S'pore millionaires have no problems getting home loans

Property Guru Thu, Jul 19, 2012

By Romesh Navaratnarajah: The Internet has been buzzing lately with news that Facebook founder ark !uckerberg ac"uired a loan to refinance his #$ home% with many wondering why a billionaire such as himself would take out a loan when he can buy the &ro&erty outright' Interestingly% the &ractice is not uncommon% even in $inga&ore where many wealthy home buyers are taking advantage of the low interest rate environment to ac"uire loans' (ccording to )esmond *hua% +ead of ,oan-uru% rich consumers usually &ay a down &ayment of ./ to 0/ &ercent of the &ro&erty1s &urchase &rice before taking u& a loan' 2(ssuming a &urchase &rice of $34 million% they will &ay down 0/ &ercent and take u& a 5/ &ercent loan' The monthly instalment over 6/ years is $36%780 &er month%2 he added% which is a small amount for any millionaire or billionaire' eanwhile% the interest &ortion to the bank would be $3509 while &rinci&al &ortion is $36%6/9' (ssuming the unit was rented out at a market rate of $3.%/// monthly% the rental yield would be .'5 &ercent' *hua said that by &aying a down &ayment of $30//%/// and renting out the &ro&erty% a wealthy buyer would 2have someone to &ay the bank $3509 &er month to service the loan and reduce the &rinci&al of the loan on a monthly basis while they wait for the ca&ital a&&reciation of the &ro&erty2' 2:ith the remaining $35//%/// saved from taking u& a mortgage loan% they can du&licate the same formula and buy one or more &ro&erties%2 added *hua' +e noted that banks assess home loans using three methods ; namely the )ebt $ervicing Ratio% (sset Based ,ending and (sset #nder anagement (ssessment' <rovided wealthy borrowers have strong credit standing% &ositive income and no outstanding litigation% they have a good chance of getting their loans a&&roved' 2#sually% any middle=income earner can fit into the first or first two assessment methods' The third credit assessment method refers to individuals with &ositive financial cash flow' $o if a rich consumer meets the third assessment criteria% then getting a loan is sim&ly a breeze%2 *hua said'

Not taking into consideration +)B &olicies and the government1s cooling measures% su&&osing a wealthy a&&licant chooses a +)B loan% *hua sees no reason for banks to reject the loan% considering their financial standing is 2enough to &urchase a few condominiums2' Related $tories:,ower mortgage rates s&reading in *hinese cities :hy does billionaire ark !uckerberg need a loan>