Which is the best bank loan package for project under construction??

[Acer]

Tks PN. The estimate your gave is a blessing for newbies like me.

As me+wifey monthly CPF OA is about $1.7k combined, that will be sufficient to cover all the monthly progressive payment until TOP...which means a progressive payment from CITI will be best for us.

For those interested, CITI current package with a 3-yr lock in is SIBOR+0.8% for the first 3 yrs. After that is SIBOR+1.25%.

Hi jonleelk,
the citi package that u had mention is for completed project or still construction project.

[jonleelk]

Hi jonleelk,
the citi package that u had mention is for completed project or still construction project.

It is for under-construction. For completed, they are having another special 1 year lock in package.

[isaaclim]

Tks PN. The estimate your gave is a blessing for newbies like me.

As me+wifey monthly CPF OA is about $1.7k combined, that will be sufficient to cover all the monthly progressive payment until TOP...which means a progressive payment from CITI will be best for us.

For those interested, CITI current package with a 3-yr lock in is SIBOR+0.8% for the first 3 yrs. After that is SIBOR+1.25%.

It is not so advisable to take SIBOR link package with 3yrs lock-in. 3yrs is way to long. SIBOR may turn into a monster in 3 yrs.

[jonleelk]

It is not so advisable to take SIBOR link package with 3yrs lock-in. 3yrs is way to long. SIBOR may turn into a monster in 3 yrs.

True that SIBOR can become a monster in the future. However, when that happens, can the bank loan interest be lower than SIBOR?

[isaaclim]

True that SIBOR can become a monster in the future. However, when that happens, can the bank loan interest be lower than SIBOR?

Of course possible. But 0.8% is still a reasonable spread.

My prediction is SIBOR may go beyond 3% in 2/3 year times. 3+%+0.8% > 3.8% still lower then board rate of many banks.

But if you can get fix rate package for 3 yrs, that is not more then 2.5% in average. Isn't it would be better?

[new2mondrian]

This thread is so interesting! And thanks for the candid exchange of views. There are certain points brought up here that I definitely agree with.

1) It is idealistic to assume that the combined household income will remain the way it is or even higher all the way till age 62. In this economic environment (just look at how many downturns SGP went thru over the past 10 years), one can never be sure even whether one remains employed/employable in 10 years, let alone right up till retirement.

2) Property can be a great destruction of wealth, especially when one factors in the interest payments compounded over the course of a typical 30-year loan taken over a property.

In the first place, the owner occupied property can never be deemed as an investment; or rather it is for self consumption. To me, should I stay in a $800K property that has been fully paid up, the opportunity cost of that property is easily $64K per annum, based on 8% returns should I invest that $800K cash used in paying for that property (or I would have received if I sell that property) in fixed income instruments. Should my investment returns is higher than 8%, the opportunity cost is easily much much higher.

Therefore for owner-occupied properties, one has to be comfortable with that level of consumption.

3) The rate of growth in property prices over the PAST 30 years cannot be extrapolated to the next 30 years. Singapore moved from 3rd world to 1st world over these 30 years. In the early 70s, a HDB 5-room flat is less than 20k. The value went up by 20-30 times over the past 30 years. Will it go up by the same amount? The clear answer is no. Over the short to medium term, I agree that we might run the risk of mass inflation. But over a much longer term, I believe we might be looking at prolonged periods of stagflation.

Then where does that put us? I think at the end of the day, it is still key to live within our means, and continue to set aside savings (be it in cash/gold/mixed basket of equities/commodities) for the future. Property wise, personally I do not see the need to own more than 1 property at any point in time. Leverage can be a double-edged sword.

[Bishan Kid]

[quote=new2mondrian]This thread is so interesting! And thanks for the candid exchange of views. There are certain points brought up here that I definitely agree with.

1) It is idealistic to assume that the combined household income will remain the way it is or even higher all the way till age 62. In this economic environment (just look at how many downturns SGP went thru over the past 10 years), one can never be sure even whether one remains employed/employable in 10 years, let alone right up till retirement.

2) Property can be a great destruction of wealth, especially when one factors in the interest payments compounded over the course of a typical 30-year loan taken over a property.

In the first place, the owner occupied property can never be deemed as an investment; or rather it is for self consumption. To me, should I stay in a $800K property that has been fully paid up, the opportunity cost of that property is easily $64K per annum, based on 8% returns should I invest that $800K cash used in paying for that property (or I would have received if I sell that property) in fixed income instruments. Should my investment returns is higher than 8%, the opportunity cost is easily much much higher.

Therefore for owner-occupied properties, one has to be comfortable with that level of consumption.

3) The rate of growth in property prices over the PAST 30 years cannot be extrapolated to the next 30 years. Singapore moved from 3rd world to 1st world over these 30 years. In the early 70s, a HDB 5-room flat is less than 20k. The value went up by 20-30 times over the past 30 years. Will it go up by the same amount? The clear answer is no. Over the short to medium term, I agree that we might run the risk of mass inflation. But over a much longer term, I believe we might be looking at prolonged periods of stagflation.

Why is HDB 5 room flat is less than 20K in the early 70s as what u claimed after Singapore has only less than 10years of independance without natural resources?
Why is Ford Cortina(E/GT) sell about 9K in 1969 in the former showroom opposite Istana though without COE ?
Why land is so cheap then as comparatively to a car?
A property is immovable, the price is highly dependable on infrastructure of the country, location,employment, income, design ,ammenties and etc.

[david8387]

hi all, advise needed comparing btw 2 banks loan package 80% loan amt and 3yrs
lock-in

MBank (fixed rated)
1st-1.6%
2nd-2.6%
3rd-2.9%
thereafter- 3.75% bank internal board rate
(subject to change by bank discretion)

CBank - for 1st ~ 3rd yrs
(X-mths sibor + 0.8%)
thereafter sibor + 1.25%
BUT, Citi has a clause to adjust the "spread" value at their discretion.

Is Citi T&C a risker one?
head cracking btw tis 2 banks

[david8387]

hi all, advise needed comparing btw 2 banks loan package 80% loan amt and 3yrs
lock-in

MBank (fixed rated)
1st-1.6%
2nd-2.6%
3rd-2.9%
thereafter- 3.75% bank internal board rate
(subject to change by bank discretion)

CBank - for 1st ~ 3rd yrs
(X-mths sibor + 0.8%)
thereafter sibor + 1.25%
BUT, Citi has a clause to adjust the "spread" value at their discretion.

Is Citi T&C a risker one?
head cracking btw tis 2 banks

[rayray]

Hi,
First post for me.
I have been reading the whole thread and found it very informative.

I just purchased my first new private property and foundation work may start next year. I was looking around for a good BUC bank loan.

I visited Maybank on their current promotion, but, too bad, I cannot fully utilize the first year interest due to foundation work may start next year.

UOB had offered me the following :

Floating Rate (Lock-in period 3 years)
1st year = 1.68%
2nd year = 2.48%
3rd year = 2.88%
4th year = 3.75%

The above is based on Board Rate minus a fixed percentage discount.
hence, would like to know :
1) Is the above UOB Floating rate package have any advantage over other banks SIBOR + X?
2) Is there any better loan package than the one offer by UOB?

Any advice is appreciated.

[teddybear]

Forget about board rate loan as you won't know how you are charged in the future (no transparency vs SIBOR rate).

Hi,
First post for me.
I have been reading the whole thread and found it very informative.

I just purchased my first new private property and foundation work may start next year. I was looking around for a good BUC bank loan.

I visited Maybank on their current promotion, but, too bad, I cannot fully utilize the first year interest due to foundation work may start next year.

UOB had offered me the following :

Floating Rate (Lock-in period 3 years)
1st year = 1.68%
2nd year = 2.48%
3rd year = 2.88%
4th year = 3.75%

The above is based on Board Rate minus a fixed percentage discount.
hence, would like to know :
1) Is the above UOB Floating rate package have any advantage over other banks SIBOR + X?
2) Is there any better loan package than the one offer by UOB?

Any advice is appreciated.

[rayray]

thanks.
One thing about UOB, they offer one free conversion 3 month from TOP, wonder this is an advantage for me to switch to a lower interest rate at that time

[Acer]

thanks.
One thing about UOB, they offer one free conversion 3 month from TOP, wonder this is an advantage for me to switch to a lower interest rate at that time

If happen that time UOB has special promotion for a fix rate and you wish to take the opportunity.
UOB will tell you. Your plan only can convert to this rate (which is higher than the promotion rate). cannot take the special rate.

Encounter that before.

[rayray]

If happen that time UOB has special promotion for a fix rate and you wish to take the opportunity.
UOB will tell you. Your plan only can convert to this rate (which is higher than the promotion rate). cannot take the special rate.

Encounter that before.

Thanks for the tip.
With the current economy situation, banks need fund since we witness their share market performance. The UOB guy told me the BR was not adjusted since 2006, this worried me more as UOB may adjust the BR anytime to recover some losses.

I may go for the Maybank package which I will not utilize the first year interest (3 years lock-in and foundation work start next year), 2nd year=2.6% and 3rd year=2.9% but by then at around TOP time, I will have to hunt around for another new loan package. At this time, can I call it a Re-Financing completed project loan or still a loan for BUC project?

[PN]

When I took up my first bank loan, it's based on board rate. Initially, the interest rate is still bearable. After a while, the bank send notices to inform that the board rate has increases & I notice my interest going to bank is getting ridiculous. I contacted another bank and refinance eventually as the package (also board rate) offered by another bank is much much attractive.

Two & a half year into the loan with this 2nd bank, I asked for refinancing & this same bank offer me Sibor rate package. After much consideration, I decided to take it up & has no regret so far. Reason being that it is transparent & I know why I was paying X% every month.

Below are more details on Board rate & Sibor rate from various sources.

What is board rate?
This is actually derived from overall bank funding costs (including business costs) from different sources. Some bank's home loan board rate is benchmarked against interbank rates, market conditions, as well as business costs. There is no standard practise & varies from one bank to another bank.

No accountability is required of bank to explain how they arrive at any particular rate. A bank Board rates are guided by and not determined by SIBOR. Banks are free to vary the board rate and discount that they would offer without having to give any prior notice. As such, Banks may move their board rate either way regardless of where SIBOR is headed for. For packages offered on the board rate, Banks would normally offer a fixed discounted rate for the initial years, after which the effective interest rate charged would be based purely on the board rate at that point of time.

What about Sibor rate?
This is Singapore Interbank Offered Rate (Sibor) and you can know the latest rate easily from newspapers or Internet. Bank loan base on Sibor is more transparent. Instead of the traditional practice of giving a discount off their respective board rate, FIs offering such reference / pegged rate packages would add a premium above the reference rate.

The advantage of such reference rate is that when SIBOR moves down, your interest rate would be adjusted accordingly. Which ever direction the rate goes, you are assured that you are paying based on transparent market rates although transparency does not necessarily mean the lowest rate available. What reference rates present is the peace of mind knowing that you are not paying excessive rates due to any Bank’s drive to increase their bottom line.

The Sibor rate chart for the last 20yrs are as below. You may use it as a reference to gauge or predict how the trend will be for the next few years. But don't blame me if you got it wrong.

[rayray]

Thanks.
It's better to go for SIBOR Loan package (no lock-in or 1 year lock-in) or maybe the citibank cash management account provided we have lots of spare cash to put into the account.

Now, it's either HSBC for SIBOR pegged or citibank cash management account for me.

[sqmin3]

Do not accept UOB floating offer. I have learned a lession from them. They will not offer your best package before 1 year after TOP. They will charge a lot if you want to refinance in another bank. IMO, SIBOR is the best package for UC project.

[rayray]

Thanks for the advice.

On hand, Citibank offer as mentioned before in previous post, SIBOR + 1% (Lock-in 3 year, 3 years lock-in maybe a big risk if market pick up) but they do offer a cash management account which pay an interest at 70% of the effective interest rate.
Come to think a bit, if SIBOR rate + X rate goes up, the saving interest rate goes up too, but I think you really save on the offset interest by having a big fund in the cash management account. Where to get so much cash when majority of the fund in CPF? SIGH

[PN]

I was looking at the poll result & noticed that 4 persons voted for ">5k & <10k". I guess you are sharing your personal experience.

I'm just curious if anyone has gotten a bank approval for 1.2mil property loan with this household income?
How much does the bank allow you to take 80% loan? 70% or lower?
Just want to learn more. Thanks.

[noblebaby]

I was looking at the poll result & noticed that 4 persons voted for ">5k & <10k". I guess you are sharing your personal experience.

I'm just curious if anyone has gotten a bank approval for 1.2mil property loan with this household income?
How much does the bank allow you to take 80% loan? 70% or lower?
Just want to learn more. Thanks.

I'm curious too... Frankly, if combined monthly income is less than 10k, really don't consider to stay in private property... even it's just a 700k mass market condo. Really hard to imagine some young couples spend huge part of their salary (>30-40%) into monthly installment or with a tenure of more than 30 years. really no need to retire.

The $$$ can be better spend on good investments... Should start to invest since young...

[teddybear]

If believe you are wrong. The government represented by HDB prohibits any household which earns more than $8k per month from buying new HDBs. What does this mean? It means they believe any household earning more than $8k per month will be able to afford private property. Based on statistics, more than $8k per month household are already in the top 25% bracket of earners. The government encourages Singaporeans to invest in their house too (as evidenced by allowing CPF to buy properties). So far, investment in their own properties has proven to be profitable over long term, and it helps people to save by having to set aside a fixed sum of money every month (particularly the young, who are mostly used to spending than saving).

I'm curious too... Frankly, if combined monthly income is less than 10k, really don't consider to stay in private property... even it's just a 700k mass market condo. Really hard to imagine some young couples spend huge part of their salary (>30-40%) into monthly installment or with a tenure of more than 30 years. really no need to retire.

The $$$ can be better spend on good investments... Should start to invest since young...

[noblebaby]

Earning more than $8k canot stay in resale HDB??? Why must die die stay in private property that is outside the comfort zone of a $8k earner?

Why must a couple with $8k monthly income to take up huge loan of more than 75% with the bank, and with a tenure as long as 35 years?? And then spend a huge part of salary for the monthly installment? What is the point of doing this? Do you think staying in private is the greatest thing in life?

I heard from many couples... "ooo, no saving, very poor", "need to save hard", bla bla... you know what, these people are mortgage slave to the bank.

of course the garment want the people to stay in private and expensive DBSS... for them to collect fat stamp duty and property tax every year. I'm not wrong, just that the garment is smarter than us.

If believe you are wrong. The government represented by HDB prohibits any household which earns more than $8k per month from buying new HDBs. What does this mean? It means they believe any household earning more than $8k per month will be able to afford private property. Based on statistics, more than $8k per month household are already in the top 25% bracket of earners. The government encourages Singaporeans to invest in their house too (as evidenced by allowing CPF to buy properties). So far, investment in their own properties has proven to be profitable over long term, and it helps people to save by having to set aside a fixed sum of money every month (particularly the young, who are mostly used to spending than saving).

[teddybear]

If people can afford the more comfortable life in a private condo, paying the property taxes is just like a contribution to the society (so that these money can be used to help the poor and the needy). If everybody saves and nobody spends, then the govt will still have to find other sources of revenues & taxes to get the money to run the country (which is even worse because they will still save and save and still have to pay similar among of taxes anyway through other means vs they spend and enjoy and pay same taxes).

The fact that HDB prices are now so close to the mass market private condos that this make private property so much more worth the money paid (which is why so many flocked to buy Caspian, Mi Casa, or even the The Quartz). Do you really think so many people are "idiots"? From the way you wrote, I suppose you do believe so but that is Ok for them. At the end of the day, can afford or cannot afford comfortably is for the individuals to decide. Everybody is entitled to different opinions and we have even saw newspaper reporting a couple complaining not enough money with $15k household incomes.

What is the problem with taking a loan to buy property and paying interest? If they did so on private property (e.g. 20 years ago), they would have been laughing all the way to the bank now despite paying the interests.

Earning more than $8k canot stay in resale HDB??? Why must die die stay in private property that is outside the comfort zone of a $8k earner?

Why must a couple with $8k monthly income to take up huge loan of more than 75% with the bank, and with a tenure as long as 35 years?? And then spend a huge part of salary for the monthly installment? What is the point of doing this? Do you think staying in private is the greatest thing in life?

I heard from many couples... "ooo, no saving, very poor", "need to save hard", bla bla... you know what, these people are mortgage slave to the bank.

of course the garment want the people to stay in private and expensive DBSS... for them to collect fat stamp duty and property tax every year. I'm not wrong, just that the garment is smarter than us.

[sqmin3]

What does monthly household income mean?

Does it mean the average monthly income of one year total as shown IRAS tax accessment notice, which includes bonus, investments and rental? Or only the basic salary? They are much different. The Average monthly income is about 10-40% higher than basic salary usually. For HDB new flat application, it seems they mean basic salary. For Loan application from banks, the banks mean the average monthly income, isn't it?

[teddybear]

Yes, you are right, HDB only considers basic. The government household income survey takes the average. Banks usually consider the average.

What does monthly household income mean?

Does it mean the average monthly income of one year total as shown IRAS tax accessment notice, which includes bonus, investments and rental? Or only the basic salary? They are much different. The Average monthly income is about 10-40% higher than basic salary usually. For HDB new flat application, it seems they mean basic salary. For Loan application from banks, the banks mean the average monthly income, isn't it?

[PN]

Some interesting statistics from Salary.sg. & Singapore Statistics. For ease of reference, I classified them as category 1, 2 & 3.

Singapore Average Monthly Household Income
75.9% of households earn <10k (Category 1)
16.1% of households earn between 10k & <20k (Category 2)
5% of households earn above 20k (Category 3)

HDB vs Condo/Private Percentage Ratio
77.8% lives in HDB (Category 1)
14.3% lives in Condo (Category 2)
6.2% lives in landed private property (Category 3)

Statistics don't lie. It doesn't requires rocket science to tell you where the majority earning <10k stay.
Households earning <10k a month live mainly in HDB. Otherwise, the 8k basics income limit is not working right?
Majority of those in category 2 (10k to <20k) & category3 (>20k) live in condo or landed private property.
Of course there are some who hold multiple properties (both condo & HDB at the same time OR multiple condo/private).

Note: The above is meant for those people who appreciates statistics only. Those who don't please ignore & skip over.

[cheerful]

Some interesting statistics from Salary.sg. & Singapore Statistics. For ease of reference, I classified them as category 1, 2 & 3.

Singapore Average Monthly Household Income
75.9% of households earn <10k (Category 1)
16.1% of households earn between 10k & <20k (Category 2)
5% of households earn above 20k (Category 3)

HDB vs Condo/Private Percentage Ratio
77.8% lives in HDB (Category 1)
14.3% lives in Condo (Category 2)
6.2% lives in landed private property (Category 3)

Statistics don't lie. It doesn't requires rocket science to tell you where the majority earning <10k stay.
Households earning <10k a month live mainly in HDB. Otherwise, the 8k basics income limit is not working right?
Majority of those in category 2 (10k to <20k) & category3 (>20k) live in condo or landed private property.
Of course there are some who hold multiple properties (both condo & HDB at the same time OR multiple condo/private).

Note: The above is meant for those people who appreciates statistics only. Those who don't please ignore & skip over.

Wow .. thanks for sharing ... how to locate that source??
U sound like an expert ( more like a banker or ministry high-flyer) ....

Yup seems like the stats don't lie & the pattern showing correlation between the two sets of numbers (if that's spelt correctly)!

[wreckwrx]

Btw, what is the date of this data set?

Some interesting statistics from Salary.sg. & Singapore Statistics. For ease of reference, I classified them as category 1, 2 & 3.

Singapore Average Monthly Household Income
75.9% of households earn <10k (Category 1)
16.1% of households earn between 10k & <20k (Category 2)
5% of households earn above 20k (Category 3)

HDB vs Condo/Private Percentage Ratio
77.8% lives in HDB (Category 1)
14.3% lives in Condo (Category 2)
6.2% lives in landed private property (Category 3)

Statistics don't lie. It doesn't requires rocket science to tell you where the majority earning <10k stay.
Households earning <10k a month live mainly in HDB. Otherwise, the 8k basics income limit is not working right?
Majority of those in category 2 (10k to <20k) & category3 (>20k) live in condo or landed private property.
Of course there are some who hold multiple properties (both condo & HDB at the same time OR multiple condo/private).

Note: The above is meant for those people who appreciates statistics only. Those who don't please ignore & skip over.

[PN]

You can get all the detail statistics from www.salary.sg and http://www.singstat.gov.sg/pubn/reference.html#sh

[cheerful]

You can get all the detail statistics from www.salary.sg and http://www.singstat.gov.sg/pubn/reference.html#sh

R those figures extracted from 'key household income trends,2008' from the 2nd URL?

Don't seem to find the two sets of data which u've provided (but read that 39% of employed household earned a monthly income of at least $7K) ...