Invest in Property - Home Loans

Can I afford it? How much should I set aside? How much can I borrow? We understand buying a property can be a complicated process. So be it a private or HDB property you are purchasing, we are here to take you through, step by step.

Afford a Home

Step 1: Understand the factors involved

While property-investing has been a popular route to wealth, it may not be a sure win thing as property value depends on various factors:

Economic and business conditions

If you are cash-rich, consider buying a property when prices are depressed and hold on till prices improve. However, if you are concerned about income stability, especially during an economic downturn, then you should think twice before investing.

Timing of investment

Time your investment. Buy when property prices are appreciating, and sell before they decline. Experience and constant monitoring of market movements will help you make better decisions. As properties are classified generally as long-term assets, you must have the financial resources to stay invested for some years, and shouldnt bet on making a quick profit on the property.

Housing and land policies

Equip yourself with the latest government policies, property developers plans and banks practices as these may affect property prices.

Profits and risks

Be realistic when you calculate the cost of purchase and the expected investment return. In particular, assess how you will be affected if the property market falls. Thats when your expected return/income will fall, while you still have to manage on-going mortgage costs.

Good location

A well-maintained property in a prime location increases your rental yield or ability to fetch a good selling price. Its thus important to make a physical inspection to ensure that the environment is suitable for occupation or investment.

In addition, buying a property may have a significant impact on your financial health, even your retirement nest-egg. Hence, it is imperative that you understand the costs and profits thoroughly before investing in property.

Up-Front Costs

Ongoing expenses after your purchase

Qualify for Loan

Step 2 : Consider a home loan

To facilitate your property purchase, you can take out a home loan with the bank. You can obtain a housing loan Approval In Principle (AIP)* from the bank before you commit to your purchase. This will give you a clearer picture of your loan eligibility.

Credit assessment checks that you will be subject to upon your request for a loan:

• Proof of regular income (e.g., Income Tax Notice of Assessment / latest computerised payslip / CPF contribution statement for the last 12 months)
• Credit bureau checks (e.g., Good payment records for credit cards / previous or existing loans, no previous blemishes such as discharged bankrupts)

Two main criteria banks use to access your loan eligibility:

1. Financial Commitment-to-income Ratio

2. Loan-to-value (LTV) ratio

Which home loan should I choose?

At DBS, we offer a comprehensive range of home loan packages, with customisable rates, to suit your unique financing needs. In addition, we offer attractive renovation loans as well as bridging loans to help ease your cash flow as you wait for your property sale proceeds. Looking for a more economical way to access extra funds for property investment? You can also check out DBS Assetline, a secured overdraft facility.

Search for Home

Step 3 : View your dream home

Fix an appointment with the seller of the property to view the property, ensure it is in a satisfactory condition and check the asking price.

Valuation

Step 4 : Obtain a Formal Valuation of the Property Current Indicative Value (CIV) from the Bank

The Bank will provide an indicative value of the property from its panel of approved valuation companies.

You have to ensure that the following details provided are correct for an accurate indicative value:

• Address of property
• Property type (landed, condominium, others)
• Land / built-in area
• Freehold / leasehold (999 years / 99 years)
• Renovation (how much was done and when)
• TOP Date
• Age of property

For the list of details required, please refer to Your Dream Home Checklist.

What if the Bank's valuation of the property and purchase price differ?

In the event the Bank's valuation is lower than the purchase price, the purchaser has to pay the difference between the purchase price and the Bank's valuation using cash. As such, the cash required up-front will be higher so it is always important to know the valuation of the property before making any offer.

Appoint Lawyer

Step 5 : Appoint a lawyer to coordinate your purchase

You will need to appoint a lawyer to do the following:

• Title search on the property to determine if the seller is in fact the rightful owner and whether there are any encumbrances on the property
• Bankruptcy search on the seller to ensure that he is not bankrupt
• Requisition searches (e.g. road lines and drainage which may affect the value of the property)
• Vet through the Option to Purchase (OTP) to ensure that it is in order

Make an offer

Step 6 : Make an offer to the seller

To make an offer, you have to place an option fee which varies:

• Buying a private property directly from the resale market:

  Usually 1% of the purchase price. To exercise the OTP, you would have to make a further payment, usually 5% or 10% of the purchase price, less the option fee.

• Buying an HDB flat:

  Usually up to S$1,000. To exercise the OTP, you have to pay up to S$5,000 which includes the option fee.

  Once exercised, the OTP will be valid for a period agreed by both the buyer and seller. During this period, you will own the sole right to purchase the property.

Loan Application

Step 7 : Apply to the bank for a home loan

For the bank to process your loan, you will need to submit these documents:

• Application Form
  • Mortgage Application Form
• CPF Documents
  • Contribution History up to the last 12 months
• Income Documents
  • Latest Income Tax Notice of Assessment or
  • Latest computerised payslip or
  • Latest 2 years Income Tax Notice of Assessment (only applicable to self-employed/commission based customers)
• Option to Purchase (OTP) or Sale and Purchase (S&P) Agreement

Additional documents may be requested on a case-by-case basis. Upon approval of your application, you will receive a Letter of Offer (LO)* from the Bank, stating the details such as loan amount, tenure and terms and conditions. Before signing the LO, you should ensure that you understand its contents entirely, as it becomes legally binding upon acceptance.

Once you have accepted the LO*, the Bank will then instruct the law firm and valuation company to proceed with the necessary mortgage documentation and valuation report respectively.

A caveat^ will be lodged by your lawyer with the Singapore Land Authority against the property.

Meet your Lawyer

Step 8 : Meet with your lawyer

Your lawyer will help you with the following:

• Exercise your Option to Purchase (OTP) / execute your Sale and Purchase (S&P) Agreement and apply to the CPF Board for the use of your CPF Ordinary Account savings towards the purchase of the property, the monthly instalments for the home loan and legal fees and stamp duties.
• Go through the mortgage documents in order to ensure that you fully understand all the terms and conditions stated therein.

Assist in Valuation

Step 9 : Obtain Current Indicative Value (CIV) of the property

• The Bank will arrange for a formal valuation of the property via physical inspection
• You need to inform the seller or the housing agent to allow the valuers access the property for inspection
• The valuers will then submit a copy of the valuation report to the Bank

Pay Collect Keys

Step 10 : Pay legal fees and collect your keys

Your lawyer will ensure that all the titles, legal requisitions, etc of the property are in order for your purchase. Your lawyer will then receive the funds on your behalf from the Bank and CPF Board to complete the purchase.

The legal fees are usually payable at this stage. Please check you receive the following:

Completion statements

Transfer document

Issuing of Certificate of Title (CT)

Your house keys!

Be Ready To Act

Next Steps

• Call us, email us or SMS "Home<space>Name<space>NRIC" to 76060 for customised rates
• Email us
  • Existing customers
  • New customers
• Request a consultation
• Calculate your estimated monthly mortgage instalments
• Get our home loan application checklist for the documents you will need
• Download an application form
 
 

Disclaimer: This document is for general information only, and does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person. It should not be relied upon as legal or financial advice. Whilst reasonable care has been taken to ensure the accuracy of the information herein, no warranty or representation is made as to its correctness or completeness. Content herein may be modified at any time without notice. DBS Bank accepts no liability whatsoever for any direct, indirect or consequential loss arising from any use or reliance

Note: The Association of Banks in Singapore (ABS) has published a consumer guide on home loans. You are encouraged to read the guide before committing to any home loan. The guide is available on the websites of ABS (www.abs.org.sg) and the Monetary Authority of Singapore (www.mas.gov.sg) in the four official languages. You may also obtain a copy of the guide at any of our branches