Housing Loan Glossary and Relevant Financial Info

ABS

Association of Banks in Singapore.

Amortisation Methodology

Refer to interest calculation.

Application In-principle (AIP)

Refer to in-principle approval.

Board Rate

Board rates are floating rates that are controlled solely by the mortgage lender. They are normally tied to the SIBOR/SOR but the exact pegging is not transparent.

Borrower

A borrower is the individual who is primarily responsible for servicing the monthly instalment of a housing loan.

Cancellation Fee

The amount that mortgage lenders charge, usually a percentage of the loan amount, if you were to cancel your housing loan after you have accepted the Letter of Offer but before the housing loan is disbursed.

Capital and Interest Housing Loan

Part of each monthly payment you make goes towards repaying the capital amount you owe and part goes towards paying interest charged on the loan. At the end of the loan tenure, the entire debt will be repaid. In the early years, payments consist largely of interest; as time goes on the capital repayment proportion increases.

Cashback Housing Loan

The lender refunds a percentage of the housing loan the cashback and you are usually tied by way of an early redemption penalty for a set number of years.

Certificate of Statutory Completion (CSC)

The Commissioner of Building Control will issue the Certificate of Statutory Completion to a building project when it is completed. The building can only be occupied when a Certificate of Statutory Completion (CSC) or Temporary Occupation Permit (TOP) is granted. The requirements for a CSC is more rigorous than a TOP and is compulsory, unlike a TOP. The title deed to the property will only be issued after a CSC is granted.

Claw-back Period

If you are to fully redeem your mortgage within the claw-back period, the lender will reclaim the cost of freebies they gave to you when you sign with them. These would usually be the legal subsidy and may include valuation fees, fire insurance premiums et cetera.

Combo Housing Loan

A combo or hybrid housing loan can be sub-divided into different parts. Each part can be treated as a separate housing loan so you can choose a package for each division. In other words, your loan, if you were to sub-divide it into two parts, can consist of a floating rate component and a fixed rate component.

Completion Date

Completion date, when used in reference to a property purchase, refers to the date of which the sales and purchase of the property is completed. i.e. the property buyer(s) become(s) the new official owner(s)

Conveyancing

The branch of law dealing with the preparation of documents for the sales and purchase of properties.

Credit Check

Checks, that are usually carried out by mortgage lenders, on an individual's credit history.

Credit History

A record detailing the debt repayment history of an individual.

Deferred Payment

Deferred payment refers to payment towards a property that is under construction starting only when the the property is completed. Deferred payment schemes are currently banned by the Singapore government.

Deposit-matching Account

Refer to interest-offset account.

Early Repayment Penalty

Refer to partial redemption penalty.

Facility Letter

Refer to letter of offer.

Fixed Deposit Pegged Rate Housing Loan

A housing loan where the reference rate is the lender's fixed deposit rate. It is hence relatively transparent compared to normal board rates.

Fixed Rate Housing Loan

Packages offering a fixed interest rate for a set period, during which there will almost certainly be early repayment charges. You are protected from interest rate increases and allows for easy monthly budgeting. However, if rates were to fall during the fixed interest period, you would be left paying a relatively high rate.

Floating Rate Housing Loan

The interest rate can rise or fall throughout the tenure of the loan. Lenders usually give at least one month notice when adjustments are made to the interest rate. Most lenders allow partial prepayments for this type of loan, making this a good package if you intend to repay a significant portion of your housing loan in the initial few years.

Full Redemption Penalty

The amount that mortgage lenders charge, usually a percentage of the loan amount, if you were to fully repay your housing loan within a specified period of time.

Full Repayment Penalty

Refer to full redemption penalty.

Guarantor

A guarantor is the individual who is liable to service the monthly instalment for a housing loan in the event the borrower fails to do so.

Home Loan

Refer to housing loan.

Housing Loan

A housing loan is a specific type of mortgage. The money that a bank or financial institution lends at interest is in exchange for taking title of the borrower’s residential property.

Hybrid Housing Loan

Refer to combo housing loan.

In-principle Approval

Loan approval from a mortgage lender based on the credit standing of borrower(s). This application should happen before an agreement is reached between the property buyer and seller. When an agreement is reached, borrower(s) should proceed with an actual home loan application. An In-principle Approval is normally valid for around a month and subject to the property valuation being higher or equal to the property purchase price.

Interest Calculation

The frequency with which lenders calculate the outstanding balance on mortgages (e.g. annually, monthly or daily) is an important consideration for capital and interest housing loans.

Interest-offset Account

Some deals come with an account whereby cash deposited into this account will offset the interest that you pay on your housing loan quantum. For every dollar that you deposit into the account, the interest may be offset fully or by a fraction. For example, your deal may offer you an account that offsets 2/3 of your interest rate for cash that you deposit into it. When you deposit S$100,000 into the account, assuming your interest rate is 3% and loan quantum is S$500,000 at the time of deposit, you will be paying interest of 3% for S$400,000 and 1% (1 - 2/3 of 3%) for S$100,000. This type of account is useful when you have access to substantial liquid funds but have no intention of using the funds to reduce your loan quantum.

Interest-only Housing Loan

Monthly payments consist entirely of the interest due on your loan so that the balance you owe is not reduced during the term.

Letter of Offer (LO)

A contract between the borrower(s) and the mortgage lender stating the terms of the housing loan package.

Loan Quantum

The loan quantum or principal is the amount of money that you borrow.

Loan Tenure

Loan Tenure is the period of time that you will take to fully repay your loan.

Loan to Value (LTV)

Loan to value is a percentage figure indicating the size of the housing loan on a property in relation to its value. Thus, a house worth S$500,000 with a mortgage of S$250,000 would have a loan to value of 50%. The maximum LTV that lenders can legally go up to in Singapore is 80% 75% (updated July 2018).

Lock-in Period

The number of years that you are tied to your lender. If you fully redeem your loan within this period, there will be a full redemption penalty that is equal to a percentage of your loan quantum. Lenders may also charge a penalty for making partial payments within this period.

Mortgage

A mortgage is the money that a bank or financial institution lends at interest in exchange for taking title of the borrower’s property. The conveyance of title becomes void upon full payment of the loan.

Mortgage Servicing Ratio (MSR)

Mortgage Servicing Ratio is a term coined by MAS with respect to mortgages for HDB properties, which includes HDB flats and Executive Condominiums (EC). MSR is the ratio of the borrower's total property loan instalments to gross monthly income, expressed as a percentage. MAS stipulates that a borrower's MSR cannot exceed 30%.

Option to Purchase (OTP)

A legal document that the property seller gives to the buyer in exchange for a sum of money (commonly 1% of the agreed purchase price for private properties or $1,000 for HDB flats). The OTP gives the buyer the option to purchase the property at an agreed price within a certain time-frame (commonly 2 weeks).

Partial Redemption Penalty

The amount that mortgage lenders charge, usually a percentage of the loan amount, if you were to prepay your housing loan within a specified period of time.

Payment Holiday Housing Loan

A type of home loan where you take a break towards paying of your interest or monthly instalment at certain periods during your loan tenure.

Pre-approval

Refer to in-principle approval.

Prepayment

Payments that you make in addition to the monthly instalments.

Prepayment Penalty

Refer to partial redemption penalty.

Principal

Refer to loan quantum.

Principal and Interest Housing Loan

Refer to capital and interest housing loan.

Progressive Payment

Progressive payment refers to payment towards a property that is under construction being rendered in stages before the property is completed.

Reference Rate

An interest rate benchmark used to set other interest rates.

Refinancing

Refinancing means switching from one housing loan package to another, usually better, deal.

Repricing

Repricing means switching from one housing loan package to another deal with the same lender.

Sales and Purchase Agreement

The key legal document with respect to the property transaction.

Singapore Interbank Offered Rate (SIBOR)

Singapore Interbank Offered Rate is fixed by the Association of Banks in Singapore. It represents the rate that banks and financial institutions lend unsecured funds to each other in Singapore. Local housing loan interest rates track movements in the Sibor.

Singapore Swap Offer Rate (SOR)

Swap offer rate is fixed by the Association of Banks in Singapore. It is basically Sibor factoring in a USD to SGD conversion upon maturity of the SOR period.

Temporary Occupancy Permit (TOP)

The Commissioner of Building Control will issue the Temporary Occupation Permit to a building project when it is completed. The building can only be occupied when a Certificate of Statutory Completion (CSC) or TOP is granted. A TOP, unlike a CSC, is not compulsory, but is usually obtained before a CSC as requirements for a TOP is less rigorous.

Term Loan

Term loan refers to the money that a bank or financial institution lends, with the borrower's property as security. Unlike a normal housing loan, the mortgage lender does not have first charge on a term loan. Term loans are not applicable for fresh property purchases in Singapore.

Total Debt Servicing Ratio (TDSR)

Total Debt Servicing Ratio is a term coined by MAS with respect to mortgages. TDSR is the ratio of the borrower's monthly total debt obligations to gross monthly income, expressed as a percentage. MAS stipulates that a borrower's TDSR cannot exceed 60%.

Variable Rate Housing Loan

Refer to floating rate housing loan.