Commercial Mortgage

Commercial property can be a good investment on a business standpoint and also for investment rental yield. If your business is currently paying a high monthly rental for the office space, buying a commercial property for your business operations can mean a much lower monthly payment and you get to have ownership of the property as well. For investment, you can be looking at a stable monthly stream of rental cash flow if your tenant is a stable business.

Small medium enterprises (SME) are really beginning to realise the benefits of owning a piece of commercial property utilising commercial mortgages. It can mean lower monthly payments that ease cash flow that is key to smooth business operations. When the company grows too big for the property in future and needs to relocate, the company will also make capital gains if the property is sold in the open market in future.

The lease period for commercial property tends to be longer compared to residential property. You can even add a clause to review rental annually. Businesses renting commercial property are more agreeable to this feature. Occupants of commercial property also tend to maintain the place a little better than a residence since the look of the office represents the image of the company.

In Singapore, you can purchase commercial property as an individual or as a company. Documents required for commercial mortgage when purchasing as a company differs a lot than if you were to buy as an individual. For an individual, the key documents for Singapore commercial mortgage loan are those that verify proof of income. For companies, the financial statements are must-have documents.

Commercial mortgage rates can also be different than those you see on residential mortgage rates. Among others, there are fixed rate mortgages, floating SIBOR and SOR pegged mortgage loans to choose from.

Fixed Rates SIBOR SOR

No matter if you are choosing a Singapore mortgage loan for the first time or a seasoned property buyer, you will come across a stage where you have to choose from fixed rate mortgages, variable rate mortgages, and floating mortgage loans that are pegged to the SIBOR or SOR. It can be a tough choice.

Although SIBOR pegged mortgage loans in Singapore are the most popular among real estate buyers, it is advised that you weigh up you decision criteria and decide on a mortgage rate structure that you are comfortable with instead of following the crowd.

Fixed rate mortgage loan Singapore

Information of 20-year or 30-year fixed mortgages can be found all over the internet. However those are not applicable when it comes to Singapore mortgages. Singapore fixed rate mortgage loans only have a fixed rate for the initial years. After the period of fixed rates, your mortgage loan will most likely be converted to one that is pegged to the Singapore Interbank Offer Rate (SIBOR) or Swap Offer Rate (SOR) with a spread.

The period of fixed rates can be anywhere between 1 year to 5 years. So if you are one who has a risk tolerance that leans towards stability, mortgage loans with fixed rates can let you know exactly what you will be paying in the initial period of fixed rates. This helps you conceptualize a clear budget for a few years on your home loan. And you know your exact financial commitments on the housing loan for a few years. But you can expect interest rates that are fixed to be higher than floating interest rates. In a way, you are paying for predictability and certainty for your financial peace of mind.

Floating rates for SIBOR and SOR

Since SIBOR and SOR are public rates, they are a little more transparent in how it is determined compared to fixed rates and variable rates. At times of low mortgage interest rate, borrowers will benefit from floating rate mortgage loans. However, when interest rates peak, borrowers will have to ride the tide as well.

You can choose from 1-month, 2-month, 3-month, 6-month, 9-month and 12-month depending on what the lender is offering. Some mortgage structures also offer the flexibility to convert between these different classes during the term of the mortgage. It is also worthy to note that SIBOR hit it’s record high in 1998 just before the financial crisis.

Variable rate mortgages for Singapore property

Variable rate mortgage loans are most commonly pegged to the lending bank’s internal board rate. This means that the lending bank can review the interest rates anytime and make changes accordingly. The Singapore mortgage rates that you will pay will then be adjusted.

Variable rates are not pegged to a public bench-mark rate nor fixed like a fixed rate. So there is a certain level of uncertainty to what a borrower will pay. Economic changes or how well the bank perform can mean changes in interest rates.

Refinance Your Property

The most common reasons to refinance your property is to enjoy lower interest rates on your mortgage or to extend or decrease the loan tenor. To fully make use of the equity in your home, you may even consider cashout refinancing. With the funds generated from the cashout, you can put them in an investment with a yield higher than the interest charged on the mortgage.

The key reason to get your home refinanced is always to exploit lower mortgage rates available in the market. It does not require the advice of a professional mortgage consultant for your to realise that it is time to refinance your home when you are currently paying 3.75& on your mortgage loan while available mortgage interest rates in the market are hovering around 1%.

The concept and strategy of cashing out on your home equity to invest in other vehicles is so obscure that there are people charging thousands of dollars for a seminar just to inform you of this investment option.

As a matter of principle, there is a growing trend of home owners who cannot bear the thought of servicing a $500,000 loan on a $1million property. To obtain a fairer value deal for their million dollar properties, these home owners rather use refinance cashout to get a 70% loan on the million dollar property. And put the extra cash into their business, other investments, or even another property.

In other words, $500,000 from the new mortgage refinancing loan goes to repaying the existing loan. The remaining $200,000 may be used to purchase investments like life insurance, collective investments, blue chip stocks, down payment for another piece of real estate, etc.

In the past year, you probably heard a lot of market talk on refinancing properties. This is hardly surprising as historically low mortgage rates have assisted many home owners on great savings through refinancing with lower monthly payments and better terms.

As the economy is picking up, low mortgage rates are not going to last forever.

By refinancing your home, you can change the structure of interest rates from floating SIBOR or variable rates to a mortgage with fixed rates. With the current low rates, you can even consider restructuring your mortgage to pay more on your monthly installments and save a lot of cash on interest rates.

If you are a home owner, it makes perfect sense to take responsibility of your mortgage loan and refinance to a better deal when the time and market conditions are right.

Find out what are your Singapore mortgage refinance options now.

Find Out What Kind Of Mortgage Interest Rates You Can Get For Your Purchase

[contact-form 1 “Contact form 1”]

Be assured that our mortgage rates are updated daily as we get them from here.