage brokers to determine and make a conclusion of which house best offers the house loans of the fha at maximum potential and efficiency.

So, the search for that perfect house that you or your family can most definitely afford is no longer a dream but a possible reality as long as you have those FHA house loans by your side. Remember that not everyone may apply for such loans as only the less fortunate and lower income earners are prioritized and entitled to benefit from this type of housing loans. Nevertheless, one will never be homeless again.

Hope For the Hopeless - FHA Housing Loans

Are you one of those people looking for getting yourself and your family a house and are looking into the possibility of going through the process of getting FHA housing loans? Are you feeling overwhelmed by the massive number in your bills that, because of the triggered interest rates, keeps on growing like a monster on your back? And do these bills make you think that maybe there isn't any more chance for you to get your home loan? The best thing to remember is not to lose hope. Due to the increasing efficacy of the FHA processes as bolstered by the Obama bailout fund, you can rest assured that you will indeed get the home you dream about.

So many Americans are looking for the best house for their families but still cannot obtain this dream because they are not financially capable to get the mortgage necessary for this. Traditional loans are not accessible to a lot of people who have low to medium salaries.

This is exactly why the Federal Housing Administration (or the FHA for short) has been in the business of giving such families the chance to get a loan for a proper house. This administration was founded long ago during the great depression. And now that another great depression is upon us, the FHA is bolstering its ranks and resources to face the new surge of families in need of FHA housing loans. The loan programs they have are specifically designed to give a good chance for the homeless and the financially challenged people.

Getting a mortgage from the FHA is very manageable. The first thing that you need to know is how to aim these kinds of loans to your particular financial situation. It is therefore vital that you approach your bank or lender first before going to the FHA themselves. This is because that the authority is not actually the one that is giving out the loans. The loan actually comes from private banks and lenders. The role of the FHA in the loan is to approve certain lenders and give them an insured loan that can protect them even if the borrower defaults from the loan. This is why the lenders are able to lower their risk assessment of the loan applicants. The insurance lessens the risk for the banks and lenders. Because of this, the mortgage brokers will still be the ones to determine the rates and other details of these special loans. There are also differences from state to state or area to area so one must be aware of these specific differences as well.

Remember that even if your credit is not that good or if your income leaves a lot to be desired, getting a housing loan is not impossible. The FHA housing loans can be availed by almost anyone who dreams of finally getting that dream house for their family. The important thing is to do the research and legwork as well as to not give up on hope.

The author is fascinated by things that are simple and minimal. He likes minimalist art, lives a simple lifestyle and writes things that are light and easy to read.