Friday, August 17, 2012

50-years housing loan

As published in the STforum, 16 Aug 2012:

I DISAGREE with the criticism of 50-year housing loans by National Development Minister Khaw Boon Wan ("50-year home loan a 'gimmick', says Khaw"; Aug 6).
Such loans are merely an alternative commercial possibility.
The offering by United Overseas Bank (UOB) is imaginative.
The bank not only provides a longer loan tenure, but also takes its services to prospective customers' doorsteps, that is, the sales and site offices, offering them the convenience of assessing their credit standing and the chances of loan approval.
Besides, the extended tenure frees up more cash for the buyer, which could come in handy.
There is no need for government intervention as some critics have urged, because the offer is a commercial decision and involves no coercion.
If buyers find 50-year mortgages unattractive, the offering will remain on the shelf.
So hats off to UOB for daring to be different.

My original:

Is there anything wrong to offer 50 years mortgages? Absolutely not; it is just another alternative commercial possibility..

Such moves by UOB Group (UOB) are creative and a 'first mover' in loans structure and origination. UOB not only provides a longer tenured loan but also brings their services to their prospects' doorstep, that is, the sales & site offices. 

Prospective clients have a chance to assess their credit standing and the success probability of their desired loan. Besides, the extended tenure, if chosen, frees more cashflow which could come in useful.  

Some have voiced concerns over the longer tenure and thought it was irresponsible for the bank to come out with such a scheme. Others even exhort the government to intervene to stop such loans. 

Please spare for a moment to think! This is a commercial decision between willing buyer (borrower) and willing seller (lender). Why must the government get involve? If the terms are attractive, viable and acceptable, the borrower will bite, otherwise there will be no takers; it will be nothing but remains an alternative.

Singapore is already 47 years old and it is overdue for all to be matured instead of expecting the government to nanny them from cradle to grave. If you do not like the tenure, terms and conditions of the loan, you have every right to stay away from it.  The government need not tell you so.

As for UOB, it's an added feather in the cap to 'dare to be different'.

1 comment:

David from said...

Generally, the shorter the term of a mortgage, the more money you can save on interest. The 50-year housing loan, however, can be a great alternative for borrowers who don't qualify under conventional guidelines as well as for areas of high housing costs. Before you decide on, it's a good idea to seek advice from a financial professional to see if such loan is right for you.