carbuncle
27-08-12, 11:20
LET me share my first-hand experience on the debate over 50-year housing loans ("50-year home loan a 'gimmick' says Khaw"; Aug 6).
I used to be the chairman of the management corporation of a small condominium a few years ago, and a young couple bought a two-bedroom unit there, upgrading from their five-room HDB flat.
The couple were on a tight budget, with enough funds for the monthly instalments and the maintenance and sinking fund contributions, and moved in just in time to celebrate Chinese New Year in their new apartment.
Unfortunately, two months later, a capital levy was imposed on all the owners to replace a seriously leaking swimming pool.
As the couple did not have spare funds for such an emergency, they had to borrow from their friends and colleagues.
Five months later, another capital levy was imposed to replace the leaking roof membrane of another block.
In desperation, the couple had to sell their apartment and downgrade to an HDB flat, not a five-room flat this time, but a four-room one because they had to pay a hefty penalty for redeeming the 20-year mortgage loan prematurely, apart from other expenses.
The principle behind taking a longer-term mortgage is not to buy a bigger flat whose cost exceeds one's financial capacity, but as a wise financial precaution.
I similarly took a 20-year mortgage loan for my unit, but at the end of each year, after collecting my annual bonus, I would work out the amount I could spare and then notify my bank to make a partial capital repayment, which effectively reduced the interest charges on my loan without affecting its term.
Consequently, every year my monthly repayments fell progressively, which then allowed me to make even larger partial capital repayments.
My 20-year mortgage was redeemed after only 12 years.
So, when you take a 50-year mortgage, it does not mean that you must take 50 years to repay the loan.
Fifty-year housing loans are definitely not a gimmick or undesirable.
On the contrary, they provide the borrower a safety margin in the event of an emergency.
I commend United Overseas Bank for its foresight in offering a safety margin with its 50-year mortgage loans.
Francis Zhan
I used to be the chairman of the management corporation of a small condominium a few years ago, and a young couple bought a two-bedroom unit there, upgrading from their five-room HDB flat.
The couple were on a tight budget, with enough funds for the monthly instalments and the maintenance and sinking fund contributions, and moved in just in time to celebrate Chinese New Year in their new apartment.
Unfortunately, two months later, a capital levy was imposed on all the owners to replace a seriously leaking swimming pool.
As the couple did not have spare funds for such an emergency, they had to borrow from their friends and colleagues.
Five months later, another capital levy was imposed to replace the leaking roof membrane of another block.
In desperation, the couple had to sell their apartment and downgrade to an HDB flat, not a five-room flat this time, but a four-room one because they had to pay a hefty penalty for redeeming the 20-year mortgage loan prematurely, apart from other expenses.
The principle behind taking a longer-term mortgage is not to buy a bigger flat whose cost exceeds one's financial capacity, but as a wise financial precaution.
I similarly took a 20-year mortgage loan for my unit, but at the end of each year, after collecting my annual bonus, I would work out the amount I could spare and then notify my bank to make a partial capital repayment, which effectively reduced the interest charges on my loan without affecting its term.
Consequently, every year my monthly repayments fell progressively, which then allowed me to make even larger partial capital repayments.
My 20-year mortgage was redeemed after only 12 years.
So, when you take a 50-year mortgage, it does not mean that you must take 50 years to repay the loan.
Fifty-year housing loans are definitely not a gimmick or undesirable.
On the contrary, they provide the borrower a safety margin in the event of an emergency.
I commend United Overseas Bank for its foresight in offering a safety margin with its 50-year mortgage loans.
Francis Zhan