Amid the ongoing financial crisis brought about by the global Covid-19 pandemic, it is important to not just take care of our immediate needs, but also look beyond to ensure we can be financially sustainable, especially for the time when relief measures and special concessions have run their course .
For many Singaporeans, our home mortgage is our largest debt obligation, and perhaps is larger than all our other financial obligations combined.
At times of difficulties, it might be prudent to explore your options for reducing your monthly mortgage repayments in the time being, since you might need to prioritise cashflow and worry less about things like potentially higher total interest you end up paying in the interim.
Here are some options that could be available to you, depending on your loan type and individual circumstances.
1. Tap on special Covid-19 loan repayment concessions
To help ease the financial strain caused by Covid-19 on Singaporeans, MAS announced a series of special concessions for long-term financial obligations, including home loans, insurance premiums, and more.
For homeowners with a bank mortgage and want to avail themselves to these concessions, they can approach their bank to defer either the principal payment or both both principal and interest payments up to December 31, 2020.
By doing so, interest charges will accrue only on the deferred principal amount, and no interest will be charged on the deferred interest payments (interest-on-interest). You also have the option to extend your loan tenure by the corresponding deferment period.
To qualify, you do not need to demonstrate any impact from Covid-19.
For homeowners taking a HDB concessionary loan, HDB announced it will suspend late payment charges on housing loan arrears for 3 months.
Deferment of monthly instalments for 6 months is also possible (with possible extension by another 6 months) for those whose CPF Ordinary Account monies have been depleted.
You can contact HDB’s housing counsellors to explore these options by calling HDB at 1800-225-5432 between 8am to 5pm on weekdays.
2. Using more of your CPF for your monthly mortgage repayment
During good times, you might have decided to pay a larger portion of your home mortgage using cash, in order to retain more of your CPF savings as a buffer and to earn guaranteed interest.
If you need to, you can amend the proportion of your monthly repayments to use more CPF instead, and in future, change that back once the financial situation has recovered.
For HDB flat owners taking a HDB concessionary loan, you will need to visit the HDB branch office managing your flat and submit Form HPS/9 (“Application for withdrawal under Public Housing Schemes”).
For HDB flat owners with a bank loan or private property home owners, you can login to the CPF website using your SingPass and submit a request under My Request – Property.
3. Stretch out the repayment period of your HDB housing loan
If you’re on a HDB concessionary loan and have difficulty with your monthly repayments, even if you were to adjust your share of CPF payments, you might want to examine if you can extend your home loan repayment period – and thereby reducing your monthly repayments.
You will need to collect and submit the change of repayment period application form any HDB Branch, and if applicable, CPF withdrawal form for revised instalments and Home Protection Scheme health declaration form.
All flat owners need to be present to submit the forms at an HDB Branch Office . Note that this is subject to eligibility and a 65-year-old age ceiling.
4. Refinancing/repricing and taking a longer loan tenure
For home owners with a bank loan and have passed their lock-in period, you could look at refinancing/repricing on your home loan package.
By refinancing (for new loan packages from a different bank) or repricing (for new loan packages with your same bank), you could choose the longer loan tenure (subject to age eligibility) and thereby reducing your monthly cash outlay moving forward.
Interest rates being at historic lows currently is an added bonus, since you could save on total interest costs, even as you stretch your monthly repayments. You can contact your bank or speak to a trusted mortgage advisor for more a free quote and more information.