New Rental Rules and Home Loans
August 27th, 2008 by ALVIN SOONG
One may notice the Sibor rates has decreased from 3.5 to 1.2 this year. Sibor rates would affect the mortgage loans. Understanding this aids in planning one’s investments.
———————————————————–
National Development Minister Mah Bow Tan announced this move yesterday and also gave a peek into new rules being studied to stop abuse of the rental scheme.
1. HDB will scrutinise the assets, including private property, of siblings and children of applicants to ensure they rely first on family, not on rental flats.
2. Another will require flat sellers to deposit part of their sales proceeds into their Central Provident Fund (CPF) accounts.
These likely changes are part of a government move to address the sharp rise in demand for rental flats, with many people joining the queue even when they have other housing options. Minister Mah said the supply of rental flats will be raised by 20 per cent to 50,000 flats, in three years. They are leased for two years at what he called ‘ridiculously cheap’ rent which has stayed the same for 30 years. It can be as little as $26 a month. This fuelled the trend he noted: an increasing number of old folk who want ‘to cash out of their flats and ask us for rental flats’.
The other three rules that may get the green light:
• When owners sell, they will have to put into their CPF account the subsidy they had enjoyed when they bought their flat from the HDB. The amount could be about $30,000 to $40,000. (Currently, those who receive a government grant of $30,000 to $40,000 when they buy an HDB flat in the resale market will have to put that grant back into their CPF accounts when they sell their flats.)
• Scrapping the current rule that allows a person to apply for a rental flat only if he has not sold a property in the past 30 months.
• The main measure of neediness now is a monthly household income of no more than $1,500. Soon, the HDB will also look into the applicant’s children’s ownership of private property and if the person’s siblings and children have the means to support him.
On home loans:
Fuelling this trend are financial institutions which are jumping on the bandwagon to launch attractive and creative loan packages to capture a bigger slice of the lucrative mortgage market.
1. Refinancing your home loans
2. Pegged rates versus fixed rates
With Sibor falling steadily, it is not surprising that many customers are opting for new Sibor-linked packages or refinancing from a fixed-rate package to a Sibor one. Still, some customers are confused when faced with a choice of a three-month or a 12-month Sibor-pegged home loan package.
3. New home loan packages
i) MortgageOne Sibor
ii) Interest-only loans This is useful only if:
• If she has an intention to buy multiple properties and would like to pay only the loan interest and keep every cent possible;
• If she has other alternatives to invest at higher returns; or
• If her cashflow is very tight.
For full details on loans, please look for a loan specialist
Summarised from Sunday Straits Times 24th Aug 2008
