Home Loans

How Well Do You Really Know Your Mortgage Agreement?

Hidden fees can make having a mortgage expensive. Here are some fees to be aware of when getting a mortgage.

Most of us skip reading the terms and conditions of our mortgage. However, as housing loans account for More families could face difficulty with home loan payments though overall household debt fell: MAS in Singapore, it's important that we understand how hidden fees can affect our bank accounts. Depending on additional services you want, like early repayment or using a safe deposit box for a spare set of keys, you could end up having to pay additional hundreds on your loan. Below, we've listed some of the most important fees you should be aware of when you have a mortgage.

Average First Year Interest Rates of Home Loans in Singapore 2020

Late Payment Charges

Most mortgage lenders will charge you an additional fee if you fail to make a mortgage payment on time. This is to discourage you from making late payments, and can cost an extra S$80 on the transaction. Even more, you could be fined upwards of 5% in interest on overdue payments. To avoid this, it's a good idea to set up a direct deposit that will take out the payments when you receive them from work.

Early Repayment Fees

If you're part of the lucky few who have saved up enough money to repay your home loan early, you may be charged anywhere from S$100-S$1,000 to do so. Also, banks require their lenders to pay at least S$10,000 so they don't lose out on potential interest. That means if you want to pay off the remaining portion of your home loan, you could be charged additional hundreds to pay it off prior to its scheduled date. Thus, in some cases, like where the fee you pay will amount to more than your interest charges for the remaining loan tenor, it might make more financial sense to hold off on repaying your loan.

Fees to Retrieve Documents

Oftentimes, banks will charge you fees for general services like producing copies of documents. For instance, if you want a retrieved copy of your signed contract from HSBC, you will have to pay S$32 (not including GST). Their valuation reports on your house, on the other hand, are S$50 per report. This means that if you need the documents to take out another loan or rent your property out, you should factor in the additional costs your home loan lender will charge you.

Safe Deposit Box Charges

If you want to store an extra set of keys to your home in a small safe deposit box at your bank, you will have to pay an additional fee. Small storage units are usually rented annually at a cost of S$160-S$321. However, there are more expensive services like Vault 268, which charge S$888 annually to rent a small box. To save on these costs, you may wish to store an extra copy of your home key with a family member.

Cost Comparison for a Small Safe Deposit Box

Cost Comparison for a Small Safe Deposit Box

Charges to Safekeeping the Title Deed

Besides safekeeping an extra pair of keys, some banks will also save the title deed to your house. The primary benefit of safekeeping the title deed is in knowing that your information is secure. However, this can be quite expensive. For example, HSBC charges S$428 for this service. If you are more cost-sensitive, consider buying your own safety deposit box for less than S$100

Returned GIRO Checks

Using direct deposit to make monthly payments on your mortgage is a super convenient way to pay, as you don't have to worry about transferring the money and can budget easier. However, if you were underpaid one month, or there is a delay in transferring the money, you may get a returned GIRO check. Banks will charge you around S$10, so it's best to make sure you have enough money in your account.

Pick the Best Mortgage to Lower Monthly Payments and Additional Fees

Sometimes you may miss your monthly payments or get a bounced GIRO cheque. Or, you may need a property valuation to get a loan to help fund a goal. In any case, you should make sure to compare home loans prior to picking one so you pay the lowest amount possible overall. Try to look beyond the advertised rates, and pay attention to the hidden fees like late payment and document preparation charges. By knowing the fees in advance, you can avoid situations where you may be charged extra on your home mortgage loan.

Anya Wasserman

Anya is a Research Analyst for ValueChampion who focuses on loans and investments in Singapore. Previously, she assisted global consultancies, hedge funds and private equities with primary research at a high-growth fin-tech based in London. A graduate of the University of Oxford and King's College London, Anya is currently interested in applying quantitative research to help consumers make better financial decisions.

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