Updated: May 19, 2020
Being on the ground, some homeowners are going through difficult times due to lower earnings, loss of jobs or negative cashflow in their business.
I feel the urge to write this article. I have helped sellers to make money and buyers to save money. It is equally important to help existing homeowners to protect their wealth so that their day-to-day activity still can carry on. This is crucial for those who are still supporting their families.
If you are facing financial difficulty, I have gathered these 7 strategies to help you overcome it.
⭐ Strategy 1: Draw equity loans from your property to get temporary cash flow
Private and commercial property owners can use a low interest equity loan from their property to overcome cash flow barrier. This is useful for those with an income (or sufficient assets to pledge).
HDB owner cannot use this strategy as the regulation don't allow equity term loan for HDB.
Do note that CPF funds cannot be used, except cash for your equity loan instalments.
" The cost of equity loans is as low as mortgage loan rates 1.3% - 1.8% at this current time of writing. "
⭐ Strategy 2: Refinance your loan for lower interest and/or stretching the loan tenure for lower monthly instalment
US federal funds rate cuts to zero bringing Singapore interest rate to a new lows.
It makes sense in doing refinancing of your loans now and save on interest rates.
If you are not eligible for refinancing due to any locked-in packages, it is always good to give your banker a call.
" In today context, do give your banker a call as there might be leniency given even if it is locked-in"
Stretch the tenure of your loan. Do you know mortgage loans can be stretched till one is 75 years old or to a 35 years period max?
Pros: Lower monthly instalment
Cons: Increase your interest paid over the long term
Hence, do partial repayment once your finance recovers.
⭐ Strategy 3: Apply for principal, interest or total mortgage deferments
Announced on 31st March 2020, MAS has allowed banks to defer mortgage payments totally or choose interest or principal free mortgage payments until 31st Dec 2020.
There are also schemes to help SMEs with SME loans and those with personal unsecured loans defer or lower their interest rates in the same announcement.
" People, who do not have the property equity or unable to take a term loan, can go for this if they are slightly tight with finance. "
⭐ Strategy 4: Retiree Owners (Private: TDSR waiver for owners with less than 50% loan on their property value) (HDB: Lease Buyback Scheme)
Announced on 10 March 2017, MAS exempted private owners with less than 50% loans on their properties from the stringent TDSR regulations.
This allows retiree private owners to draw out an equity loan amount Up to 50% of the property value without having to meet income or asset pledging requirements; or to include their children’s name as guarantors for the loans in case that state prevents them from doing so.
" Extra support to retirees having private property to draw up to 50% loan "
Whereas HDB owners above age 65 can opt for HDB lease buyback scheme.
E.g. A couple, both 65 years old, are joint owners of a fully paid 5-room flat worth $520,000, with 65-year remaining lease. They choose to keep a 30-year lease, and sell the tail-end 35-year lease to HDB.
⭐ Strategy 5: Renting out rooms / partial space
Rental gives you immediate cashflow if you have a big housing space or smaller family nucleus.
Do note that there is a cap of 6 people allowed for HDB 3-room flat or bigger and private residential property.
Private residential properties can now be rented out for a minimum period of 3 months unless condo MCST prohibit it. Lesser restriction means easier to rent out.
HDB properties must be rented out for at least 6 months and register on HDB portal.
" Quick small relief if you are able to accommodate to a smaller space with others "
⭐ Strategy 6: Renting out whole flat and rent a cheaper flat / staying with others
Besides the max cap of tenants and minimum lease duration, HDB owner compared to the private owner, needs to meet the 5 year minimum occupation period, check the non-citizen quota of subletting and tenant working sector.
Renting out whole property gets you a bigger rental income. Plus you dont need to stay in the same roof with the tenants. You can go rent a cheaper flat. This makes sense for homeowners of newer flat moving over to the same neighbourhood of older flat with low rent. These older flats have bigger space some more.