50 year home mortgage loan has just been launched

United Overseas Bank (UOB) has introduced a home loan that now allows the home owner to stretch his home mortgage to 50 years – that’s half a century.
UOB said they introduced this longer loan package as more customers have been asking for it.
The loan is currently applicable to private residential and HDB only. Also, there is a cut-off age but UOB declined to say what it is.
If the property is leasehold, it needs to have at least 35 years left on the lease at the end of the 50-year loan. That is, the property needs to have 85 years or more left on its lease before the owner can apply for this kind of home loan.
Having a longer term will result in a smaller monthly loan instalment and will be of help in the monthly cashflows. However a longer repayment period also means that more interest will be incurred.
By taking on such a long-term loan, it means the home owner will be servicing the loan into his retirement years which means he can’t afford to retire since he needs the cashflows to continue servicing his loan. If a couple, say, marries at 30 years old, it means they will be servicing their housing loan until the age of 80.
Homeowner Edward Ti, 28, said, “I would take a 50-year loan if interest rates are low. I would think that it is more efficient to use the money saved from the monthly mortgages to do something else.”
If a borrower takes out a 50-year loan for $1 million at an interest rate of 1.7 per cent, he would have to pay about $2,475 monthly for his mortgage, compared with $3,548 if the loan ran for 30 years.
Hence, this spells good news for the developers since the high-priced properties especially those at the million-dollar level become more ‘affordable’ due to lower monthly mortgage payments.
It is not known if an even longer-term home loan will be available in the market in future.
In Japan, especially during the bubble years, Japanese banks created a “Two Generation” mortgage loan. That is, the home loan is taken out by 2 generations of people, typically the father and the son. When the father can no longer service the monthly mortgage payments, the son takes over.
Will we start to see some creative banks coming out with “Two Generation” mortgage loan in Singapore soon?
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Author: Gilbert Tan TS

IT expert with more than 20 years experience in Apple, Andriod and Windows PC. Interests include hardware and software, Internet and multimedia. An experienced Real Estate agent, Insurance agent, and a Futures trader.

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