Property Investment

Property Investments

For some people, a home is their single greatest asset and for some, it could serve as an investment. A real estate and property investment in Singapore requires careful scrutiny of your financial standing. Choosing the right mortgage plan is equally important as this could make the difference in the long term.

Properties in Singapore are sold either freehold or on leasehold tenure. A freehold title gives the owner perpetual ownership to the property. A leasehold title, usually with durations of 99 or 999 years gives the owner the title rights to the property for the leased duration. When the lease expires, the title and property is returned to the government.

Expatriates residing in Singapore are allowed to purchase apartments in condominiums. However, for landed properties such as terraced houses or bungalows, prior approval from Singapore Land Authority (www.sla.gov.sg) is required.

The most convenient and common way to purchase a property is to hire a property agent to manage the transaction. Once a property has been located, the next step is to shop for the right mortgage plan.

While you are in Singapore you may also purchase properties in foreign countries. Local banks in Singapore, as well as foreign banks and financial institutions, offer overseas finance and mortgage plans to make your home purchase (property investment) feasible.

Multi-Currency Mortgages

This is only suitable for financially sophisticated borrowers and holds many inherent risks. One of the main reasons for selecting a multi-currency mortgage is to take advantage of lower interest rates. This can currently be achieved by borrowing in currencies such as the Singapore Dollar or Japanese Yen.

Multi-currency mortgages also allow borrowers the flexibility to switch their mortgage between currencies. By switching between currencies mortgages could potentially be reduced to the borrower’s advantage, but, it is extremely important to note that adverse fluctuations in currencies would be to their disadvantage.

Extreme caution should be exercised and professional advice taken when considering such a scheme for your property investment.

Repayment (Capital and Interest) Mortgage

Every month, your payments to the lender go towards reducing the amount you owe as well as paying the interest they charge. Each month you are paying off a small part of your mortgage.

Advantage: It is a simple and clear approach as you can see your loan getting smaller with every repayment made.

Disadvantage: In the early years, your payments will be mainly made up of interest. If you decide to repay the mortgage or move house in the early years, you may find that the amount owed will not have been reduced by very much.

Interest-Only Mortgage

As the name suggests, your monthly payment only pays the interest charges on your loan. You are not actually reducing the loan itself. The loan is repaid by arranging some other way to repay the loan at the end of the term, for example, through an investment or savings plan.

Advantage: As you are only paying off the interest and not the loan itself, your monthly payments will be lower.

Disadvantage: The debt is not going to go away. Throughout the life of the mortgage, you will need to ensure your investment or savings plan is on track to repay your loan at the end of the term.