Excited to buy a private property but don’t know how to get a mortgage in Singapore? (Mainly applies to private property RESALE market).
You’re not alone!
Navigating the mortgage process can be overwhelming for many homebuyers, especially for first-timers. They don’t know where to begin when it comes to initiating the property buying process.
We have prepared this guide to make the mortgage process easy and smooth for you.
So, let’s get started!
Follow this seven-step guide to secure a mortgage for your private property in Singapore.
Step 1: Do the Groundwork for an In-Principle Approval
First, you need to get an in-principle approval. It is a conditional, non-binding approval that enables you to determine how much of a mortgage loan you can qualify for before approaching the banks. It generally remains valid for about a month.
Once you’ve found a property you’re interested in, you must ascertain your borrowing capacity before making any commitments with the seller.
Keep in mind that the initial approved amount may differ from the amount the bank eventually approves after reviewing and processing your application.
Here’s what you need to do before obtaining an in-principle approval.
- Get a rough estimate of the loan amount you can afford.
- Have an idea of the kind of private property you want to purchase.
- Research and compare different mortgage packages and decide which ones are feasible for you. This will give you an idea of the banks you can approach for a loan.
- Make sure you can meet the prevailing Mortgage Servicing Ratio (MSR) limit. MSR is the portion of your monthly gross income you can spend on your mortgage repayment.
Step 2: Submit an Application to the Bank or Financial Institution
The next step is to reach out to a bank and apply for in-principle approval.
Please note that you’ll have to make a separate application if you decide to apply for a loan at another bank.
Make sure you gather all the important financial documents, including payslips, credit card statements, CPF contribution histories, and any housing loans that you may currently have.
Mortgage packages may differ at every bank. You should try to find out about the different packages before making a well-informed decision.
Step 3: Await the Bank’s Approval
Once you’ve submitted your application, you’ll have to wait for the bank to review your documents and approve your application. They will do their due diligence to assess your mortgage eligibility and the amount they can lend you.
Banks take some time to perform a background check to check if you meet their criteria. They will assess your current Total Debt Servicing Ratio (TDSR) if you intend to purchase private property and your MSR if you opt for an HDB property.
According to the TDSR, you can spend no more than 60% of your monthly gross income on debt repayments.
Do note to be transparent with all financial documents. Do not to hide your credit card statements since banks can check your credit credibility when they request your credit report from Credit Bureau Singapore (CBS).
Step 4: Receive the Bank’s Response
Typically, banks take two to three days to give an in-principle approval. This report remains valid for approximately 30 days. Since this approval is non-binding, you’re not obliged to commit to the bank for a loan.
With the in-principle approval from the bank, the Buyer can now start the negotiation process with the seller.
Once the selling price has been agreed by both parties, the Buyer will have to pay a standard non-refundable 1% deposit (also known as Option Fee) to the seller, who will issue an Option-To-Purchase (“OTP”) to the buyer.
This OTP is usually valid for 2 weeks and the said property cannot be sold to another party during this period.
Step 5: Reach Out to a Conveyance Lawyer
Once the buyer decides to proceed with the property purchase, they must exercise the Option to Purchase (OTP) in the presence of a conveyancing lawyer and place a 4% deposit (Option-Exercise-Fee) into the lawyer’s escrow account. At this time, the buyer also informs the lawyer of their preferred completion date and arranges to pay the stamp duty within two weeks of exercising the OTP.
It is essential to consult with a conveyancing lawyer before the property transfer. The lawyer will conduct searches to ensure the property is free from encumbrances and address any outstanding payments owed by the seller, such as property taxes and management fees, if applicable.
On the completion date, the buyer must arrange for the remaining balance of the purchase price, after deducting the 5% deposit and the pre-approved bank loan amount, using cash, CPF savings, or both. The lawyer will ensure all outstanding payments are settled before transferring 99% of the sales price to the seller’s lawyer.
Finally, the conveyancing lawyer will complete the purchase by handing over the balance sales price in exchange for the property title deed. They will then apply to the Singapore Land Authority to register the transfer of the property to the buyer’s name.
Step 6: Update IRAS after the Property Transfer
After the transfer of property, you must go to the nearest police post and update your address. IRAS will send you an acknowledgment notice in a week.
In case they don’t get back to you, don’t hesitate to call them. You wouldn’t want to become a property tax dodger by accident!
Step 7: Pay the Remaining Fees
The final step involves paying the remaining fees before moving into your new home. The conveyancing lawyer typically charges between SGD 2,500 and SGD 3,000, which may be payable through your CPF.
Agent commissions vary based on the property type. For resale properties, the seller covers the agent’s commission, which is then split with the buyer’s agent. For new properties purchased from a developer, the developer pays the agent’s commission, usually around 1-2% of the property’s total price.
It’s crucial to ask questions if you’re unclear about any part of the process. The mortgage process includes numerous fees and paperwork, so understanding each step can help you avoid unnecessary issues. Stay informed about the documents you sign and the fees you pay to ensure a smooth transaction.
Congratulations, you can now own your private property! The mortgage process can be overwhelming and nerve-wrecking, but it’ll be all worth it when you get the loan!
Facing Issues? We’re Here to Help!
ValueMax (VM Credit Pte Ltd) is an alternative mortgage lender in Singapore. We can help if you don’t qualify for traditional financing due to issues such as income restraints, current liabilities or poor credit history.
You can also avail yourself of our services if you have ample equity in the property but need more cash, want to restructure your debt, need a complex, multiple-collateral loan, need a loan urgently, or are a foreign national.
In short, we are at your service to assist you when you don’t meet the traditional lending guidelines. Contact us now to find out more!
