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With the abundance of different property loan packages out in the market, it is important that you understand the terms and conditions each one offers and select the right package that caters to your requirements. You should consider other factors besides only the cheapest interest rates. These include the number of years of locked-in, prepayment penalty and any clawback imposed. For example, it will make more sense to choose a lower lock-in period with a lower prepaymentpenalty for a commercial property investment so that in the event you should decide to sell off your property, you will not be penalized so heavily.Comparing loan packages across different banks is a tedious process and can be rather time consuming and frustrating. With the assistance of a mortgage consultant, you can do a comparison on the loan packages with more than 15 Banks and Financial Institutions as they are constantly updated with the latest market offerings. They also understand each bank’s approval criteria and can match you to the most suitable ones more efficiently. Remember, a right mortgage package can save you substantial interest over the years.
2. Don’t underestimate partial prepayment penalty
Partial prepayment refers to repaying a lump sum of money to the existing mortgage loan. Currently, partial prepayment penalty offered by at least 15 banks and financial institutions ranges from 0.75% to 2%. This means if you are intending to prepay part of your loan during the penalty period, you will be charged a penalty fee to do so. That being said, some banks do allow you to make a free partial payment for a certain amount of the loan.
If you have outstanding loan of $500,000 and the mortgage package is still within the lock-in period, with a partial prepayment penalty of 1%, if you repay $200,000, you will be penalised $2000. If your interest savings over the long term outweighs this penalty fee, then it will be wise to make the partial prepayment.
To find out whether it make economic sense to pay down your loan during or after the lock-in period, speak to our mortgage consultants and we will provide you with a detailed analysis to ease your worries and make help you make a more informed decision.
3. Remember to refinance your mortgage loan
Refinancing your mortgage loan refers to the transfer of your property loan from one bank to another with a view of saving on interest by obtaining a lower interest rate package. Refinancing is one of the most important activities for a purchaser with a property loan but usually neglected for many reasons.
Most of the time, it does come to the mind that one should refinance their loan as banks usually offer what we know as a step up interest rate. This means that interest for the first year of the loan period is usually the lowest and would gradually increase as each year passes. As such, with the progressive increment of the monthly payments, most borrowers will overlook their rising cost. But if they were to compare difference between their payments for the first year and third year, they will realize that they are currently paying a lot more than when they first took up the loan.
Usually, the interest rate will almost double after the second year into the loan. Therefore, it would be wise for borrowers to refinance every few years once the mortgage loan is out of lock-in to save big on interest. This is especially so when the interest rate market is currently relatively low. Borrowers should ride on the market trend and enjoy a lower mortgage rate to save more on interest. You’ll be surprise on the amount you can actually save!
Occasionally, banks will also offer promotional rates. Therefore, it will advantageous to keep a lookout for best mortgage deals. To do this in a hassle-free way, G-mortgage has a Mortgage Alert service to keep you updated with the latest mortgage deals in town. Also, by signing up with them, you will receive timely reminders to refinance your property loans. More importantly, it is free! Now, you will never have to worry and miss any opportunities to save!