Home Loan Part III continued

Interest on the bridging loan is payable at a minimum of 2% above the prevailing Prime Lending Rate (PLR). Today's Prime Lending Rate is 5% for DBS Bank, and 5½% for OUB, UOB and OCBC banks. So you see, DBS still offers the most competitive pricing. If you take a bridging loan from DBS Bank today, the interest rate for your bridging loan is 5% + 2% = 7% (or slightly higher if you are not considered a first rate customer).

Remember, the advantage of having a bridging loan is that you only start paying interest for whatever amount you use and for whatever period of time you have used that money. Simply put, if your bridging loan is approved at S$150000 and you withdraw, say S$130000 today and put the money back two months and three days later, interest is charged only on S$130000 for two months and three days. The moment you return the money, interest payment stops there and then.

One other thing is that you can arrange for the bridging loan term to be extended from six months to, say nine months. This is useful, for you never know - the legal paperwork for the sale of your existing flat/house may be delayed and your money from this sale may not be released to you in time to pay back the bridging loan.

If you are the Kiasu (scared to lose) type, and want to be assured of a home loan before you start your search for your dream home, don't fret. Some banks have anticipated this situation, and offer Pre-Approved Home Loans (Standard Chartered Bank has this option). You just have to open your mouth and ask for it.

What you need to do is to approach the bank and bring along your latest payslips and income tax returns, such as IR8A form. The home loan officer will work out how much the bank is prepared to lend you, on the basis of your present income and your declared commitments (you need to tell them your commitments, such as car loans, other hire purchase facilities). Then the bank will issue you with a letter promising you that loan amount. Usually, the validity of that Pre-Approved Home Loan is for a period of six months from the date of the letter.

Armed with that letter, you can confidently go about shopping for that dream apartment of yours. Isn't that just great? Of course, you just have to take care that you do not get involved in any legal suits in the meantime because once your name gets into the court's database, the bank will know about it and your Pre-Approved Home Loan letter may not be valid anymore! (Remember - even if it's a Pre-Approved Home Loan, the moment you decide to take up their offer, the bank will do a search of the law courts on you, just to make sure you are law suit-free before they give you the money.)

If you have any comments or questions, please e-mail us at editor@getforme.com .

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