Even with its burgeoning private property prices, Singapore has managed to constantly attract an influx of foreigners to seek greener pastures in our little red dot. But as a foreigner looking to settle down in Singapore, applying for a home loan can be a rather tedious process. Do not worry though – this step-by-step guide will ensure your process in applying for a home loan will be smooth sailing!
6 Steps in Applying for a Home Loan in Singapore for Foreigners
1. Find out the legal requirements and restrictions
To obtain a home loan in Singapore as a foreigner needs overcoming certain legal restrictions that are specific to you, including the mandatory additional stamp duty of 20% for the first residential property purchased by foreigners (in addition to the standard stamp duty), as well as the ability to only buy certain properties with the approval of the Singapore Land Authority. But exemptions are applied to nationals from countries such as Switzerland, Norway, Liechtenstein, Iceland, and the United States under Free Trade Agreements.
Foreigners will also need to overcome other restrictions when working with lenders that are open to working together. Without an existing credit history, you need to have a stable income as well as prove your intention to stay for the long haul. The process to apply for a loan is generally the same for citizens and non-residents alike without any enhanced fees or costs, but differ slightly according to the lender and specific home loan package.
2. Understand which home loans you qualify for
As a rule of thumb, foreigners must prove their legal and financial status in Singapore, as well as meet few other specific requirements. For example, the level of ease of the application process will depend on having a stable income and valid work visa as a foreigner. Two types of foreigners generally exist, including:
- If you are staying and working overseas, and most likely purchasing private properties in Singapore for investment purposes or if your children are studying here. Depending on factors such as your profile and country of work/residence, you will be able to obtain 50%-60% financing. Generally, the proof of income will be six months of payslips with bank statements to show your salary being credited to your bank account.
- If you are working in Singapore – assuming you are on an employment pass – you might be able to obtain a higher loan at 60%-70%. You would require an income verification of up to three months payslip.
The types of mortgages offered by banks will include both fixed or variable rates, where banks typically loan up to 75% of the purchase or valuation price at maximum, with the remainder topped up in cash. Not forgetting accumulated debts from credit card bills to property and car loans, the Total Debt Servicing Ratio (TDSR) of 60% of an individual’s income should also be factored in.
3. Search for the best mortgage package
When it comes to choosing your ideal home loan package, you can choose between fixed or variable rates. With a stable interest rate of between 2%-2.5% lasting between one to five years, the less flexible but consistent fixed rate mortgage is more accessible. Alternatively, you can obtain a home loan tied to a variable rate such as the relatively resilient Singapore Interbank Borrowing Offer Rate (SIBOR) or Swap Offer Rate (SOR).
Get the best home loan across all banks suited to your needs. You can get unbiased advice by speaking to our in-house mortgage specialist.
4. Apply for IPA
Submit the documents listed below to a home loan banker to get an In-Principle Approval (IPA). At this stage, you are allowed multiple IPAs, which establishes as a formal confirmation on the maximum amount a bank can loan you.
As a foreigner, you are generally required to provide a foreign identification number (FIN) during the loan application, which you will have once the visa application is completed. Furthermore, you will typically be asked the following documents when applying for a home loan as a foreigner:
- A valid work visa
- Copy of your passport
- Latest copy of your income documents including:
- Six months of payslips with bank statements (if staying and working overseas) OR
- Up to three months’ payslip (if working on employment pass)
If the property is already confirmed for purchase, the bank will also require:
- Either the signed option to purchase (OTP) or Sales and Purchase Agreement (S&P)
- Official valuation report
Need assistance in applying for an IPA? You can engage Ohmyhome’s experienced mortgage advisory service for free to help determine your loan eligibility before buying your dream home.
5. Get legal conveyancing
If you’re buying a property in Singapore, it’s important to have a local qualified lawyer to help you. The bank will usually refer a lawyer in their panel list- if you have a lawyer referred by your friend, ensure that the lawyer is in the bank’s panel list.
Submit all the documents listed above to the conveyancing lawyer, after signing the S&P for buying the property. The lawyer will work directly with the CPF Board, the bank and the seller’s bank.
The lawyer has an important role drawing up the contracts, performing searches to confirm details of the property and its ownership and making sure the property won’t imminently be affected by any major infrastructure projects. The lawyer is also responsible for due diligence checks on the seller (for resale condominiums) and will liaise directly with the developer’s solicitor, which can ensure you’re not victim of a scam.
6. Pay the required fees
In addition to the lengthy documentation process, you will need to prepare sufficient funds prior, with such massive upfront payments required. This is to prevent you from being blindsided by exorbitant fees, before your new property purchase in Singapore. You will be required to pay various fees to finish purchasing your property in Singapore, such as the OTP fee to purchase property, a downpayment, conveyance fees for legal services, Buyer’s Stamp duty, Additional Buyer’s Stamp Duty (ABSD), as well as valuation fee. Upon completion of the transaction, the bank will begin deducting the money from your local bank account.
Keep in mind that investing in a property in Singapore as a foreigner will require an overall understanding of the process involved in applying for a home loan. After learning what to expect when you apply, researching the different loan types available to foreigners living in Singapore beforehand will only benefit you in the long-term.
Have we piqued some unanswered questions? Ask our friendly Mortgage Specialist for free! Call 6886 9009 now.
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