Principal, Interest, Taxes, & Insurance

Consider PITI when determining how much house you can afford.  Most online calculators only calculate P&I which can mislead some buyers into thinking they can manage to pay for more home than they can actually afford.   Below is PITI  defined:

Principal-The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage.

Interest- The interest charged on a loan used to purchase a residence. (Not the same as MIP or PMI which protects the lender in case of default)  

Taxes- Local tax assessed on property owned. Usually federal income tax-deductible.

Insurance- An insurance policy that combines personal liability insurance and hazard insurance coverage for a dwelling and its contents. Hazard Insurance- coverage that in the event of physical damage to a property from fire, wind, vandalism, or other hazards. Liability Insurance- coverage that offers protection against claims alleging that a property owner’s negligence or inappropriate action resulted in bodily injury or property damage to another party.)

PITI reserves

A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.

If you are considering buying a home don’t forget to consider Taxes & Insurance into your monthly budget!

During the National Day Rally on 29 Aug 2010, PM Lee Hsien Loong announced several measures to ensure that public housing will always remain within the reach of Singaporeans who are buying their first home. This will be achieved by increasing housing supply and dampening demand from those who are not in urgent need of housing. I will like to give you a summary on the recent HDB changes and my views about it.

Summary as below: 
1. Increase the holding period for imposition of Seller’s Stamp Duty (SSD) from the current one year to three years
* If you sell your property within the first 3 years, you will be taxed
Sold within the first year of purchase, the full SSD rate (1% for the first $180,000 of the consideration, 2% for the next $180,000, and 3% for the balance) will be imposed.
* Sold within 2nd year, 2/3 of SSD and 3rd year, 1/3 of SSD

2. For property buyers who already have one or more outstanding housing loans at the time of the new housing purchase:
(a) Increase the minimum cash payment from 5% to 10% of the valuation limit;
* property buyers have to make cash payment of at least 5% of the valuation limit.  With effect from 30 Aug 2010, the cash payment is increased from 5% to 10% of the valuation limit

(b) Decrease the Loan-to-Value (LTV) limit for housing loans granted by financial institutions regulated by MAS to these buyers from the current 80% to 70%.
* This will not apply to those who do not have any housing loan

3. Treatment of Minimum Occupation Period (MOP) of non-subsidised flats
(a) The minimum occupation period (MOP) of non-subsidised flats for resale and subletting of flat will be increased from 3 to 5 years.
* Owners can sublet their HDB flats 3 years after occupancy for non-subsidised flats in the past. Now its increased to 5 years.

(b) Buyers of non-subsidised flats will be disallowed from concurrently owning both an HDB flat and a private residential property within the MOP.
* Owners are not allowed to buy a Private Residential Property until after 3 years upon buying a non-subsidised flat. There wasn’t such restriction in the past.
* For those who purchase a non subsidised HDB flat when they have a private property, they will need to dispose the private property within 6 months.

Table 1: Changes for Non-subsidised Flats

4. Ensure enough supply of houses in the pipeline
* HDB will ramp up the supply of new flats, DBSS flats and ECs substantially to meet the housing needs of first-time homebuyers

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My Views:
* These measures will stem the property prices temporarily(3-6 months) as both buyers and sellers will likely wait and see how the market moves. However, overall, the short term demand is still high and the ramped up supply will only comes in at least 3 years later. There will surely be people who cannot wait and urgently need the house.
* The higher cash component and lower loan limits will present more challenges for middle income group to purchase their 2nd property but there will still be enough people who have the capabilities to overcome these challenges. This measure will help to widen the income disparity gap as the rich get richer and the poor gets poorer and middle income stays the same.
* These measures will not likely result in knee jerk reactions like the one in 1997 where property market overheat and crash. There was a crash in 1997 because it was coupled with the Asia Financial Crisis during that time and there was a bad recession then. Today, the employment market is good, demand is high with the slack immigration policies and PM had assured that property will rise as per the economic growth of the country. With confidence and probably over-confidence of general Singaporean, property prices will likely to continue its upward trend until another recession hits Singapore.

In such bad times, bad credit home refinance mortgage loans are gaining popularity. These loans are particularly significant for individuals having bad credit score. Although, if you’re one of them and considering of acquiring such a refinancing loan, you should to be very cautious and beware of scrupulous lenders out there prepared to prey on you. Here are few some guidelines for landing with the right loan provider to acquire a refinance loan. Be patient as you’re in search of a bad credit home mortgage refinancing loan to assistance you in this tough time. As you’re having a bad credit, it is normal that loan providers you approach tend to be cautious when providing such loan. They’re in business in any case to make a profit and it is common that they access you first cautiously prior to extending the loan to you. Don’t feel discouraged as your application is rejected.

Take it gradually as there are fairly a number of other lenders out there who are still keen to assist you. It is just that you might take a longer time compared to those with good credit to situate one that is keen to provide the loan at terms appropriate for you. You need to patient one thing; you also have to carry out proper homework prior to signing up for a loan. As there’re quite numerous lenders available out there in the market focused with these bad credit mortgage refinance loans, you require to find who are the best and good lenders situated in your area. A good lender must treat you suitably even though you have a bad credit and perhaps a little desperate. If you locate one that are rude to you, beware of them as these lenders are unlikely keen to help out you and might be even try to cheat you and bring you into more debts. In case one loan provider doesn’t work for you, you need to look for others.

Be Cautious With Those Lenders Who Are Out To Gain from Your Bad Situation

In some situation, an individual’s financial situation is so poor that his/her home perhaps on the edge of foreclosure. Be cautious if you’re in such condition. Few thorough lenders might take advantage of your condition and might come up with alternatives that have adverse terms. Don’t fall prey to them and do not agree with the terms if they aren’t at all able to assist you out. Just keep in mind, the mortgage refinance home for bad credit is supposed to assist you to lessen your financial burden and not foremost you to more troubles and debts. If you find the lender not supportive and is all out to gain from you, move on and search for another one.

Interest rates can have a large effect on the amount of money you pay on your mortgage loan. Just a slight fluctuation in interest rates can have a major impact on the amount of money you pay in interest on your mortgage loan. Perhaps not a large jump in your monthly payment but over time it definitely adds up! That’s why getting the best interest rates is so important!

 Shop Around

 As with most things, the key to finding the best deal is to shop around! The same holds true when it comes to interest rates . Not every company has the same resources. This is also a great way to get the best deal on closing costs. Keep in mind that interest rates fluctuate depending on market conditions and therefore change on a daily basis. The quote you got one day may not be the same as the next day. When obtaining an interest rate nothing is settled until you lock the interest rate in. This means that your interest rate will not fluctuate until the lock expires, usually 15-30 days, at which point if the lock on your interest rate expires, your previous interest rate will be no good. That is why closing your loan in a timely manner is crucial. Be sure to work with trusted professionals. What good is a great interest rate and low closing costs, when your lender cannot close your loan on time?

 Credit Score

 Before you apply for a mortgage loan you should review your credit and make sure there are no inaccuracies. There may some things on your report that are not yours or have been misreported. It is really easy to clean up a false credit report. You don’t want inaccuracies on your credit report to keep you from getting the best interest rate, or worse not getting a loan at all! All consumers are entitled to one free credit report each year, be sure to get a copy of your credit report and look it over.

 How you pay your bills also has an effect on your credit score. Payments over 30 days late can be reported negatively on your credit report. So be sure to pay all your bills on time. Even things that don’t report to the credit bureaus should be paid on time, as you can request payment histories from them and submit them with your application if you lack credit or have none at all. Before you apply for a mortgage loan you should pay down the balances on the lines of credit you have. Not only will it boost your score, but also lower your debt to income ratio, which is a key deciphering factor in determining your mortgage loan eligibility and interest rate. The higher your credit score, the lower your debt to income ratio, the more you can borrow and the better interest rate you will qualify for. In addition, through out the course of you mortgage transaction; never apply for any new credit. This may cause a significant change in your credit score and affect your ratios. Maintain your score until the close of your mortgage transaction.

 Down Payment

If you are in the market to purchase a home then you will need a down payment. The more you can save to put down, the better interest rate you will receive. With a higher down payment you are looked at as a lessor risk then someone with a lower down payment and therefore will qualify better. In addition, having a higher down payment reduces your loan to value ratio increasing the amount of equity in your home. It eliminates the need for private mortgage insurance, which can be quite costly. So not only will you save money in interest but your monthly payment will be less.

 Obtaining a mortgage loan is a big financial decision, whether it’s a purchase or a refinance the interest rate is crucial. Taking these simple preliminary steps can help you secure the best interest rate! For more information on interest rates and mortgage loans please visit our website at www.OCDirectloans.com!