Home Loan FAQ

Why does my outstanding loan remain high at the initial stage despite the repayments made?
During the early years of the loan, a significant amount of your repayments will go towards the payment of interest. So if you make partial repayments to repay the principal sum outstanding, you make substantial savings in your interest payments and thus shorten your loan tenure.

Can I make extra payments other than the monthly contractual repayments?
This depends on the terms and conditions stated in your loan agreement. By paying in extra money each month or making an extra payment at the end of the year, you can speed up the process of paying off the loan. When you pay extra money, be sure to indicate that the excess payment is to be applied to the principal. However, if you make a lump sum payment or partial repayments to your principal loan, you must give notice to your financial institution. The notice period ranges from 1 to 3 months.

Do I need a guarantor for a loan facility?
This is at the financial institution's discretion and depends on the credit standing of the borrower.

Does the financial institution have the right to charge my loan account for any miscellaneous charges incurred by them such as late payment charges, legal costs, insurance, etc?
The financial institution's power to impose charges on your account is normally indicated in the Terms and Conditions of the loan.

How long is the grace period for payment of my monthly installment/interest?
Generally, the financial institution gives a grace period of 7-14 days for you to repay your installment payment. Any payment received after the grace period will be subjected to late payment charges.

When does the financial institution release the loan to the seller/developer?
For houses under construction, the financial institution will release the progressive payment to the developer based on the claim made upon completion of each construction stage as certified by the Architect's Certificate. For completed properties, the loan will be released upon completion of legal documentation or when all relevant approvals, such as the approval of the state government have been obtained.

Can I purchase a house under joint names and apply for the housing loan only under my name?
The financial institution will consider such applications on the merits of each case, under the following circumstances:

* The co-owners are related as husband and wife, and one party is not working and the other party is solely responsible for the loan

* The co-owners are related as father/mother and children, the parents are old and not working and the children will be responsible for the loan
However, the above is at the financial institution's discretion and they may also consider other circumstances.

If the developer abandons the project, am I still required to service my interest/instalment payments?
Yes. You are still obliged to service your loan based on the loan agreement signed between you and the financial institution. However, since the financial institution has vested interest in the property, you could discuss a repayment plan with your financial institution. You should also report the matter to the Ministry of Housing & Local Government.

What happens when the loan is fully repaid?
When the loan is fully settled, the financial institution through its solicitors, will release its charge on the property. The financial institution (chargor) will uplift his claim on the property and the title to the property will be transferred to you.

What happens in the event of death of a borrower who has not bought insurance?
The deceased's survivor/next of kin can claim through the court the rights of the deceased's property. The person will have an option to either proceed to service the loan or redeem it. However, most financial institutions make it compulsory to insure (MRTA) against such an event.

What can the financial institution do if I do not make repayments?
If you fail to make three consecutive payments, the financial institution will take the necessary actions to recall the loan. In the worst case scenario, the financial institution will foreclose the property and sell it to settle the loan. The borrower would still be liable to pay the difference between the auction price and the loan amount outstanding.

What is the most convenient way to repay my loan?
Financial institutions offer a wide range of services to make banking easier for you. Some of the alternative ways of servicing a loan include:

Open a savings/current account and arrange for standing instructions with minimal charges (if you maintain deposit and loan accounts with the same bank, the charges may be waived)
Through an ATM transfer
Internet Banking
Telephone banking service
Deposit your cheque at the deposit machine or send your cheques direct to your financial institution

Should I consider refinancing my loan if I am offered a lower interest rate?
The main consideration in refinancing would be the costs involved. As you are clearly aware, you have incurred a substantial amount to pay for the necessary fees to obtain your first loan. For example, processing fees, legal fees, stamping and transfer fees. Refinancing means you would have to incur the same charges again. Before you decide to refinance, you should ensure that the savings from the lower interest rate is enough to compensate all the costs incurred associated with refinancing, including penalty charges, if any.