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Thread: Smart moves in home loan market

  1. #1
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    Default Smart moves in home loan market

    Published April 17, 2008

    [B][SIZE="5"]Smart moves in home loan market[/SIZE][/B]

    By SIOW LI SEN


    PERHAPS US Federal Reserve chairman Ben Bernanke can take a leaf from our local bankers when it comes to his nation's sub-prime home loan borrowers who are struggling to meet higher instalments after lenders reset their interest rates higher.

    Recently United Overseas Bank (UOB) launched a home loan package called UOB Clear where borrowers can fix their instalments for a three-year period, regardless of interest rate movements.

    If the interest rate goes down, more of the principal would be paid off. And if interest rates move higher, a higher amount of the instalment would be used to pay the interest portion.

    Fixing the instalment for 36 months is pretty radical, and unheard of, even without the volatility in interest rates.

    But customers who use their Central Provident Fund (CPF) money to pay their home loans will appreciate the convenience since it is a hassle to inform the CPF board each time the instalment amount changes.

    UOB is banking on the extra service it is offering to retain existing customers, as well as to get new ones.

    Banks have been pretty creative in looking for ways to both retain and attract new home loan customers as refinancing has become the only game in town amid a dearth of new home sales.

    Mortgages as a product, while low margin, is also relatively risk-free in Singapore, provided the economy continues to enjoy full employment, as it should given the strong economic growth momentum of the first quarter.

    The economy surprised with a robust 7.2 per cent gain in the first quarter, against 5.4 per cent in the fourth quarter of last year.

    Savvy borrowers who have begun shopping around for cheaper home loans in light of falling interest rates may also have come across a new feature offered by DBS Bank. One of its packages which pegs the interest rate to the 12-month Sibor, or the interbank interest rate, offers two free repricings within 24 months.

    With DBS's huge customer base, it frees its bankers from having to negotiate with impatient borrowers every time interest rates fall. The projection is that the key interest rate here will fall to below one per cent before the year is out. The 3-month Sibor yesterday was 1.36 per cent.

    The penchant for home loan borrowers to switch banks every two or three years, especially once the lock-in periods are over, is a constant headache faced by bankers here.

    Local banks have a harder time in a falling interest rate environment given their much bigger customer bases.

    Even borrowers still within their lock-in periods are demanding their banks reprice their loans lower. Bankers explain that this is a losing proposition because they had secured the funding cost for the existing loan at an earlier higher price. But in the same breadth, they will offer to pay the penalty to lure new refinancing customers from a rival.

    Still, the penalties worked into each package actually ensures that banks don't lose out when customers jump ship.

    The market is tough but standing still is just not an option.

  2. #2
    safrina
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    I am currently a grad student with about $35 K in loans for my undergrad and another $40 K for grad school, which I'm still not done with. I'm not sure when I should consolidate the federal loans, but I plan on doing it soon. The private loans just keep increasing like crazy, and even though I'm still in school and don't have to pay them yet. Is there anything I can do while in school to help keep them down?

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    Quote Originally Posted by safrina
    I am currently a grad student with about $35 K in loans for my undergrad and another $40 K for grad school, which I'm still not done with. I'm not sure when I should consolidate the federal loans, but I plan on doing it soon. The private loans just keep increasing like crazy, and even though I'm still in school and don't have to pay them yet. Is there anything I can do while in school to help keep them down?
    Are you talking cock?
    What have your study loans got to do with property loan?

    Which state are you from? Selangor? Penang?

  4. #4
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    Hi there Safrina,

    You have touched on a very interesting topic that is not very commonly discussed in Singapore. This is known as a debt consolidation strategy in the financing environment. It is not used very often in Singapore too. I am guessing that your student loan is floating about the region of 5% - 7%. It is possible to consolidate this debt to a range of about 1.7% - 4%. Debt consolidation strategy is often used when a private individual takes on too much debt, especially in credit cards, personal loans and etc. It may also happens at the corporate level when a company has to consolidate the debts to drive the bottom line down.

    Debt consolidation strategy relies on several kinds of methods which might include rolling between credit cards [very dangerous and pretty much useless], consolidating into a balance transfer, rolling into a mortgage and many other methods. Different kinds of methods will yield a different range of interest rate, loan tenure and installments. I could go on at length about this topic but it will not be appropriate as this is a property forum. I'm sure the moderator already have a hard time cleaning out the porn masters posting their ads here. Shall not add on to their workload. LOL

    Talk to a bank officer, experienced in the matters of personal finance and he or she may be able to guide you along.
    Mortgage Advisory and Brokering Services
    [URL="http://www.cpcgonline.com"]http://www.cpcgonline.com[/URL]

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