Although budget travelers may enjoy their time in Lion City, it is evident that Singapore has a high and growing cost of living. In 2020, the median monthly income from employment was $4,534, up 51.1% from 2010 and up 2.8% when adjusted for inflation. A 20-year average inflation rate is 1.48% from 2000-2020.
Land prices significantly contribute to the increase in the cost of living. Being in short supply, the land is highly sought. There will always be a rise in property and rental costs. A Bridging Loan Singapore is one of the numerous loan and financing options available on the market today to serve the general public.
What Is A Bridging Loan?
Bridging loans are short-term bank loans used to cover expenses like a downpayment on a new home before you get the money from selling your old one.
Let’s say you’ve come to the point in your home improvement project where you’re ready to sign the sales and purchase agreement and officially make the upgrade. But you don’t have money in hand, and the proceeds from your previous home’s sale haven’t arrived yet. In this case, you may apply for a bridging loan from a bank to fill this gap.
How Wise Is It To Take A Bridging Loan?
You may wonder whether or not to obtain a bridging loan. You won’t need a bridging loan if you have saved up enough money for the down payment on your new home. However, in the absence of sufficient funds, this is a necessity. By asking yourself the following questions, you can get insight into how to weigh your alternatives and make a more informed choice.
Why Do You Need A Bridging Loan?
80% of Singaporeans live in public apartments run by the Housing and Development Board (HDB). Singapore’s public housing symbolizes the state’s cleanliness, thoughtful design, vibrancy, and upkeep. And that is the reason why people frequently use a bridging loan in Singapore to purchase the property of their dreams.
How Much Cash Do You Need For Down Payment?
If someone is thinking about getting a bridge loan, it’s clear that they don’t have enough cash on hand to pay the down payment. But there may be times when someone would “save” their cash (for example, for an emergency) and avail of a bridging loan instead.
It makes sense, though, only if you want to keep your “cash on hand” balances rather than the money in your CPF OA (which has strict withdrawal conditions).
Also, your CPF funds have much lower interest rates than a bridging loan. You shouldn’t get a bridging loan if you have enough money in your CPF to cover the down payment. Instead, you should use the money in your CPF.
Conclusion
It’s better to always be ready. Before you take out a bridging loan, ask your lender what the “exit clauses” are in case the sale of your old property falls through for some reason. Will you get in trouble? The terms and conditions will likely differ from one lender to the next. So, make sure to double-check and take these things into account when deciding which loan to get.