What is TL,DR and WOT? Its the bank letter of offer! The loan contract that everyone got to sign at one point of time, be it for your new house/car purchase or funding for your business.
Too Long, Didn’t Read because of the Wall of Text.
In today’s topic, we shall look at what are the things you need to look out for in the letter of offer.
Every bank’s differs from others, but the content are more or less the same.
This is typically the first page.
You should check on:
- Your name and corresponding address – This will be the address that the bank sends all the important letters to you. i.e the sibor rate changes, housing insurance matters etc.
- Mortgage property – This is the property that you are buying.
- Borrowers and mortgagors – Ensure the names are correct, take note who are the Borrower(s) and Mortgagor(s).Borrowers are the person that take on the loan and service the monthly installment.
Mortgagors are the owner(s) of the property.
PropertyWiki Tip : Its possible to have 1B 2M instead of 2B 2M, if its single borrower, then you should inform your law firm about it, so that they can prepare the correct mortgage documents for you to sign.
- Purchase price of the property. – Ensure the purchase price is correct.
- Housing loan
Purpose – Check that its for the purchase of the property.
Loan amount – Check that its the correct amount that you are eligible and requested for.
Tenor – Check its the correct amount of year that you are eligible and requested for.
Interest Rate – Check that its the correct interest rate that you are eligible and requested for.
Continuing on the 2nd page :
You should check on :
- Monthly Installment – If you have taken a periodically floating rate from the bank, then they will inform you every X month(s) of the rate changes by mail and adjust your monthly installment accordingly.
Continuing on the 3rd page :
You should check on :
- Using the CPF Funds – You should check on this clause to see how much CPF the bank allows you to use.If it’s lower then what you intended to use, then you should inform the banker to increase this limit, The law firm will also help to inform the bank on your behalf. The bank will then issue a letter of variance or a supplementary letter to effect the increase in CPF limits.
A couple of reasons why the bank only pre-approved a lower limit might be due to existing CPF funds are being used in the current property or you do not have enough CPF in your OA right now. Its advisable to inform the bank if you are already in the process of selling the current property and awaiting the CPF refund or if you have done a voluntary refund in cash.
Do also take note to check if the clause allows you to use your CPF for legal fees and stamp duties and monthly installment. If they didn’t mention it, then the law firm will do the needful for you in order for the CPF to be drawndown successfully.
- Prepayment Period and Fee.
There are Sibor rate, Sor rate and Fixed rate offered by the bank, if you take any of these rates, and wish to do a redemption then you should take note of the following:
If you take SIBOR or SOR rate, you need to know which exact day the rate changes and inform your law firm to send the redemption notice to the bank one day before the rate changes.
If you take Fixed rate, its should be relatively safe to redeem at any time.
The redemption period is standard 3 months, if you serve a shorter notice, you will still have to pay the full 3 months interest known as (interest in lieu).
The penalties will usually be 1.5% of disbursed loan (varies from bank to bank).
If you wish to change the completion date after serving the notice, then there will be an admin cost of $2-300 varies from bank to bank. The law firm can assist to write in to the bank to waive it (subject to the bank’s approval).
Simply put – If you wish to do a full redemption, then you should call in to the bank’s hotline to check which day can you instruct your law firm to serve the redemption notice in order not to incur any penalties arising from lock in period or the rate review date.
Click here for part 2.
Click here for part 3.