Accrued interest is interest that has been incurred but not paid.
The gradual reduction in the principal amount owed on a debt. During the earlier years, most of each payment is applied toward the interest owed. During the final years of the loan, payment amounts are applied almost exclusively to the remaining principal, unless there has been negative amortisation.
A lump-sum payment, which is larger than your regular periodic payment, paid at the end of your loan repayment period.
An amount equal to 1/100th of a percentage point. For example, a fee calculated as 50 basis points of $200,000 would be 0.50% or $1000.
Borrower refers to the person who is taking the home loan and will be financially obligated to the Bank.
Bridging loan can be taken for the required cash down payment for the new property before cash proceeds are received from the sale of the existing property.
Cancellation fee is payable when the loan is cancelled before it is disbursed.
A caveat is a notice of a claim in interest to the property. Once the buyer has paid the cash downpayment/outlay for the property, his/ her lawyer will lodge a caveat with the Singapore Land Authority (SLA).
Certificate of Statutory Completion (CSC)
An application may be made for a CSC when all the building requirements have been complied with. Otherwise, when only certain requisites are complied with, application for a Temporary Occupation Permit (TOP) may be made first before finally complying with all requirements and obtaining a CSC. CSC is usually issued one year after TOP.
Claw-back period refers to a predetermined number of years the borrower is liable to refund the Bank for the cost of subsidies received from the Bank if the borrower cancels the loan. These would usually be the legal subsidy, valuation fees and fire insurance premiums.
An asset, such as a car or a home, used for securing the repayment of a loan. The borrower risks losing the asset if he/she doesn't repay the loan.
Construction loan is a short-term loan for financing the construction of a new property, or the reconstruction, addition or alteration of an existing property.
The legal process in which ownership of the property is transferred from the seller to the buyer. Generally undertaken by a lawyer.
Conversion refers to the act of transferring your existing loan package to another within the same bank. It is normally subject to a conversion fee.
A record of an individual's debts and payment habits over time. It helps a lender determine whether or not a potential borrower is a good business risk.
The maximum amount you can borrow under a line of credit.
The likely ability of a borrower to repay debt.
Failure to make mortgage payments on time or to meet other terms of a loan. Default can lead to foreclosure.
Failure to make payments on time.
The amount of cash you pay toward the purchase of your home to make up the difference between the purchase price and your mortgage loan. Downpayments often range between 5% and 20% of the sales price depending on many factors, including your loan, your lender, your credit history and so forth.
Any lien against a property or any restriction in its use, such as an easement; a right or interest in a property held by one who is not the legal owner.
The difference between the fair market value of your home and your outstanding mortgage balances and other liens.
The ownership interest an individual holds in real property. This is also the total sum of all the real properties and personal properties owned by an individual at the time of death.
Fair Market Value
The likely selling price of a home between a willing buyer and a willing seller in the open market. In a mortgage or a home equity loan, the fair market value is usually determined by a valuation by a certified valuer.
Fire Insurance typically provides insurance coverage for loss and damage to your property caused by fire. It is compulsory for Housing Development Board (HDB) flat owners to purchase fire insurance. Although it is not compulsory for private property owners to purchase fire insurance (unless taking a home loan from the Bank), it is advisable that they do so to protect their property.
Before committing to an insurer, please ensure that the terms in the policy provide adequate coverage for your property.
A set interest rate on a mortgage-fixed for a period of time. This varies from lender to lender.
Guarantor refers to the person who agrees to be responsible for another person’s mortgage in case of default.
Home Insurance / Mortgage Reducing Term Assurance (MRTA)
Home insurance protects the borrower's family from losing the home should the borrower becomes mentally/physically disabled or pass away before the home loan is fully repaid. The Central Provident Fund Board (CPF) Home Protection Scheme is compulsory for all HDB flat owners who are using their CPF to repay their housing loans. Although it is not compulsory for private property owners to purchase mortgage insurance, it is advisable that they do so to prepare for unfortunate events and provide financial protection for themselves and their families.
Home/ Mortgage Loan
Home/ Mortgage loan is a loan secured by the borrower’s property. Failure to make repayments on the loan could result in losing the property that is secured against the loan.
In-principal approval is an approved loan amount given by the Bank based on the credit report and affordability of the borrower. It is not a binding document and is subject to the property valuation and other checks in the application process.
Interest rate is the rate of interest that is charged on the loan. It can be fixed, variable, or a combination of both over the loan period.
Property that is purchased to generate rental income, or to be sold once it has appreciated in value.
Property ownership is by two or several individuals, and upon the death of any of the individuals, his/her interest is vested in the survivor(s).
The penalty charged to the borrower when a payment is made past the due date and any allowable grace period.
Legal Fee / Conveyance Fee
Legal fee refers to the fee incurred for hiring a lawyer to handle all the legal paperwork for your property purchase and taking up a home loan. It includes the conveyance fee that is incurred for all the legal and administrative work associated with transferring the ownership of land or buildings from one owner to another. Your lawyer is responsible for checking the details of the contract, ensuring that it contains nothing detrimental to the purchase or intended use of the property, e.g. title restrictions.
If you are using CPF funds to pay for the property, you can pay the fees with CPF funds. However, we advise that you set aside cash for it first as CPF takes longer to release the funds, which may result in late payment charges.
Letter of Offer (LO) / Facility Letter
Letter of Offer (LO) is given by the Bank upon acceptance of the loan application. It is a contract that states the terms of the loan package offered to the borrower. The borrower will sign the LO if he/she accepts the terms and both parties are bound by the contract from there on.
A legal claim by one party against the property of another as security for a debt. Must be paid off when property is sold. A mortgage or a first trust deed is a lien.
The amount of money that you intend to borrow from a financial institution for the purchase of your home. Subtracting the downpayment from the purchase price of the home will provide you with the loan amount.
Loan tenor is the number of years that you plan to repay the loan, usually up to 40 years.
The relationship between the amount of the mortgage loan and the appraised value of the property, expressed as a percentage. A LTV ratio of 80 means that a borrower is borrowing 80% of the value of the property and paying 20% as downpayment.
Lock-in period refers to a pre-determined number of years that the borrower is penalised for if he/she changes the terms of the contract (either by cancellation, prepayment or conversion). As every loan package has different terms and conditions, it is advisable to consult the Bank before making changes.
Maintenance and Service Charges
Maintenance and service charges vary with the residential development. Part of the monthly maintenance contribution will be allocated to a sinking fund, which is funds set aside for periodic repainting, replacement of electrical and mechanical installations and other major repairs and improvements to the development.
The day on which all outstanding principal, interest and fees must be repaid.
The lender or other party named in the mortgage as the party who is entitled to receive repayment of the home loan. Mortgagee refers to the lender (the Bank).
Mortgagor(s) refers to the owner(s) of the pledged property (mortgage).
Mortgage done in advance and is signed by the borrower against borrowing before the property title deed is issued. Applies to building under construction (“BUC”) projects.
Option To Purchase
An Option to Purchase is a right or option given by the seller of the property to the buyer to buy the property at a specified price within a specified period of time (the validity period of the option). If the buyer decides to buy the property, he/she has to exercise the Option to Purchase within its validity period by signing the Sale & Purchase Agreement and paying the down-payment. The buyer must pay a booking / option fee for this right or option, which will be forfeited if the Option to Purchase is not exercised within its validity period.
A penalty assessed by some lenders if a loan is paid off early. This is a lump-sum amount due and payable in addition to the loan balance, and is usually limited to the early years of a mortgage. Not all loans have prepayment penalties.
Interest charged by financial institutions to top-rate borrowers.
Property tax is a government tax payable annually, computed based on a percentage of the annual value of the property. The annual value is the estimated annual rent that your property can fetch, regardless of whether you are able to rent it out or not.
If you own and occupy the property, the tax rate is 4% of the annual assessed value. If your property is rented out, the tax is currently 10% of the annual assessed value of the property.
Paying off one loan with the proceeds from another loan, generally using the same property as collateral. Refinancing refers to going to a different bank to apply a new loan to replace the existing loan. It is usually done to lower the monthly repayments by taking a lower interest rate package.
Before refinancing your loan, you should check on the penalties you may incur (eg lock-in period, claw-back period) if you cancel your existing loan.
Repayment Ability Ratio (RAR)
The percentage of your total debt compared to your total income before taxes, expressed as a percentage. The lower the ratio, the healthier your finances. Depending on the type of property, employment and income level, the loan will be rejected if the RAR is too high.
Sale & Purchase Agreement
Sale & Purchase Agreement refers to a private contract between the seller and the buyer for the sale and purchase of a property.
Singapore Interbank Offer Rate (SIBOR)
Singapore Interbank Offer Rate (SIBOR) refers to the rate that financial institutions in Singapore lend/borrow unsecured funds to/from each other. This rate is transparent and published daily in The Business Times.
Stamp duty is a government tax on certain legal documents and financial contracts for validating the documents or contracts legally. Stamp duty is imposed on documentation involving transfer of interest from one party to another. The law makes certain documents inadmissible as evidence unless they have been stamped. Examples of taxable documents include transfers, mortgages, tenancy agreements, deeds of gifts and trust deeds.
Swap Offer Rate (SOR)
Swap Offer Rate (SOR) is SIBOR plus lending costs incurred by the banks. It is as transparent as SIBOR that reflects market conditions. This rate is transparent and published daily in The Business Times.
Each property owner has his/her distinct share and upon death, his/her ownership can be assigned.
Temporary Occupation Permit (“TOP”)
Issued by the Commissioner of Building Control that the building can be occupied.
A legal document showing a person's right to or ownership of a property.
An examination of records used to determine the legal ownership of property and all liens and encumbrances on it. Usually performed by a lawyer.
An informed estimate of the value of property. When made in connection with an application for a loan secured by a home, it is usually made by a professional valuer.
Variable Rate / Floating-Rate Loan
An interest rate that may fluctuate or change periodically, often in relation to an index, such as the prime rate or other criteria. Payments may increase or decrease accordingly. A variable/floating-rate loan is usually benchmarked against the Bank’s reference rate. The reference rate can be the Prime Lending Rate, SIBOR, SOR or rates offered by the CPF Board.