What is MRTA? (Part 2)

MRTA is an insurance policy that provides protection to the insured party’s next of kin ensuring that the outstanding mortgage will be settled should there be an untimely death or total permanent disablement of the insured party. The sum insured of the Policy will match the loan of the mortgage.

This policy is on a reducing term life that corresponds directly to the loan amount and length of time remaining on a loan. If the insured party dies during the loan period, the insurance company pays the balance remaining on the loan to the Bank.

MRTA is a single premium payment at the inception of the Policy and financing is also made available where required.

The advantages of taking up a MRTA policy are:

• It offers your family financial security i.e. the outstanding housing loan will be fully settled from the policy
• It protects your family from having to sell the property in order to settle the housing loan
• It is also tax deductible

Article source : https://www.pbebank.com

What is MRTA?

Almost everything needs protection, including your home loan. Here's why...

Mortgage Reducing Term Assurance (MRTA) is also frequently referred to Mortgage Life Insurance. MRTA helps you settle your housing loan in the event something happens to you.

Although many people don't like talking about it, disability, illness or death can occur any time. MRTA will cover the unpaid portion of your loan if this happens. It gives you peace of mind and protects your family from losing a home. It provides coverage even during the construction period. The premium is reasonable, and it can even be financed by your bank.


What are the benefits?

• Lump sum repayment to your mortgage loan in case of death or total and permanent disability due to natural causes, illness or accidents.
• Coverage is 24 hours, worldwide.
• Premiums can be financed by the bank.
• Discount on the premium for joint life application if your home is jointly owned by your spouse or immediate next of kin.

What does MRTA cover?

It covers disability, illness or death and also total and permanent disability. However, there are exclusions such as:

• Death due to suicide and AIDS/HIV
• Total or permanent disability due to self-inflicted injuries, armed forces, riot and civil commotion, flying other than as a fare-paying passenger, racing on a horse or wheels
• Pre-existing conditions such as AIDS/HIV

How much would my premium be?

Premium factors depend on the sum assured, interest rate, term, construction period, premium financing, joint-life, age at next birthday.

If you are between 18 and 60 years of age and in good health, you are eligible to take up MRTA. You can always make an application by filling up an application form at the Bank.

Article source: http://www.memylife.com

Home Equity Scams For You?

A home is the most expensive investment most people will ever own. For cash-strapped homeowners a home equity loan is a temptingly easy way to get cash. However, some home equity lenders are dishonest, and gullible consumers are at risk of losing their biggest asset. Borrowers should be wary of unscrupulous lenders and their scams to avoid losing their homes.

Financially unsophisticated homeowners, such as the elderly, members of minority groups and people with poor credit ratings, are often targeted by unscrupulous lenders using unethical lending practices.

One tactic used is called "equity stripping". In this instance, cash-strapped prospective borrowers who the lender knows cannot met the monthly payments are encouraged to exaggerate their income on the application form to help get the loan approved. As soon as the borrower fails to meet the monthly payment, the lender forecloses, stripping the borrower of all the equity in the home. Low-income homeowners should beware of lenders who encourage them to accept loans which they cannot afford to repay.

Another tactic is the balloon payment. A borrower who is falling behind in mortgage payments is offered mortgage refinancing at a lower monthly payment. However, the payments are lower because they cover only the loan interest. At the end of the loan term, the principal -that is, the entire amount of the loan -is due in one lump sum called a balloon payment. If the borrowers cannot make the balloon payment or refinance, the home is foreclosed.

Loan flipping is another deceptive practice. The company holding a homeowner's mortgage offers to refinance in order to give the homeowner extra cash, but charges high points and fees for doing so. The extra cash received may be less than the additional costs and fees charged for the refinancing; moreover, interest must be paid on the extra charges.

Home improvement scams are very common. A contractor offers to install a new roof or remodel a kitchen at a price that sounds reasonable, and offers financing through a lender he knows. Sometimes the contractor even attempts to get the homeowner to sign blank contract forms with the promise they will be filled in later when the contractor is "less busy". Often, the rates offered are not competitive, and as soon as the contractor has been paid by the lender, he has no interest in completing the job to the homeowner's satisfaction. The homeowner is left with unfinished or shoddy work and a large loan to pay off.

Credit Insurance Packing is the charging of extra fees at the closing of a mortgage. A homeowner and a lender come to an agreement on a mortgage, but at closing, the lender tacks on charges for credit insurance or other "benefits" that the borrower did not ask for and did not discuss. The lender hopes the borrower won't notice this, and just sign the loan papers with the extra charges included. If the borrower questions the last minute charges, the lender may state that the charges are standard policy for all loans, and if objections continue, the lender will claim that it will take several days to draw up a new contract, or that the bank manager may reconsider the loan altogether. Due to these last-minute pressure tactics, the loan may wind up costing considerably more than initially stated. Borrowers who agree to buy the insurance are paying extra for a product they may not want or need.

Mortgage Servicing Abuses occur after the mortgage has been closed. Borrowers get bills from mortgage companies for payments such as escrow for taxes and insurance even though the homeowner agreed beforehand with the lender to pay those items themselves. Bills arrive for late fees, even though payments were made on time. Or a message may arrive saying that the homeowner failed to maintain required property insurance and the lender is buying more costly insurance at the homeowner's expense. Other unexplained charges such as legal fees are added to the amount owing, increasing the monthly payments or the amount owing at the end of the loan term. The lender does not provide an accurate or complete account of these charges. When homeowners get tired of these tactics and ask for a payoff statement in order to refinance with another lender, they receive inaccurate or incomplete statements. The lender makes it almost impossible to determine how much has been paid and how much is still owing on the loan.

Homeowners should avoid signing over the deed to their properties to lenders under any circumstances. If a borrower is in danger of foreclosure, a second "lender" may offer to help prevent the loss of the home, if only the homeowner will sign over the property as a "temporary" measure. The promised refinancing never arrives, and the lender now owns the property. Once the lender has the deed to your property, he can treat it as his own. He may borrow against it or even sell it to someone else. The borrower no longer owns the home, and will receive no money when it is sold. The lender can treat the borrower as a tenant and the mortgage payments as rent. If the "rent" payments are late, the borrower can be evicted.

To protect against unethical lending practices, homeowners should never agree to loans beyond the means of their monthly income; sign any documents before reading the fine print; or let any lender pressure them into signing immediately. Never allow the promise of extra cash or lower monthly payments get in the way of good financial judgment. If a loan sounds too good to be true, it probably is.

Always ask specifically if credit insurance is required as a condition of the loan. If the added security of credit insurance is desired, shop around for the best rates. Keep careful records of all payments, including billing statements and canceled checks. Challenge any inaccurate charges; many companies hope that borrowers will simply not be bothered.

Hire contractors only after checking their references, and get more than one estimate for any job.
Borrowers who are financially inexperienced should consider consulting with an accountant or an attorney before signing a loan.

Article Source: http://www.tips.com.my

Poor Credit Home Equity Loan Tips - How To Find The Best Home Equity Loan

Home equity loans are perfect for bad credit individuals who cannot get approved for a personal bank loan. There are several advantages and disadvantages to obtaining a home equity loan. These loans gain a lot of attention because they are easy to qualify for. On the flip side, home equity loans are taken out against your property. Thus, you run the risk of losing your home if you are unable to repay the loan.

Advantages of Applying for a Home Equity Loan
The advantages of home equity loans are numerous. While these loans carry interest rates higher than first mortgages, the rate is noticeably lower than most credit cards. Instead of making a huge purchase using a credit card, homeowners may benefit by applying for a small home equity loan.

The loan terms for a home equity loan are shorter than first mortgages. Typical loan terms are five to fifteen years. On the other hand, if you were to use a credit card, it may take you many years to payoff a small balance. Home equity loans are perfect for emergencies and huge expenses. These may include home improvement projects, debt consolidation, college tuition, wedding expenses, or vacation.

Home Equity Loan Dangers
Before applying and accepting a home equity loan offer, it is essential to carefully weigh your finances and discern whether you can afford an additional monthly payment. In most cases, homeowners use the funds acquired from a home equity loan to payoff high interest credit card balances and other consumer debts. In this instance, homeowners may save money because the home equity loan payment is much lower than previous debt payments. Be careful if you are obtaining a home equity loan for another purpose, thus creating an entirely new debt.

How to Choose the Best Home Equity Loan
When selecting a home equity loan and lender, homebuyers must shop around. Money sources include traditional mortgage companies, banks, and credit unions. These lenders offer prime rates, thus they prefer to work with good credit applicants. If you have bad credit, a mortgage broker is your best alternative.

Mortgage brokers have access to various lenders that offer sub prime loans. These loans are geared specifically toward applicants with a low credit score or no credit history. By submitting an application through a local or online broker site, your application will be reviewed, and you will receive quotes from the lenders.

Before choosing a home equity loan package, homeowners should compare all quotes received. The mortgage loan interest rate offered is important. A low rate mortgage will lower your monthly payments, whereas a higher rate results in higher payments. To guarantee a low rate, homebuyers should attempt to boost their credit score before applying for a loan.

Article Source: http://www.tips.com.my

BUYING TIPS (Tips for Singaporean)

Location
You have to first determine where's the most likely location for you and your family to live at, by taking into consideration several important factors such as distance from working place, schools, kindergartens and places your family visits frequently, accessibility, lifestyle, etc.

Type & Size
What is the type and size of house do you need? You have to plan for the next few years, say at least 3~5 years. Ask yourself whether there will be any addition (due to new born or moving-in) or any reduction (due to moving-out) of your household members in the near future. How many bedrooms do you need? Where is the area within the house that your family would likely to spend most the time?

Budget
After determining the location & size of your future house, you need to start financial planning by looking into your own financial status - monthly household saving, asset, CPF ordinary account balance, other financial commitments, etc. You can source around just by talking to the banks for the best mortgage packages in terms of interest rate, loan tenure, early redemption penalty, bank charges, etc. Before you get on the frenzies of sourcing for your mortgage loan, it's best to check the local regulation on bank financing.

Amenities
Are there any amenities like shops, eating places, banks, market, school, transport, etc. within walking distances?

House Viewing
Don't lose track of the numerous properties you may view. During viewing, try to note down the address, asking price, floor area, orientation and add in your comments too. Here is what you should look out for when viewing a property:
(1) Water seepage. Signs of water seepage like peeling paint work, damp patches or discoloration;
(2) Wall cracks. Crack lines and spalling concrete on walls, pillars and ceiling;
(3) Layout. Odd shape rooms may mean that you will have problem to fit in your existing furniture.
(4) Condition of property. Renovated and well maintained property will save you from incurring extra renovation cost.
(5) Noise. If you need lots of peace and quiet, try to visit the property at different times of the day to identify and gauge the potential sources of noise nearby.

Making Decision
Always keep your cool and avoid rush decision upon finding the property that suits you best. However, you have to decide soon; otherwise somebody eyeing the same property may deprive you of your dream home!

Keep an Open Mind
Always bear in mind that, there is no such thing as 100% perfect house! Always keep an open mind and be prepared to have some flexibility with your expectation.

Credit to : http://www.geocities.com/singaporeagent/buyingtips.html

Useful Tips on Housing Loan (Tips for Singaporean)

Home Loans (or what is typically known as Mortgages in other countries)

What are Home Loans?
Mortgages are secured loans. Your property is the collateral in this loan transaction. These loans are normally used to finance purchase of HDB flat and private residential property. In Singapore, financial institutions can lend up to 90% of the value of the property, inclusive of CPF contributions, for owner occupied property. The balance of 10%, 5% must be paid in cash and 5% can be in CPF. Before the loan is approved, the bank will get an independent valuer to value your property. This property value is used to determine your loan amount.

For investment properties, the financing offered may vary from bank to bank.
Financial institutions normally approve loan amounts with instalment repayments that are not more than half of your monthly income. This amount will include any other outstanding instalment repayments such as car loans, and other financial commitments.

Currently, there are loan packages which provide fixed rates of up to a few years while others offer floating rates that are pegged against the bank's board rates.


How do they work?

Interest calculations: Currently, there are two methods of interest rate calculation:
Monthly Rest: The interest calculations are computed on a fixed date each month. If you repay your installment earlier than this date, you do not benefit from any interest savings.
Daily Rest: The interest calculations are computed daily. This provides an incentive for you to pay promptly as any reduction in the outstanding balance results in a reduction in interest charge almost instantly. The advantage of daily rest over monthly rest is therefore a slightly more rapidly declining interest expense.

Bridging loans: Most banks will provide a bridging loan for any mismatch in timing during the process of selling an existing property and buying a new property. This is to tie you over the gap period. However, to qualify for a bridging loan the bank will want assurances that you have sold your existing property. The interest rate for bridging loans is calculated on a daily basis and payable every month. Upon completion of the sale of the property, the bridging loan has to be repaid in full subject to a maximum period of six months.

Default: Mortgage payments that have been delayed for more than three months will be considered a default and usually the bank will step in and try to resolve the problem for instance, by restructuring your loan repayments for you. The bank would only see forced sale of property as the last resort. In any case if you plan your finances properly, forced sale of property is unlikely to happen.

How do I find the best deal?
When shopping for the right mortgage loan, keep these tips in mind:

Match duration: Check the maximum loan term that you can get. The normal loan term is 30 to 35 years, or up to when you are 65 years old, whichever is lower.

Monthly payment projections: Compare the monthly repayment (based on different interest rate scenarios) from various providers to see if you are comfortable with the amount.

Interest rate Comparison: Check to see if the bank offers fixed rate loans and how long the fixed rate period will be, especially if you anticipate interest rates going up.

Fees: Check to see if the bank charges a processing fee, pre-payment fee, or third-party fee (such as a legal fee, valuation fee or insurance premium)

Extras: Check to see if the bank gives free fire insurance and free valuation on your property. Banks may also give legal subsidies.

Credit to : http://www.housingloansg.com/housing.htm#1

Home Loan Frequently Asked Questions (Tips by Bank Negara Malaysia)

How much can I afford?

This depends on your income and other financial obligations. As a rule of thumb, most house buyers buy houses that cost 1.5 and 2.5 times their annual income. For example a house buyer earning RM40,000 a year would buy a house between RM60,000 and RM100,000. Furthermore, the monthly loan repayment should not exceed about 1/3 of your gross monthly income. In assessing your repayment capability, the financial institution would also take into account your other debt repayments such as car loan, personal loan and credit cards.

How much can I borrow?
This will depend on the value of your property, your income and your repayment capability. Margin of financing can go as high as 95% (inclusive of MRTA). The higher the margin, the higher you will have to pay per instalment. Also, at a given rate, a shorter tenure will require you to pay higher instalment.

How long does it take to process a loan?
It usually takes about one to two weeks for your loan application to be approved from the time you supply full documentation. You should ask the financial institution for the checklist of documents required for the application to avoid any delay.

What is the difference between conventional financing and Islamic financing?
Under conventional financing, your outstanding loan consists of principal plus the interest charged on you. The interest is actually the financial institution's cost in obtaining the funds. Islamic financing works on the concept of buying and selling where the financial institution purchases the property and subsequently sells it to you above the purchase price.

Why do I need a valuation?
A valuation is required if you are buying a completed property. The financial institution requires a valuation to ascertain whether the property provides sufficient security for the loan given. It also provides an indication that the property is worth what you are paying for.

Do I need to appoint a lawyer? Can I choose my own lawyer?
Yes. You need to appoint a lawyer to draw up your loan documentation. Normally, the financial institution will provide a panel of lawyers who are familiar with their documentation requirements for you to choose from. If you prefer to engage your own lawyer, you should discuss this with your financial institution.

Who pays for the legal fees?
Generally, legal fees are borne by the buyer. However, certain developers and financial institutions may offer to pay the legal fees on the legal documentation as part of their marketing package. In addition, some financial institutions also extend financing for the loan documentation fees.

What if I run into financial difficulties and cannot meet my loan repayments?
If this happens, you should contact your financial institution to discuss a reasonable repayment program, which could include extending the tenure of the loan.

Can I pay off my loan in full earlier than the agreed loan tenure?
Normally there will be penalty charges for early loan settlement. Depending on the financial institution, penalty charges will range between 2-5% of the outstanding amount. The charges that are made will depend on the type of product you have chosen and when you decide to redeem your loan. Note that in some loan packages, there are certain minimum periods you need to observe before full settlement is allowed.

Is there any waiver of penalty fees for early loan settlement?
Any waiver of penalty fee is strictly at the discretion of the financial institution.

Why does my outstanding loan remain high at the initial stage despite the repayments made?
During the early years of the loan, a significant amount of your repayments will go towards the payment of interest. So if you make partial repayments to repay the principal sum outstanding, you make substantial savings in your interest payments and thus shorten your loan tenure.

Can I make extra payments other than the monthly contractual repayments?
This depends on the terms and conditions stated in your loan agreement. By paying in extra money each month or making an extra payment at the end of the year, you can speed up the process of paying off the loan. When you pay extra money, be sure to indicate that the excess payment is to be applied to the principal. However, if you make a lump sum payment or partial repayments to your principal loan, you must give notice to your financial institution. The notice period ranges from 1 to 3 months.

Do I need a guarantor for a loan facility?
This is at the financial institution's discretion and depends on the credit standing of the borrower.

Does the financial institution have the right to charge my loan account for any miscellaneous charges incurred by them such as late payment charges, legal costs, insurance, etc?
The financial institution's power to impose charges on your account is normally indicated in the Terms and Conditions of the loan.

How long is the grace period for payment of my monthly instalment/interest?
Generally, the financial institution gives a grace period of 7-14 days for you to repay your instalment payment. Any payment received after the grace period will be subjected to late payment charges.

When does the financial institution release the loan to the seller/developer?
For houses under construction, the financial institution will release the progressive payment to the developer based on the claim made upon completion of each construction stage as certified by the Architect's Certificate. For completed properties, the loan will be released upon completion of legal documentation or when all relevant approvals, such as the approval of the state government have been obtained.

Can I purchase a house under joint names and apply for the housing loan only under my name?
The financial institution will consider such applications on the merits of each case, under the following circumstances:
The co-owners are related as husband and wife, and one party is not working and the other party is solely responsible for the loan
The co-owners are related as father/mother and children, the parents are old and not working and the children will be responsible for the loan
However, the above is at the financial institution's discretion and they may also consider other circumstances.

If the developer abandons the project, am I still required to service my interest/instalment payments?
Yes. You are still obliged to service your loan based on the loan agreement signed between you and the financial institution. However, since the financial institution has vested interest in the property, you could discuss a repayment plan with your financial institution. You should also report the matter to the Ministry of Housing & Local Government.

What happens when the loan is fully repaid?
When the loan is fully settled, the financial institution through its solicitors, will release its charge on the property. The financial institution (chargor) will uplift his claim on the property and the title to the property will be transferred to you.

What happens in the event of death of a borrower who has not bought insurance?
The deceased's survivor/next of kin can claim through the court the rights of the deceased's property. The person will have an option to either proceed to service the loan or redeem it. However, most financial institutions make it compulsory to insure (MRTA) against such an event.

What can the financial institution do if I do not make repayments?
If you fail to make three consecutive payments, the financial institution will take the necessary actions to recall the loan. In the worst case scenario, the financial institution will foreclose the property and sell it to settle the loan. The borrower would still be liable to pay the difference between the auction price and the loan amount outstanding.

What is the most convenient way to repay my loan?
Financial institutions offer a wide range of services to make banking easier for you. Some of the alternative ways of servicing a loan include:
- Open a savings/current account and arrange for standing instructions with minimal charges (if you maintain deposit and loan accounts with the same bank, the charges may be waived)
- Through an ATM transfer
- Internet Banking
- Telephone banking service
- Deposit your cheque at the deposit machine or send your cheques direct to your financial institution

Should I consider refinancing my loan if I am offered a lower interest rate?
The main consideration in refinancing would be the costs involved. As you are clearly aware, you have incurred a substantial amount to pay for the necessary fees to obtain your first loan. For example, processing fees, legal fees, stamping and transfer fees. Refinancing means you would have to incur the same charges again. Before you decide to refinance, you should ensure that the savings from the lower interest rate is enough to compensate all the costs incurred associated with refinancing, including penalty charges, if any.