Wednesday, August 15, 2012

Get Long Loan? Get Screwed!

Cannot afford means cannot afford WTF. When Mr Ah Beng next door who has monthly household income of $6,000 decided to buy a mass market condo, you also want to keep up with the Bengs since UOB gave this magic own a bigger property than you can afford genie lamp. Why people even consider thinking of taking 50-year loan just to make themselves feel smug and shiok that they can "afford" a damn fucking expensive 99LH condo in Bishan or Toa Payoh? If  people snapped it up because they think it makes monthly installments "affordable", then they should just use a simple online amortisation or mortgage calculator to have a good rough feel of how banks shove it up my ass and yours once we take up a home loan. "Afford" means to me is that you can pay for the home in full and you only take a loan since interest rate is so low now at less than 2%, and the money is spent earning something else in the meantime where there are better returns. OK you get a picture of how of conservative I am.

Simple calculation  - loan of $1 million at 2% fixed, impossible for it to be fixed at 2% but let's play along in this magic genie lamp world, over 50 years. Monthly payment is $2,633.34 and total interest paid at end of 50 years is $580,003. Interest paid is half the loan amount! WTF! Beware of the genie's wishes given to home buyers!

In contrast with $1 million loan at 2% fixed over a standard 30 years tenure, again let's pretend that we live in a nice fluffy world of flowers and low interest rates, the monthly installment of $3,692  is higher but total interest paid to the blood-sucking bank is $329,139 after 30 years! Simple compare and contrast of an oversimplified fixed low interest rate and the result is that the longer you take the loan, the higher the total interest paid! The home is not that cheap after all. Wake the fuck up, my fellow daft Singaporeans who want to afford a home by taking a 50-years loan.

Anyway, some analysts and industry players interviewed said that UOB's loan gimmick is because banks are competing for loans and not because the property market is in trouble. WTF loser explanation. Facepalm. The property market is in trouble and that is why banks want to compete for the shrinking pool of home buyers taking loans. Duh. Anyway, the property agents and developers have a vested interest to give the impression that their industry is still booming and point the fingers at the banks having loan competitions unilaterally instead.

Longer mortgage tenures could have adverse implications
By Linette Lim | Posted: 14 August 2012 2150 hrs

SINGAPORE: Longer mortgage tenures could have adverse implications for the property market, borrowers and banks if it becomes more widespread.

Deputy Prime Minister Tharman Shanmugaratnam gave the assessment in a written reply to Parliament on Monday.

He added that the government will continue to closely monitor the property market.

Stretching a home loan out over 50 years does translate to a lower monthly instalment. But this is just an illusion of affordability.

Mr Tharman said that the borrower ends up paying more interest. The repayment period could also stretch past the retirement age, when the borrower may no longer have a steady income stream.

According to analysts, the higher interest rate on a longer term loan would mean that loan repayment can be easily be 20 per cent more in the long run, compared to taking a 30-year loan.

The government said it will monitor mortgage tenure in the context of how banks structure their mortgage products, as well as banks' underwriting standards.

Still, analysts said the government is wary such loans could fuel speculative buying and undo its efforts to cool the property market.

Alfred Chan, director, Financial Institutions, Fitch Ratings, said: "Had property prices not been where they are, let's say (if) they were to be increasing at a more moderate pace, I think affordability wouldn't be an issue and banks wouldn't need to go out that aggressively to offer 50-year loan tenors."

Analysts added that the move to offer 50-year tenor loans also reflects the stiff competition among banks.

Loan yields in Singapore are at 2 per cent compared to emerging markets like Indonesia, with 6 per cent.

Timothy Kua, director,, said: "I don't think the property market has cooled very significantly. It is still fairly healthy and UOB's 50-year loan tenor is probably more of an inter-bank competitive move to try and win over a bigger chunk of the mortgage market."

The government said its cooling measures in recent years have helped reduce the risk of a sharp escalation in property prices.

Still, it has cause for concern.

Fifty-year tenor loans first appeared six years ago in California, driven by sky-rocketing home prices.

California now has the second-highest foreclosure rate in the United States as of last July. According to reports, its foreclosure rate is one in every 239 households.


  1. I suspects most people who wish to take up such a loan are also those who think they will be able to sell off in first x years and make a profitable killing before they will be tied down in a 50yrs. This is essentially a speculative tactics for some people. Daft but perhaps Desperate.

  2. EXACTLY!! 50-year, 100-year loans are just symptoms and a consequence of a wider problem. (guess what is the problem?)

    banks and individuals are merely reactive players to the game. we should ask then who sets the rules to the game? financial engineering and funny financial products only happen when ppl want to squeeze blood out of stone.

    dun hate the player, hate the game.. (and those who set the rules) is this just one BIG sideshow for the audience once again??

  3. Anonymous 10:14 am - I think so after you pointed it out. They think since it is "affordable" in terms of installments, get the 50 year ball and chain and then sell off the property after 3-5 years depending on private seller stamp duty or HBD MOP factors.

    Anonymous 2:32 pm - There are many games going on. The main game is herd mentality greed and envy in the property market. One shouldn't hate the game either, but learn how to benefit from it. Developers are the ones laughing to the bank. Resale and subsale markets, those I'm not too sure if they are boomtown as developer sales.

  4. I am really getting worried about the state of affairs or should I say financial affairs. The government might call it's policies prudent but if we really have that much reserves why can't we spend more on the people. Instead we are spening more on areas which the benefits or expenditure cannot be verified i.e defence. The recent reports by Kenneth and the Professor Christpher makes me worried. Why do I keep dreaming about Marcos