Jargon Buster
Adverse Credit
Adverse credit is when a borrower's credit standing has certain problems. Examples include late payment, mortgage arrears, defaults and bankruptcy.
Back to topAdverse Credit Lender
A lender who lends money to someone with adverse credit.
Back to topAdverse Credit Mortgage
A type of mortgage offered to a borrower who is deemed to be unsuitable for normal mortgages. This may be due to the borrower having had a history of adverse credit.
Back to topAmortization
The process of payment of debt through structured periodic payments. In the case of a mortgage, the monthly payment comprises two portions. The first portion is for payment of interests and the second portion is for payment of the principal loan. Initially, a larger portion goes to the payment of interests. As the interests decrease, the principal payment increases. At the end of the loan term, the loan amount would have been paid for completely.
Back to topAssets
Assets are possessions that have monetary value. Examples of assets are cash, accounts receivable, machinery, stocks, property, land, and inventories.
Back to topBad Credit Mortgage
Similar to adverse credit mortgage. This is a type of mortgage offered to a borrower who is deemed to be unsuitable for normal mortgages. This may be due to the borrower having had a history of adverse credit.
Back to topBankrupt
A person, company or organization that is unable to pay off debts to creditors is known legally as a bankrupt.
Back to topBankruptcy
A court process to assist a bankrupt to settle their debts under the protection and administration of the court.
Back to topCapped Mortgage
A mortgage where the interest rate you have to pay is limited to a certain maximum percentage. This usually happens in special deals.
Back to topCapped Rate
A capped rate is the maximum interest rate - a ceiling - that can be charged during a certain period..
Back to topCashback Housing Loan
A cashback housing loan allows you to receive a cash rebate on the loan amount. There is usually a certain lock-in period where you are tied to the loan and penalties apply for early full repayment.
Back to topCertificate of Statutory Completion (CSC)
A compulsory certificate issued by The Commissioner of Building Control upon completion of a building project.
Back to topCharging Order
An order from the court placed on a debtor's property to pay debt owed to a lender. This means if you sell your property, you will have to pay off the debt first. Depending on the circumstances, a deed of postponement can be placed into effect to postpone the charging order so as to allow for a re-mortgage on the property.
Back to topClaw-back Period
IThe period of time in which, if you were to fully repay your mortgage, there will be a penalty where the lender reclaims the cost of freebies which may include the valuation fee and lender fee.
Back to topCombo Housing Loan
In a combo mortgage, the loan is divided into several portions and the borrower can choose to take up a different loan package for each portion.
Back to topCPF Minimum Sum
A statutory requirement introduced in January 1987 where CPF members are required to set aside a minimum sum in their retirement account upon reaching the age of 55 to provide them with a monthly income upon retirement. By 2013, the Minimum Sum will be $120,000. The account owner can set aside the amount in cash or pledge the property up to 50% of the Minimum Sum.
Back to topCredit Limit
In mortgage terms, this is the maximum loan that a lender will give to a borrower.
Back to topDeferred Payment Scheme
A scheme where the initial payment is made within eight weeks. The remainder of the payment is made only upon obtaining the Temporary Occupancy Permit. Typically, the deferred amount comprises 80% of the property purchase value.
Back to topEn-Bloc Sale
The entire condo development is put up for sale and the owners usually gain more profit than if they were to sell their units individually.
Back to topFifth (5th) Charge Term Loan
An additional loan secured against a mortgaged property or real estate.
Back to topFixed Interest Rate
This is where the loan interest rate is set at a definite rate for a certain period of time.
Back to topFixed Rate Housing Loan
A fixed rate housing loan is where the interest rate is set at a fixed percentage for a certain period. In Singapore, it is up to three years. Upon expiration, the interest rate will revert to a floating rate. There is usually a lock-in period and a penalty for early payment completion. A fixed rate mortgage is especially popular when interest rates are low. Borrowers protect themselves from hikes in interest rates by locking themselves in.
Back to topFloating/Variable Rate Housing Loan
Variable rate mortgages, also known as "floating" rate mortgages applies to packages where the interest rate is based on a reference rate and a margin. If the reference rate is based on the bank's independent lending rate, you are usually given at least one month notice before the rate is adjusted. If the reference rate is based on SIBOR, the rate is adjusted every 3 or 12 months. There are usually no penalties for early redemption unless the margin is lower for a specified lock-in period.
Back to topFull Redemption/Repayment Penalty
A predetermined amount charged to you for early redemption of your loan. It is usually a percentage of the loan amount.
Back to topGuarantor
A person who is usually held liable if the borrower defaults on payment. Often, the guarantor will then have to assume the responsibility of paying the debt.
Back to topHome Content Insurance
An insurance policy that insures all items in the policy holder's household such as the refrigerator, television, and computer.
Back to topIn-principle Approval/Pre-approval
This is where the bank, upon evaluating the borrower's credit standing, feels that the potential borrower will not have any problems paying back the loan. As such, the borrower is almost guaranteed to get the loan should they actually apply for it. In Singapore, approval is usually valid for a month provided the property valuation is at least equal to the purchase price.
Back to topInterest Rate
The interest rate determines how much interest you pay. It is usually linked to the SIBOR's rates. It can also be an independent rate which is set by the lender.
Back to topInterest-only mortgage
Interest-only mortgage means the monthly payment is only for interest payment. The loan principal will be paid only at the end of the loan term. Interest-only mortgage can be for the entire loan term or for a specified period only.
Back to topInterest-offset Accounts/Schemes
The interest-offset mortgage allows you to get the same interest rate on part of your cash deposit. Normally, the ratio is two-thirds of the deposit. The remaining one-third of the deposit will be at the normal rate. This can then be used to offset the interests that you have to pay on your loan.
Example:
You are getting a loan of $600,000 at 3% interest rate and you have $300,000 in the bank. Interest rate on two-thirds of the deposit (i.e. $200,000) will also be at 3%. The remaining $100,000 will be at a lower rate (e.g. 1%).
Loan amount: $600,000
Loan interest rate: 3%
Annual interest on loan = 0.03 x $600,000
= $18,000 ------ (1)
Cash in bank: $300,000
Annual Interest on deposit = 0.03 x $200,000 + 0.01 x$100,000
= $7000 ----- (2)
Annual interest to pay on loan after offset = (1)-(2)
= $18,000 - $7000
= $11,000
Interest-offset mortgage is good if you have a lot of cash in the bank at very low interest rates.
Joint Tenancy
This is where the property is legally owned by more than one person. In the case of the death of any one person, the rights of the property goes to the surviving person(s).
Back to topLDAU Approval
LDAU, which stands for Lands Dealing Approval Unit, is an approval granted by the Singapore Land Authorities for a foreigner to purchase landed properties in Singapore.
Back to topLetter of Offer
A letter by the lender to the borrower that explains the terms and conditions of the loan offer. Should the borrower accept and sign the letter, it becomes legally binding for both parties. A Letter of Offer is commonly referred to as "LO".
Back to topLoan Quantum
The principal amount of money that you want to borrow.
Back to topLoan Tenure
Also know as a loan term. It is a mutually-agreed period of time for the borrower to fully repay the loan to the lender.
Back to topLoan to Value (LTV)
The ratio of the loan amount to the valuation of the property. It is expressed as a percentage. For example, if the loan is $800,000 and the property is valued at $1,000,000, the LTV is 80%. The maximum legal LTV in Singapore is 90%.
Back to topLock-in Period
The number of years you are tied to your loan in which, if you fully repay the loan, there will be a repayment penalty. Some lenders also charge a repayment penalty for making partial payments during this period.
Back to topMortgage
A transfer of interest of a property or real estate from the borrower to the lender as security for a loan. Should the borrower be unable to repay the loan, the lender can foreclose the property and sell it off to pay off the debt.
Back to topMortgage Broker
A mortgage broker acts as an intermediary who offers mortgage product packages on behalf of the lenders. They obtain a referral fee from the lenders for recommending and selecting the best loans for borrowers.
Back to topMortgage Reducing Insurance
An insurance policy that covers the outstanding loan.
Back to topNegative Gearing
This is when the investment returns do not cover the interest from the loan.
Back to topOption To Purchase
A legal agreement which entitles a person the right to buy. It details the terms and conditions of the sale. A fee (also known as option deposit) is paid for the agreement and it gives the buyer more time to reconsider the purchase. If the purchaser decides not to buy, the option deposit is forfeited.
Back to topOverdraft
A revolving line of credit that you can use as standby for an emergency. This is often secured against the mortgage of your property.
Back to topPartial Redemption Penalty
A predetermined amount charged to you for partial redemption of your loan during a tie-down period. It is usually a percentage of the loan amount.
Back to topPayment Holiday Housing Loan
Payment holiday mortgages are actually a feature incorporated into certain mortgage packages. It allows you to take a break from making the monthly payments once or twice a year.
Back to topProgressive Payment Scheme
Once you sign a standard Sales and Purchase Agreement, you will need to make monthly installment payments to repay the loan. These monthly installments are called progressive payments. The term can also be used when the payments are made according to the stages of property development. The payment will go directly into the project account and the developer must maintain this account with an accredited bank.
Back to topQuest Line Search
A search to find out litigation suits lodged against an individual by other organizations.
Back to topRefinancing
Refinancing involves replacing your current mortgage plan with a new plan either with your current lender or a new lender. People often refinance to take advantage of the lower interest rates and a smaller monthly payment.
Back to topRepricing
Same as refinancing but in this case, you switch to another housing loan offered by the same lender.
Back to topResidential Investment Loan
A loan to finance the purchase of a property that will be used for investment purposes and not for personal residence.
Back to topSingapore Interbank Offered Rate (SIBOR)
SIBOR is the interest rate at which banks lend to one another. SIBOR-linked mortgage loans follow the rise and fall of the interest rates.
Back to topSingapore Swap Offer Rate (SOR)
SOR is fixed by the Association of Banks in Singapore. It is the combination of SIBOR and the lending costs incurred by the banks.
Back to topTemporary Occupancy Permit (TOP)
A building can only be occupied once it receives the Temporary Occupancy Permit (TOP) or the Certificate of Statutory Completion (CSC). Both are granted by The Commissioner of Building Control. Unlike a CSC, a TOP is not compulsory and the requirements to obtain a TOP is less stringent.
Back to topTracker mortgage
A mortgage loan whereby the interest rate is linked to the lender's independent rate.
Back to topUnencumbered
A property or real estate with no mortgages secured to it.
Back to topValuation
A professional opinion of a property's value. This is needed to allow the appropriate withdrawal amount form the CPF Board and to allow lenders to determine the loan amount.
Back to topVariable Interest Rate
Unlike a fixed interest rate, a variable rate constantly fluctuates according to the market interest rates which usually follows the SIBOR's rates.
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