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18-12-2014, 10:10 PM
An honorable member of the Coffee Shop Has Just Posted the Following:
According to the Straits Times news report "More homes put up for fire sale as borrowers default" (Dec 15) - "159 properties were put up for fire sale this year - five times the 32 units last year, according to Colliers International."
Mortgage refinancing new rules: Must reduce principal?
Mortgage refinancing woes?
Described below is a case of a homeowner trying to refinance the existing housing loan after one year with a financial institution.
During the first year, the interest rate was 1.32% per annum and now the interest rate is 1.78% per annum in the second year – an increase of 0.46% per annum.
Refinance to get a lower interest rate?
As such, the borrower is compelled to try to refinance the loan, as refinancing will bring the interest down to about 1.22% – the current market rate.
But some financial institutions may be making it rather difficult to refinance.
Please see below – the terms that a homeowner has to comply, in order to get refinancing of the loan.
Total Debt Servicing Ratio?
This loan was for an owner-occupied property bought way before the Total Debt Servicing Ratio (TDSR) was implemented.
Need partial principal repayment in order to refinance?
The terms asked for a partial principal repayment and also the financial institution cut the loan tenure – thus increasing the monthly loan repayment.
This homeowner has been prompt in his loan repayment and the financial institution is still imposing such terms.
New rules may trigger default?
At the rate that some financial institutions are going - they may be the ones triggering default on the loan through their revised terms.
If the homeowner cannot fork out the large repayment amount required for refinancing – he has to pay the increased monthly repayment, and be stuck with a higher interest.
Terms for repricing the loan:
“Our Credit department has reviewed and requires the loan to be paid down further so as to keep the overall Loan to Value (LTV) within 60%.
Hence, the new proposed prepayment amount and loan tenure are as follows:
Term Loan:
Original loan: $2,738,262
22 years
Original monthly repayment: $11,957
Current loan tenure balance: 253 months
New monthly repayment due % increase to 1.78%: $12,563
Re-financing requirement:
Make a Capital Partial Prepayment of $200,000
New proposed loan tenure shortened to 218 months. Estimated new installment amount upon re-financing is $12,528 monthly.
A catch-22 situation?
Perhaps there may be many people facing this situation now. Stuck with a higher interest rate, but unable to refinance their loan.
Could such actions taken by the financial institutions be a contributory reason to why there is an increase in defaults on mortgages? If the homeowner sticks with the existing loan package, then he will be stuck with a higher interest rate. If he refinances, then he may also be stuck with less cash for meeting other contingencies.
Win battles lose war
Click here to view the whole thread at www.sammyboy.com (http://www.sammyboy.com/showthread.php?196062-Housing-loans-New-rules-causing-defaults&goto=newpost).
According to the Straits Times news report "More homes put up for fire sale as borrowers default" (Dec 15) - "159 properties were put up for fire sale this year - five times the 32 units last year, according to Colliers International."
Mortgage refinancing new rules: Must reduce principal?
Mortgage refinancing woes?
Described below is a case of a homeowner trying to refinance the existing housing loan after one year with a financial institution.
During the first year, the interest rate was 1.32% per annum and now the interest rate is 1.78% per annum in the second year – an increase of 0.46% per annum.
Refinance to get a lower interest rate?
As such, the borrower is compelled to try to refinance the loan, as refinancing will bring the interest down to about 1.22% – the current market rate.
But some financial institutions may be making it rather difficult to refinance.
Please see below – the terms that a homeowner has to comply, in order to get refinancing of the loan.
Total Debt Servicing Ratio?
This loan was for an owner-occupied property bought way before the Total Debt Servicing Ratio (TDSR) was implemented.
Need partial principal repayment in order to refinance?
The terms asked for a partial principal repayment and also the financial institution cut the loan tenure – thus increasing the monthly loan repayment.
This homeowner has been prompt in his loan repayment and the financial institution is still imposing such terms.
New rules may trigger default?
At the rate that some financial institutions are going - they may be the ones triggering default on the loan through their revised terms.
If the homeowner cannot fork out the large repayment amount required for refinancing – he has to pay the increased monthly repayment, and be stuck with a higher interest.
Terms for repricing the loan:
“Our Credit department has reviewed and requires the loan to be paid down further so as to keep the overall Loan to Value (LTV) within 60%.
Hence, the new proposed prepayment amount and loan tenure are as follows:
Term Loan:
Original loan: $2,738,262
22 years
Original monthly repayment: $11,957
Current loan tenure balance: 253 months
New monthly repayment due % increase to 1.78%: $12,563
Re-financing requirement:
Make a Capital Partial Prepayment of $200,000
New proposed loan tenure shortened to 218 months. Estimated new installment amount upon re-financing is $12,528 monthly.
A catch-22 situation?
Perhaps there may be many people facing this situation now. Stuck with a higher interest rate, but unable to refinance their loan.
Could such actions taken by the financial institutions be a contributory reason to why there is an increase in defaults on mortgages? If the homeowner sticks with the existing loan package, then he will be stuck with a higher interest rate. If he refinances, then he may also be stuck with less cash for meeting other contingencies.
Win battles lose war
Click here to view the whole thread at www.sammyboy.com (http://www.sammyboy.com/showthread.php?196062-Housing-loans-New-rules-causing-defaults&goto=newpost).