Excited to buy a new home 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!
How to Get a Mortgage in 7 Steps
Follow this seven-step guide to secure a mortgage for your dream home in Singapore.
Step 1: Do the Groundwork for an In-Principle Approval
First and foremost, you need to get an in-principle approval or approval-in-principle. It is a conditional, non-binding approval that enables you to determine how much of a home 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 property you want to purchase (whether it is private property or an HDB flat).
- 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 Banks
The next step is to reach out to one of the shortlisted banks 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.
However, mortgage packages may differ at every bank. You must try to find out about various packages as much as possible to make a well-informed decision.
Step 3: Get 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 and check if you fit their criteria. They would 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.
Important: You wouldn’t want to lie about anything at this stage. Try not to hide your credit card statements since banks can check your credit credibility and the loans 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.
The said 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 has decided to proceed with the purchase of the Property, he will have to exercise the said OTP in the presence of his conveyancing lawyer.
The buyer will also have to place a further 4% deposit (also known as Option-Exercise-Fee) under the escrow account of his appointed lawyer.
When exercising the OTP, the buyer will also need to inform his lawyer on his preferred date of completing the property purchase (“Completion Date”).
The buyer will also have to arrange for payment for stamp duty within 2 weeks of exercising the OTP.
It is crucial to consult with a conveyance lawyer before the property is transferred to your name. Your bank may pick a law firm for you unless you specify that you want to choose one on your own.
The conveyancing lawyer will then conduct relevant searches on the property to ensure that the property will be handed to you free from encumbrances on Completion Date.
On Completion Date, the buyer will need to arrange for the cash difference (can be in cash, CPF savings or both), i.e. the remaining balance of purchase price after deducting the 5% deposit paid & the pre-approved bank loan amount, and hand to his lawyer.
The lawyer will also look for any payments owing by the seller on the Property, such as outstanding property tax and management fee (in cases of condo purchase). If found, they may divide the taxes between you and the seller.
Your lawyer will have to ensure all the above outstanding payments on the Property are fully settled before handing over the 99% of the sales price to the seller’s lawyer.
The purchase is thus completed with the handing over of the balance sales price in exchange for the property title deed.
Your lawyer will then apply with Singapore Land Authority to register the transfer of the property to your name upon completion of the purchase.
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 last step involves paying the remaining fees before you can move into your new home. The conveyance lawyer usually charges between SGD 2,500 and SGD 3,000, depending on the purchase price. You may be able to pay this amount through your CPF.
Next, you need to pay the agent commissions. If you buy a resale property, the seller will have to pay the agent’s commission (which will later be split with your agent).
On the contrary, if your purchase a new property from a developer, the developer will pay your agent. The commission is generally about 1 to 2% of the total property price.
Don’t hesitate to ask questions if you’re confused or concerned about anything. The mortgage process involves a lot of small fees and paperwork. Make sure you take the time to understand it all to make a well-informed decision.
You should stay on top of everything, from the documents you sign to the things you pay for.
Congratulations, You Can Move into Your New House!
The mortgage process can be overwhelming and nerve-wracking, but it’ll be all worth it when you get the loan!
We urge you to work with a professional who knows the ins and outs of the process to ensure everything goes as smoothly as possible. Now that you know how to get a mortgage, you can start preparing to move into your dream house real soon!
Facing Issues? We’re Here to Help!
ValueMax (VM Credit Pte Ltd) is the alternative mortgage lender in Singapore. We can help if you don’t qualify for traditional financing due to:
- Income restraints
- Current liabilities
- Property nature
- Poor credit history
You can also avail yourself of our services if you have ample equity in the property but need cash, want to avoid foreclosure and restructure your debt, need a complex, multiple-collateral loan, can’t wait for 3-6 months to get a loan, or are a foreign national.
In short, we are at your service to assist you when you don’t meet the traditional lending guidelines.
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