Banks are now providing a degree of flexibility when granting loans to home buyers who are moving from one home to another.
They are granting loans of up to 60 per cent of the property’s value first, and increasing it to 80 per cent later.
The move is introduced to help property upgraders save time and money as they navigate tricky timelines created by new property financing rules first introduced last August.
The rules stipulate that home owners with an existing home loan can obtain only 70 per cent financing for a second home they wish to buy. The limit was reduced further to 60 per cent this month. The usual loan limit is 80 per cent.
This makes it hard for home buyers who simply want to move from one property to another. They now have to prove they have sold their existing property before qualifying for 80 per cent financing.
Most banks here say they are prepared to grant these buyers 60 per cent financing on a new home, and then restructuring the loan to 80 per cent financing when the buyer proves he has sold his home.
Greg Zeeman, head of HSBC personal financing services said: ‘We are flexible about reviewing loan quantums, as we understand customers sometimes need more time to sell their existing property or decide on the proportion of loan and CPF savings used to finance their new property.’
This is a radical departure from past practice. In the past, once the letter of offer from a bank was accepted by a borrower, the terms could not be changed.
United Overseas Bank (UOB) loans division head Chia Siew Cheng said UOB also offers this flexibility, but added that it also takes into account ‘current market regulations and guidelines, customers with good credit records, stable income and the ability to service the loan’.
Private property owners who are buying and selling their homes in back-to-back transactions will potentially benefit from this increased flexibility. This issue is less acute for them because in the private property market, home sellers can stipulate a longer period of time for a sale to be completed.
The stamp duty certificate – the proof needed for 80 per cent financing for private property – is also obtained earlier in the sale process.