5 Mistakes First-Time Homeowners In Singapore Should Avoid

By Jen-Li Lim / iMoney.sg | February 19, 2019 10:58 AM SGT
Thinking about getting your first home? Here are some common mistakes you should avoid:

1. Not comparing different home loan packages

If you’re taking out a housing loan from a bank, you’ll need to pay attention to the different packages available.
One of the most important ways packages differ is by how the interest rates are set. Some packages are floating-rate loans, while others are fixed-rate loans.
Here’s what a floating-rate loan may look like, compared to a fixed-rate loan:
Apart from that, look out for these other features of your home loan:
Lock-in period. This is a period of time (generally a few years) where you’ll have to stay with your home loan package. If you’re switching banks before this period is up, you’ll have to pay a penalty – typically around 1.5% of your outstanding loan.
Partial prepayment penalty. Say you’ve received a big influx of cash and would like to put it towards reducing your outstanding home loan. However, if your bank imposes a prepayment penalty, you’ll have to pay a fee for doing so, which could negate the interest savings from reducing your outstanding loan.
Early redemption penalty. Similarly, if you pay off the entirety of your mortgage early, you may have to pay a penalty.
Closing costs. Consider how much you may need to fork out for closing costs, which are costs associated with finalising the loan. Different lenders may have different closing costs, and you may be able to ask your lender to subsidise certain costs.

2. Using all your savings as down payment

You’ve been socking aside money for years, and you finally have enough saved to afford the minimum down payment on a home. Here’s why you shouldn’t blow out all your savings:
You need buffer savings. If you lose your...