Few essential home loan terms you should know

When it comes to best home loan Singapore, it’s hard to escape from the number of terms that come in front of us which look like completely hard to understand. These are usually lengthy pages of terms and conditions that most of us don’t bother to read through because we are not usually aware of such terms.

Probably, buying a home is one of your biggest life expenses. Understanding the terms will give you a clearer picture of the actual cost of the home loan and help you find out which type of home loan will be best for your own situation.

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Lock-In Period

A set number of years that the borrower is ‘locked-in’ to a loan contract is known as the home loan’s lock-in period. This means that if the borrower makes any changes in the terms of the loan while in the lock-in period, he or she will be penalized.

Repricing/Refinancing

It refers to the transferring of your existing home loan to another bank or financial institution. With the purpose of lowering your monthly loan repayments, refinancing is done by getting a new home loan package with more attractive interest rates. In order to prevent any prepayment penalties, you should aim to refinance your loan after the lock-in period.

Conversely, repricing is same but instead of going to a different bank, you go to the same bank but choose a different loan package with an attractive package.

Approval-In-Principle (AIP)

Based on your credit score and income, Approval-In-Principle (AIP) is the approved home loan amount that the bank agrees to lend you when the time comes.

Keep in mind that an AIP is basically a guarantee, not a loan in itself from the bank that it will extend you a loan.

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