Bank ask to Top up if Prop falls below Valuation

[Chillyred888]

Hi All,
I have these 2 Scenarios:

1)New not yet TOP project : if selling price is eg. $900k ,if economic crisis came and Valuation of this unit drop to 800k.

Q)Will the Bank ask me to Top up in cash the 100k difference?

2)Re-sale Condo : if bank loan me 900k but my prop value drop to 800k.

Q)Do i still need to be liable and need to Top up cash of 100k,since im already staying there say like few years?

[devilplate]

Hi All,
I have these 2 Scenarios:

1)New not yet TOP project : if selling price is eg. $900k ,if economic crisis came and Valuation of this unit drop to 800k.

Q)Will the Bank ask me to Top up in cash the 100k difference?

2)Re-sale Condo : if bank loan me 900k but my prop value drop to 800k.

Q)Do i still need to be liable and need to Top up cash of 100k,since im already staying there say like few years?

ask the banker....y ask here?

[focus]

Wa.. now got people asking about top-ups..

I remember this happen around the time of the crisis as well..

So now the mood for those on the fringe investors are getting pessismistic? On the verge of unloading to reduce burden on leverage?

[proud owner]

Wa.. now got people asking about top-ups..

I remember this happen around the time of the crisis as well..

So now the mood for those on the fringe investors are getting pessismistic? On the verge of unloading to reduce burden on leverage?

precautionary lah

not necessarily pessimistic

[jwong71]

Hi All,
I have these 2 Scenarios:

1)New not yet TOP project : if selling price is eg. $900k ,if economic crisis came and Valuation of this unit drop to 800k.

Q)Will the Bank ask me to Top up in cash the 100k difference?

2)Re-sale Condo : if bank loan me 900k but my prop value drop to 800k.

Q)Do i still need to be liable and need to Top up cash of 100k,since im already staying there say like few years?

yes, some cases require topups.
That why u see in recession, alot of desperate sales.
those with no money to topup, rather dispose it at loss,than to top up more cash.
*cos they can manage the monthly mortgages,but cant manage the topups amount.

[devilplate]

yes, some cases require topups.
That why u see in recession, alot of desperate sales.
those with no money to topup, rather dispose it at loss,than to top up more cash.
*cos they can manage the monthly mortgages,but cant manage the topups amount.

my understand is: as long u can service ur loan...they wun ask for top-up...unless the banks themselves no $$...haha

[jwong71]

my understand is: as long u can service ur loan...they wun ask for top-up...unless the banks themselves no $$...haha

ur understanding vs real cases of top up upon TOP especially when valuation drops. which is more real.??

[kingkong1984]

Dun be caught, valuations do go down and if its a net negative, definitely a top up is needed. Banks are not suckers, stupid fools are.

[lkwangli]

If property is 900k and bank lent you 720k. (80%).

If prices drop to say, 800,000, bank can ask you to top-up the difference (up to the 80% limit again) (720k - 640k == 80k).

If prices drop to say, 700k, good luck to the bank. Even if the bank force sale the property, it still loses 20k, so if you continue to service the monthly mortgage, unlikely the bank will do a force sale.


My 2c base on my understanding.

[ymgsterling]

If property is 900k and bank lent you 720k. (80%).

If prices drop to say, 800,000, bank can ask you to top-up the difference (up to the 80% limit again) (720k - 640k == 80k).

If prices drop to say, 700k, good luck to the bank. Even if the bank force sale the property, it still loses 20k, so if you continue to service the monthly mortgage, unlikely the bank will do a force sale.


My 2c base on my understanding.

Understanding my banker before I sign up for my
loan last month;

Local bank will not ask to top up unless you
are not able to service your loan.
However, do note contractually, they have a
right to do so.
Typically, this only happens to mortage loan from
foreign banks, where these foreign banks want
to pull out their operations during crisis.

[Squall8888]

If you are servicing your loan promptly, there is no top up. It doesn't make sense when the bank gets back negative amount and you don't have anything else to pay. And the bank end up a bigger loser. They are not suckers as what you said so no. Pay your installment promptly and you will be fine.

Dun be caught, valuations do go down and if its a net negative, definitely a top up is needed. Banks are not suckers, stupid fools are.

[howgozit]

If you are servicing your loan promptly, there is no top up. It doesn't make sense when the bank gets back negative amount and you don't have anything else to pay. And the bank end up a bigger loser. They are not suckers as what you said so no. Pay your installment promptly and you will be fine.


Quote:
Originally Posted by kingkong1984
Dun be caught, valuations do go down and if its a net negative, definitely a top up is needed. Banks are not suckers, stupid fools are

From what I recall based on the experience of the 1997 Asian Financial Crisis. There were many who were asked to top-up despite being able to service the loans promptly when their properties went into negative equity.

What happened then to some speculators was that they took on multiple property loans with the same bank and all the properties went into negative equity. Considering that CPF has first charge, the bank is at a very real risk of being unable to recoup even its principal. The bank may then ask for a top-up of the property that is non-resident (therefore an investment property). This brankrupted some speculators during that time.

[Regulators]

are you a korean with a younger son and older daughter?

If property is 900k and bank lent you 720k. (80%).

If prices drop to say, 800,000, bank can ask you to top-up the difference (up to the 80% limit again) (720k - 640k == 80k).

If prices drop to say, 700k, good luck to the bank. Even if the bank force sale the property, it still loses 20k, so if you continue to service the monthly mortgage, unlikely the bank will do a force sale.


My 2c base on my understanding.

[devilplate]

From what I recall based on the experience of the 1997 Asian Financial Crisis. There were many who were asked to top-up despite being able to service the loans promptly when their properties went into negative equity.

What happened then to some speculators was that they took on multiple property loans with the same bank and all the properties went into negative equity. Considering that CPF has first charge, the bank is at a very real risk of being unable to recoup even its principal. The bank may then ask for a top-up of the property that is non-resident (therefore an investment property). This brankrupted some speculators during that time.

i tot CPF 2nd charge?

how about the person nvr use CPF?

but y wud the bank ask for top up if borrower can service the loan? if cannot top-up, force sale?

last yr, banks actually restructured those who defaulted on their installment ...temp interest only loan....

[Chillyred888]

yes, some cases require topups.
That why u see in recession, alot of desperate sales.
those with no money to topup, rather dispose it at loss,than to top up more cash.
*cos they can manage the monthly mortgages,but cant manage the topups amount.

if one cant top up required by bank,will they force sell your property,den legally ask you to pay back by instalment to make up their negative losses /minus off what you have paid(initial 20% dwnpayment)?

[Chillyred888]

yes, some cases require topups.
That why u see in recession, alot of desperate sales.
those with no money to topup, rather dispose it at loss,than to top up more cash.
*cos they can manage the monthly mortgages,but cant manage the topups amount.

mine is a case of can manage mthly mortgages but cant manage any top up for now cos of other commitments

[teddybear]

Don't anyhow spread rumors lah. Where got people can pay instalments promptly got asked to top up when property in negative equity? If have pls state the bank name for the benefits of all here.
More like miss or late payment then get bank asking for top up! This has happened before, remember somebody write to ST Forum complaining about this and end up bank clarifying with strong words that it is the complainer who pay late first and then the complainer shut up after that. So lesson learnt is: Never Never miss or pay late any monthly instalment payment!

From what I recall based on the experience of the 1997 Asian Financial Crisis. There were many who were asked to top-up despite being able to service the loans promptly when their properties went into negative equity.

What happened then to some speculators was that they took on multiple property loans with the same bank and all the properties went into negative equity. Considering that CPF has first charge, the bank is at a very real risk of being unable to recoup even its principal. The bank may then ask for a top-up of the property that is non-resident (therefore an investment property). This brankrupted some speculators during that time.

[howgozit]

i tot CPF 2nd charge?

how about the person nvr use CPF?

but y wud the bank ask for top up if borrower can service the loan? if cannot top-up, force sale?

last yr, banks actually restructured those who defaulted on their installment ...temp interest only loan....

Before 2003, CPF was first charge.

Topping-up of value was a risk management manouevre by the bank. There will be a bigger loss if the the property devalues further and the loaner defaults later. The more loans you have with the bank means the bank has a higher exposure to that loss.

This was done selectively and highly leveraged speculators were targetted rather than owner-occupiers. Many speculators nowadays prefer to loan with different banks for different properties in order to able to escape the radar of any individual bank.

Cheers

[Chillyred888]

Before 2003, CPF was first charge.

Topping-up of value was a risk management manouevre by the bank. There will be a bigger loss if the the property devalues further and the loaner defaults later. The more loans you have with the bank means the bank has a higher exposure to that loss.

This was done selectively and highly leveraged speculators were targetted rather than owner-occupiers. Many speculators nowadays prefer to loan with different banks for different properties in order to able to escape the radar of any individual bank.

Cheers

as a 1st time buyer,strong in monthly repayment but not much $ to top up in worst case scenario..seems like i am safe?

or am i taking too much risk to commit in property now that prices went up so much,for fear it also come down fast

[howgozit]

as a 1st time buyer,strong in monthly repayment but not much $ to top up in worst case scenario..seems like i am safe?

or am i taking too much risk to commit in property now that prices went up so much,for fear it also come down fast

In my unqualified opinion, you are safe. Good Luck and have fun shopping for your dream home.

Current fiscal measures protect the bank, ie. 80% loan quantum on 1st property and 70% loan on 2nd, plus the bank has first charge ahead of CPF. Therefore the chances of the bank invoking the contractual clause to require loans to be topped up are extremely low as they are protected by a 20-30% margin.

All the best!

[Chillyred888]

In my unqualified opinion, you are safe. Good Luck and have fun shopping for your dream home.

Current fiscal measures protect the bank, ie. 80% loan quantum on 1st property and 70% loan on 2nd, plus the bank has first charge ahead of CPF. Therefore the chances of the bank invoking the contractual clause to require loans to be topped up are extremely low as they are protected by a 20-30% margin.

All the best!

thks for your "unqualified opinion" in the most resourceful way!

may i know what is "First charge ahead of cpf'?
btw,my cpf OA will all b wipe out to use for housing

when you say bank r protected by 20-30% margin, does it mean if current TOP or exisiting condo u staying if drop to 30%in value,den chances r the bank might ask for top up in cash?

[mogyi]

Don't anyhow spread rumors lah. Where got people can pay instalments promptly got asked to top up when property in negative equity? If have pls state the bank name for the benefits of all here.
More like miss or late payment then get bank asking for top up! This has happened before, remember somebody write to ST Forum complaining about this and end up bank clarifying with strong words that it is the complainer who pay late first and then the complainer shut up after that. So lesson learnt is: Never Never miss or pay late any monthly instalment payment!

Absolutely true....so far in spore, under normal circumstances bank to not practice "top up" even if valuation fall below loan quantum...else 10 yrs ago i already commited suicide. But still.. the was lesson learnt, never leverage too much, especially on 2nd property onwards. Now i am more conservative, infact already consider 'kia si' i think .... Holding on to a negative equity for a decade is no joke even if there are tenants paying for your installments.

[Chillyred888]

Absolutely true....so far in spore, under normal circumstances bank to not practice "top up" even if valuation fall below loan quantum...else 10 yrs ago i already commited suicide. But still.. the was lesson learnt, never leverage too much, especially on 2nd property onwards. Now i am more conservative, infact already consider 'kia si' i think .... Holding on to a negative equity for a decade is no joke even if there are tenants paying for your installments.

ha..so i considered a Kia Su 1st time property hunter.. may i know how much your prop drop 10 years ago?

is it that when u face negative equity,you might have to top up your mortgage minus rental proceeds?

[hopeful]

Absolutely true....so far in spore, under normal circumstances bank to not practice "top up" even if valuation fall below loan quantum...else 10 yrs ago i already commited suicide. But still.. the was lesson learnt, never leverage too much, especially on 2nd property onwards. Now i am more conservative, infact already consider 'kia si' i think .... Holding on to a negative equity for a decade is no joke even if there are tenants paying for your installments.

Property is not value on a daily or even on a monthly basis, unlike shares, futures where it is valued daily and have to do margin top up,
Banks don't like to book a loss - as it will affect their CAR. So key point is to be punctual in your payment.

[howgozit]

thks for your "unqualified opinion" in the most resourceful way!

may i know what is "First charge ahead of cpf'?
btw,my cpf OA will all b wipe out to use for housing

when you say bank r protected by 20-30% margin, does it mean if current TOP or exisiting condo u staying if drop to 30%in value,den chances r the bank might ask for top up in cash?

For HDB flat The CPF charge will take effect upon the release of CPF savings. The ranking of charge is shown in below:

1st Charge - Bank's or HDB’s Outstanding Loan

2nd Charge - CPF principal sum up to 100% of VL plus CPF used to pay the legal and stamp fees in the purchase, and cost of upgrading under the HDB Main Upgrading Programme.

3rd Charge - Equal ranking -CPF principal sum beyond 100% of VL plus CPF accrued interest -Repayment of outstanding balance of the housing loan interests

4th Charge - Equal ranking -CPF legal costs and expenses -Bank's legal costs and expenses

Private Property The CPF charge will take effect on the property when the CPF savings are released. For private residential properties bought or refinanced after 1 September 2003, the ranking of the charge is shown in the Table below:

1st Charge - Outstanding housing loan from your financier

2nd Charge - CPF principal sum up to 100% Valuation Limit plus CPF withdrawals used for the legal and stamp fees in the purchase

3rd Charge - Equal ranking (pari passu) -CPF principal sum beyond the 100% Valuation Limit plus accrued interest -Repayment of outstanding balance of the housing loan interests

4th Charge - Equal ranking (pari passu) -CPF legal costs and expenses -Financier's legal costs and expenses

------------------------------------------------

You can do more reading here http://mycpf.cpf.gov.sg/CPF/my-cpf/buy-house/BH6.htm . Cheers!

[vip]

If the property value falls below the outstanding mortgage, you are holding a negative asset. By right, the bank can ask you to top up the difference.

Below is what I observed during the bad times in 1999, 2002 to 2004.

1) In Singapore, owners holding negative asset properties were not asked to pay the difference. The banks were afraid of handling so many troubled properties. They rather called up the owners to restructure the loans, especially if the owners did not pay the installments on time.

2) In Hong Kong, owners unable to pay the difference had their properties repossessed by the banks. The society gave this group of people the name "negative asset class". Everyday you read news about the negative asset class committing suicide (mostly jumping off buildings, burning charcoals or jumping off MTR platforms). It was so sad that the police said they would rather deal with real crimes ...

All these are too painful to forget. I tell myself that I will never chase prices or over-commit in any property investment.

[kingkong1984]

Read this here

http://www.salary.sg/2008/margin-cal...-housing-loan/

Plus tricks to watch out for.

http://propertybuyer.com.sg/articles...an-still-play/

Case study 1 , Dishonest agent dupes buying into believing that the deal is sealed at $1.23m, this price is acceptable by the seller.

Found these

http://forums.condosingapore.com/showthread.php?t=7111

J-Dog (Death by top up?)

[devilplate]

If the property value falls below the outstanding mortgage, you are holding a negative asset. By right, the bank can ask you to top up the difference.

Below is what I observed during the bad times in 1999, 2002 to 2004.

1) In Singapore, owners holding negative asset properties were not asked to pay the difference. The banks were afraid of handling so many troubled properties. They rather called up the owners to restructure the loans, especially if the owners did not pay the installments on time.

2) In Hong Kong, owners unable to pay the difference had their properties repossessed by the banks. The society gave this group of people the name "negative asset class". Everyday you read news about the negative asset class committing suicide (mostly jumping off buildings, burning charcoals or jumping off MTR platforms). It was so sad that the police said they would rather deal with real crimes ...

All these are too painful to forget. I tell myself that I will never chase prices or over-commit in any property investment.

u seems very old bird...

[Squall8888]

Bought two units at villa marina in 1997. Stupid timing but the value drop 60% at one point of time. Two bedders at 1M+. Both 80% loan with a local bank. At its lowest point in 2003, it was 500k. Bank didn't ask for top up though amount is about 70% loan remaining. Both loans with same bank.

Reason for drop is simple. Yield was around 1% in 1997 when I buy. Didn't know why also, maybe you can say chasing market. I have learnt my lesson so I hope no one does the same. Look at the yield before you buy. If it is 1%, screw it. Rented out both for 10 years and just sold off recently.

Before 2003, CPF was first charge.

Topping-up of value was a risk management manouevre by the bank. There will be a bigger loss if the the property devalues further and the loaner defaults later. The more loans you have with the bank means the bank has a higher exposure to that loss.

This was done selectively and highly leveraged speculators were targetted rather than owner-occupiers. Many speculators nowadays prefer to loan with different banks for different properties in order to able to escape the radar of any individual bank.

Cheers

[devilplate]

Bought two units at villa marina in 1997. Stupid timing but the value drop 60% at one point of time. Two bedders at 1M+. Both 80% loan with a local bank. At its lowest point in 2003, it was 500k. Bank didn't ask for top up though amount is about 70% loan remaining. Both loans with same bank.

Reason for drop is simple. Yield was around 1% in 1997 when I buy. Didn't know why also, maybe you can say chasing market. I have learnt my lesson so I hope no one does the same. Look at the yield before you buy. If it is 1%, screw it. Rented out both for 10 years and just sold off recently.

still underwater....

btw, doesnt seem possible for yield 1% ...let say 2k pm work out to be ard 2%?

or u mean the yield drop to 1% in 2003? i wud tink still can fetch 1.5k pm during tat period...