6 Tips for Staying On Top of Your Singapore Home Loan Payments
Taking on a home loan, whether it’s from a bank or from Singapore’s own Housing and Development Board (HDB), may feel like a tremendous responsibility. Your mortgage repayment, in particular, will be a pressing concern from the day your loan application is accepted to the day the loan matures. But the money matters behind your home loan don’t have to be as difficult or as overwhelming as you think they should be. With discipline and foresight, you can learn how to manage your home loan payments and stay on top of this very important financial obligation.
Below are some helpful tips for Singaporean homeowners who are looking to pay off their first mortgage. These will help you prioritise your loan repayments, keep you in good standing with your creditor, and prepare you for future mortgages with greater responsibilities.
Pay the Largest Sum Possible Before the Loan Period Starts
Once you’re approved for your mortgage, one of the first things you should explore is how much you can pre-pay or pledge as down payment. The rationale behind this is fairly simple. The more you pay before the loan term starts, the less money you’ll have to borrow from your lender. This also means you’ll owe them less interest as the loan matures, thus making your home loan less expensive on you. Ask your lender how much you can pre-pay, and make the largest possible sum you can before you start making repayments with interest.
Decide on the Most Convenient Loan Terms for Yourself
Another thing that’s wise for you to do is to plan your loan terms. Think about how many years you’ll want to spend paying off your mortgage. You can opt for small monthly payments, but be cognizant of the fact that you’ll have to pay interest for longer. You also have the choice of making higher monthly payments over a shorter time frame. This may be the more expensive arrangement in the short term, but it will help you pay off your loan faster.
Use a Loan Interest Calculator to Keep Track of Your Payment Amounts
Maybe maths aren’t your strong point, and that makes you extra worried about calculating the right amounts for your mortgage payments. Getting the numbers right may seem like an even more daunting task if your arrangement changes. Luckily, it’s easy to arrive at accurate estimates if you use tools like the HDB loan interest calculator. You use this tool or one that’s similar, and simply plug in the details of your loan amount, loan tenure, and annual interest rate. Use technology to your advantage when managing your loan repayments, and settling them will eventually start feeling like second nature to you.
Set a Benchmark for Your Monthly Payments Based on Your Income
The next thing you have to consider about your loan repayments is how to budget them alongside the rest of your monthly expenses. While you should have a sum allotted for your mortgage, you should also have enough for other necessities like food, healthcare, utilities, or insurance.
When it comes to allocating a percentage of your income for an HDB loan, you can follow HDB’s own Mortgage Servicing Ratio. If you take on a home loan from HDB, your monthly repayments shouldn’t exceed 35% of your monthly household income. For private properties, there’s a more liberal Total Debt Servicing Ratio in place. The only requirement for this ratio is that you don’t spend more than 60% of your income on your total debts, mortgage included. Regardless, you should aim to set aside a reasonable percentage of your household income for your home loan repayments, for example between 25% and 30%. And take care not to borrow too much, whether for your mortgage or your other debts, as it may not be healthy for your long-term finances.
Explore Another Method for Your Home Loan Repayment
The issue of paying off your mortgage may feel like an especially burdensome one because you think you can only do so with cash. But in Singapore, there’s also the option of using your Central Provident Fund, or CPF, to pay off a home loan. This applies for both HDB loans and housing loans from banks.
If you do pursue an option like your CPF, just take note of the borrowing limits that come with it. In addition, you’ll eventually need to repay the CPF monies if you sell your house. Settle all inquiries with the Central Provident Fund Board before you try this method. Regardless, knowing that you have another option besides cash may give you some much-needed peace of mind about your payments.
Plot Your Loan Payment Dates on a Calendar
Lastly, never forget to be timely about your monthly payments. Pay them in full and as early as you possibly can. If you have a hard time remembering when exactly to make the payments, plot the payment dates on a calendar. You can write reminders for yourself on an old-fashioned paper calendar, or you can set up push notifications from a calendar app. Keep up the habit of paying on time, and your creditor will look favourably on you for your next home loan application.
Your current home loan may not be the only home loan you’ll ever take on. There may be opportunities for you to save up and apply for a bigger and better home, especially if you intend on growing your family. It’s best to start off your home loan journey with a small and affordable property, then apply for larger loan amounts later. What’s important is laying the foundations for greater financial discipline—and building those while you also build your dream home.