Updated: Jul 10, 2020
Why Should Property Owners Stretch a Longer Tenure For Their Property Loan
A loan tenure, the amount of time given to repay a loan, might sound stressful to some due to the idea of having to carry a debt for a period of time. Some might want to get it done and over with as soon as possible, but others might want to stretch out the loan tenure for as long as they can. In general, the benefits that comes along with a longer tenure period tend to be greater than that of a shorter tenure if you are an average-wage salaryman in Singapore.
With a longer tenure, the monthly repayment amount will be lesser, thus relieving your financial burdens. Your finances can also be better managed as you will be able to direct them to immediate financial responsibilities which might have a higher interest rate that the home loan.
If you take on a shorter loan tenure, you might be faced with a huge amount of stress from having to repay the home loan and also the necessary daily expenses.
The ability of you to repay the home loan will also greatly affect your credit worthiness. It will be negatively affected if you opt for a shorter tenure but is unable to repay the monthly repayment amount. Thus, it would be best to go for a longer loan tenure to prevent your credit worthiness from dropping. If it does drop, it will affect your chances of getting a loan in the future.
The possibility of you taking up another loan is determined by Total Debt Servicing Ratio (TDSR). It is a ratio that will assess if you are able to take on another loan, on top of your current financial responsibilities.
The ratio must fall below 60% in order to qualify for a loan. Therefore, a longer loan tenure will mean that the monthly loan repayment will be lower and it will be advantageous to your TDSR.
Financial institutes operate in such a way that makes it easier to adjust from a longer loan tenure to a shorter one; and not the other way around. Even though you might want to repay off your home loan quickly, a shorter loan tenure will make it harder for you to opt for a longer loan tenure if you are unable to keep up with the costly monthly repayment.
The risk of failing to service the loan will have a great impact on your financial health and possibility of taking up loans in the future. However, if you can afford to opt for a shorter loan tenure, it is advisable to go for it as the total repayment amount will definitely be much lower.
The option of a shorter loan tenure should be taken up especially by property investors as the interest rate is relatively low the past few years. The advantage of this is that you might be able to pay off the loan before the interest rate starts to rise again.
Contact Mortgage Consultancy now to get the smartest financial bank loan advice specifically for your home. We are able to provide more than 100 loan packages from 16 banks for you to compare and choose from! Feel free to contact us at +65 8556 5271 so that we will be able to help you make an informed decision, suited to your needs.