Mortgages occur when a mortgagor pledges their interest — their right to their property — as security / collateral to a mortgagee for a loan.
We know this, yes?
Include terms like:
- amortise (to pay off) over a period of time
- loan amount:
- 80% max of property valuation for HDB loans
- 15 – 75% max of property valuation for bank loans
- principal
- interest
- fixed rate
- flexible rate
- combination of both over the…
- term
- duration of loan
- 15-30 years
Legal mortgage gives mortgagee rights over property when they choose to exercise it.
Equitable mortgage is an agreement related to the deposit of title deeds of the property to secure financing.
Legal mortgage > equitable mortgage. If a purchaser in good faith buys the property without notice of equitable mortgage, they gain legal mortgage.
Priority of payment
When a property is sold:
- All costs of sale
- Mortgage, interests and costs
- Subsequent mortgages and charges
In HDB / CPF-related mortgages:
- All costs of sale
- Mortgage, interests and costs (bank/HDB)
- CPF
- Any charges
Rights
Mortgagor:
- Right of Redemption
- re-transfer the ownership back to me when the debt is paid
- Right to sell the property
- Right to grant lease
Mortgagee, should mortgagor default:
- Possession
- Power of Sale
- notice given to mortgagor
- no payment for three months
- Appointment of a Receiver
- Foreclosure
Types of mortgages
Standard mortgage (capital and interest) means mortgagors pay both interest and principal monthly.
Interest-only mortgage means the full loan principal is paid off at the end of the term.
Fixed rate mortgage allows a lock-in of rates before it becomes a floating rate loan.
Variable rate mortgage means interest rates will fluctuate, to bank’s board rate. What used to be pegged to SIBOR or SOR will soon be replaced with SORA — Singapore Overnight Rate Average.
[extra notes below, we don’t actually need to know this for the exam…
30 June 2023 – SOR will be discontinued
31 Dec 2024 – 1-month and 3-month SIBOR will be discontinued
Switching from SOR and SIBOR to SORA: What you need to know (moneysense.gov.sg)]
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Image of money rolled up and stuck into the ground
to look like it’s coming out by Kris from Pixabay.
