Wednesday, July 25, 2012

UOB unveils 50-year mortgage

With increased demand seen for longer loan packages in Singapore, United Overseas Bank (UOB) recently launched a 50-year mortgage that is applicable for HDB flats and private homes. However, the age ceiling for the loan has yet to be revealed.

For leasehold property, there should be at least 35 years left on the lease at the end of the 50-year loan. This means that the property should have 85 years or more left on the lease before the owner can apply for this mortgage.

Taking the mortgage means that borrowers will be servicing the loan until their retirement years and onwards. For instance, a couple who got married at age 30 must service the loan until the age of 80.

If a borrower took out S$1 million under a 50-year mortgage at an interest rate of 1.7 percent, he will only pay around S$2,475 per month, compared with S$3,548 if it was a 30-year loan.

Ultimately, this is expected to benefit developers because high-priced homes, particularly those worth S$1 million and above, are now more ‘affordable’ due to lower monthly instalments.

However, experts said that buyers will more likely prefer shorter repayment periods due to higher interest costs and retirement concerns.

“The average loan period we are seeing now for customers is about 30 years. In general, especially in Asia … customers are prudent when it comes to managing their mortgages, so most of them do not stretch out to the maximum period,” said Lui Su Kian, Managing Director and Head of the Deposits and Secured Lending Group at DBS Bank.

View the original article here


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