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Mortgage Print E-mail
A mortgage is a security agreement under which the purchaser pledges his property as collateral for a loan.

1) Different type of mortgages:

(i) Adjustable rate loans.
Fixed for a number of years and then converted to flexible rate for the rest of the term.

(ii) Interest only loans
Example of such loans are short term bridging loans and reverse mortgage (meant only for Singaporeans who are above a certain age)

(iii) Second Mortgage and Refinancing Packages.
Refinance property by getting a new loan with lower interest rate (norm) or get a secong mortgage.

2) How interest rates are calculated?

Interest rates are charged on the principle amount. Repayment of the loan (principle + loan) can be done monthly or annually. After each repayment, the manner in which principle is reduced is known as rest.

(i) Monthly rest
Here, the bank may allow the principle loan amount that had been repaid in the previous month to be deducted from the outstanding principle in the current month’s interest computation.

(ii) Yearly rest
For yearly rest, the principle repayment every month is not accounted for at the end of every month but only deducted from the principle amount at the end of the year.

Depending on agreement, the loan can be monthly rest or yearly rest. It is important to check on this factor as the interest rate paid will be higher when the principle loan amount is reduced less frequently.

(iii) Fixed rate
Unlike reducing principal loans, the principal repayments are not taken into considerations in the flat rate computation. A fixed rate is charged on the full amount financed for the entire loan term.