A house loan tenure is something that borrowers don’t put enough thought in. The choice of a home loan tenure is not a straight forward answer. While most people go for a tenure that goes as long as the lender will allow, it is not always the best choice.
You may have also deferred the purchase of a house because you were not confident of getting a significant house loan Singapore to finance your home purchase. It is possible that you can get a high housing loan amount if you choose a longer loan tenure while only getting a low loan amount when you choose a shorter one. Although in some instances, the loan tenure you choose for your mortgage can determine your loan amount, there are other things that you should consider when deciding on your home loan tenure.
In effect the maximum house loan tenure depends on your age. If you are at the age of 35 now, and the official retirement age is 65, your maximum tenure is 30 years. There may also be instances that you are offered a better interest rate if you take up a longer loan tenure. Do note that the longer loan tenure you choose, the more total interest you will pay. So if you are comfortable with that over the long term, the total interest you will pay for your house loan Singapore will be of little issue.
The main reason most people take up home loans with extended loan tenure is to pay a lower monthly installment. Again, you generally pay more total interest with a longer loan tenure. So if you do have cash on hand, you should consider making a greater down payment and obtain a house loan Singapore with a shorter loan tenure so that you can pay off the loan sooner. The monthly installments may be higher, but you will be paying less total interest on your mortgage. When you do make a higher down payment, the loan lender may also see it as your commitment and financial strength. This can result in the best terms offered to you.
If you are reaching retirement age and is certain that your children will be taking over the payments for the Singapore housing loan, it makes sense to include them when you apply for the housing loan. This can potentially get you a longer loan tenure resulting in lower monthly payments that you have to make now. When you retire, your children will also have to only service a lower monthly payment.
High networth investors
If you are going to build up your own property empire, you may want to use a different approach to choosing your property loan. A common approach used by seasoned property investors to leverage their finances is to stretch out the house loan Singapore loan tenure. Stretching out can gain better terms and concessions from the lender. With lower monthly payments, the investor uses less cash to gain control to a house. When the lock-in period of the home loan expires, the property guru refinances the house that has appreciated in market valuation while cashing out on the appreciated home equity. Gaining access to more cash with the cash out refinance, the investor uses it to purchase another property and repeat the process. Although this method of increasing your wealth seem desirable, it is not for the faint-hearted and those that are risk adverse.