It was very sad to read in the newspapers today about an elderly Singaporean couple who got thrown out of their home after they gave it to their son as a wedding present. They now live under the staircase of a school!

The couple thought that they could live in the house with their son. He, however, decided to sell the property for RM960,000 to buy another condominium. Lim and his wife were then sent off to live with the daughter.

After a year, the daughter decided that they were no longer welcome and banned them from touching her children.

The couple could not enter the house after their daughter changed the locks to the house. (link)

Is this really what life in developed countries have become? It is a sad day when the money you can obtain from a sale of your property becomes more important than your own parents who gave you that home.

If you’re like most house owners out there, your home is probably being propped up by a hefty mortgage. Banks are clever people and they have built a system where additional payments every month will not help to reduce your loan and interest payments. So, what’s the best way to reduce your mortgage and interest payments?

By prepaying down your mortgage. Read on to understand how it helps you reduce your home loan.

How Prepayments Can Save Mortgage Interest

Prepayments are essentially a lump sum of money that is paid directly into your loan account above the normal monthly installments to offset the principal. When you prepay, your principal amount is reduced and hence, the interest should be reduced correspondingly. Depending on your financial loan terms, you have the option of opting for reduced monthly installments or a reduced tenure as a result of the principal reduction.

Check The Terms Of Your Loan Agreement

However, before you decide to prepay your mortgage, do check your loan agreement to see if there is a clause which prohibits you from making a mortgage prepayment. Most loans will not allow prepayments to be made in the first 5 years of the loan when the interest portion is highest. In some cases, certain loans may not even allow prepayments to be made which works very much against your favor as you have no means of reducing your loan principal amount.

How To Do A Mortgage Prepayment

Before you prepay your loan, ensure that you contact the bank to inform them that you are planning to do a prepayment. Some banks may require at least two to three months notice before the prepayment is made. Be sure to specify that you want the lump sum to be deducted from your loan principal. Without specific instructions, some banks may craftily bank in that amount into your Advanced Payment account instead and you would not have benefitted from the prepayment at all.

Is it wise to prepay your mortgage? Well, it is basically a question of delayed or instant gratification and your personal view on loans. If you believe that the excess money you have now might earn you a better interest than what your mortgage interest rates are, then consider investing it. Otherwise, dumping it into your mortgage will help you be debt-free earlier!

Photo credits

The newspapers today are often full of property launches and tempting properties which promise beautiful facilities, high-tech security features and accessibility to attractions. However, before you excitedly sign on the dotted line, read below for some tips in buying your home or property.

Choosing A Good Location

Property appreciation is  always about location, location, location. Properties in established neighbourhoods, cities and close to good schools often have higher appreciation in the future. However, these properties will also come with a premium attached to them so be prepared to pay a higher price for a good neighbourhood.

Landed Property vs Condominiums

Decide if you would prefer to live in a condominium or landed house. If you like gardening, have pets or want ample space for your children to run around in, a home with some garden might be more preferable than a condo unit. However, if security is a concern, then a gated community or a high-rise unit with security features might be favoured. In KL, new landed properties in prime areas are becoming quite scarce and often the only affordable options available are high-rise condomiunim units.

Beware Of Errant Developers

If you are buying an uncompleted or partially completed property directly from the developer, do some preliminary research on who the developer is. An errant developer may abandon the project halfway, leaving you with a hefty loan and no property. Build your knowledge on the more reputable developers in the market. Again, properties by reputable and high quality developers may come with a slight premium which may be worth paying for to avoid a lot of future problems.

Uncompleted Or Completed Homes

Buying a home from a developer means you get it at the best price available as completed homes prices are often higher by the time they are ready for the reduced risk. Do remember that buying an uncompleted home may expose you to errant developer risk so decide if you would rather pay a premium for a completed or second-hand property or take a minimal risk with an uncompleted property by a more reputable developer.

Ask Questions

If you are attending a sales launch, ask questions. Find out in detail the exact location of the property, the built-up and what is included in the actual property. Often, showhouses or showunits are done up with lots of interior design works and prospective buyers might think that the actual house comes with all those added features. They do not, so do ensure you are clear on the features and specifications of the potential property.

Hopefully, this has provided you with some ideas on what you should be keeping in mind when looking for a suitable home. In the second installment of this series, look out for financing and legal tips to help you own your home with minimal hassle.

Photo credits

To rent or buy my first property? That’s a popular question amongst many newly-weds or those who are planning to move out of the family home.

Should you rent or should you buy? Read on below for pros and cons of both alternatives and which might work out better in the long run.

High Up-Front Costs

Buying a home often involves large up-front costs for the deposit and legal fees which may make purchasing a home too expensive for newly weds who might have just blown a huge amount on their wedding. However, it is also important to remember that renting also has up-front costs (two months rental and a utilities deposit) which you will need still to budget for.

Take Advantage Of Lower Interest Rates

The recent economic crisis which subsequently pushed down interest rates worldwide have made the cost of debt cheaper for new house owners. So there is really no better time than now to take advantage of these low rates to own your own home. Many often cringe at the word debt and are hesitant to owe the bank lots of money, however, do remember that each monthly payment made on your loan installment is equity invested in your own home which will one day be your asset.

Purchasing A Home Offers Stability

Renting a home often places you at the mercy of the landlord and while most rental contracts are valid for a year, the landlord is entitled to take possession of it at any point during the contract, with sufficient notice. Hence, with renting, you can never be sure if you can have the house for a long term period or if you might be required to pack your bags and move again in the near future.

Furnishing Your Home

You are often bound by various terms in a rental property which means no built-ins or any form of furnishing that might destroy the property. Some contracts even require permission before you nail or drill a hole in the wall! If you don’t like rules and have grand interior design plans for your home, renting is definitely not for you!

Rent Now, Buy My Dream Home Later

Many often prefer to rent in the short term until they find their dream home. Not tying up your money in a housing loan means you would have more debt ratio available for a bigger housing loan when you find your dream home. However, having your own property now might provide you with some leverage to upgrade in the future when your current property has appreciated.

Rental vs Buying, Which Is Better?

Ultimately, it is your choice on which you prefer. Rental often benefits in the short term as you save on upfront costs and may have access to properties in prime areas which may not be within your purchasing budget. However, in the long term, purchasing your home may be a better option as monthly rentals may be better put towards owning a home which is an appreciating asset. However, do weigh both options and your plans carefully before you commit to buying or renting your first home!