Check before seeking a Home Loan
November 18th, 2008 by ALVIN SOONG
Check if bank can meet unit’s valuation to avoid overpaying for the property. A Spring Grove condominium unit owner was denied the chance to take advantage of lower interest rates by refinancing his devalued property without coughing up more hard-earned cash. The owner had to make up the shortfall because the reduced value of the Grange Road unit meant the bank could not extend a large enough loan.
Another buyer had to cancel his purchase recently after he learnt that banks’ valuation of the property was less than what he was supposed to pay. The banks could not offer him the loan he needed as the collateral was inadequate.
Property values fall amid the global financial crisis and banks tighten lending. Banks are still dishing out home loans but are much more selective these days, mortgage consultants said.
Banks can grant only up to 90 per cent of the purchase price or valuation, whichever is lower. So if the sale price of a property exceeds the valuation - which is determined by an independent professional - the buyer will have to make up the shortfall. Amid poor demand and falling prices, banks are sticking to lower property valuations in anticipation of further price falls.
‘No bank can match the property’s valuation as there was a recent sub-sale deal done at 15 per cent below the developers’ price of $2,000 per sq ft,’ said Mr Dennis Ng, spokesman for mortgage consultancy Buyers can avoid overpaying for a property by checking to see if the banks can match the valuation to the property’s purchase price, he said.
Today most banks offer housing loan packages for 80 per cent financing. It also offers 90 per cent financing on a case-by-case basis if the applicant meets its credit assessment criteria.
Consumers seeking a loan for their property purchase should note the following:
1. Get prior approval or have more cash on hand.
2. Approach a mortgage specialist for a joint assessment if they are unsure whether they can afford the home purchase
3. ‘Things are quite fluid these days so buyers should re-check their loan eligibility after one month as advised by Mr Ng
Summarised from Sunday Straits Times 16th Nov 2008
