The COVID-19 pandemic has hit us so unexpectedly that many of us are left reeling from the financial devastation of COVID-19. Since for most of us, our house is the biggest purchase we will make in our lives, we’ve decided to compile a list of tips to help readers (and ourselves) to better manage our property. After all, your mortgage is a liability, but your home is an asset.
Whether it’s tightening your budget to save up for a rainy day or paying off outstanding credit card debts to avoid unnecessary interest rate charges, it’s no secret that many of us are worried about Singapore’s impending recession. Cutting back on these expenses is prudent, and will definitely help in easing your immediate financial burden.
Read on to find out how you can be more money savvy in this crucial COVID-19 period.
#1. Refinance to save hundreds on monthly mortgage repayments
In the same vein, reducing your monthly mortgage repayment will go a long way because it’s likely to be the biggest recurring monthly expense you have.
This can be done if you manage to refinance your housing loan to a more attractive mortgage. Here’s an example: Say, after 3 into your mortgage, your interest rate increased to 2.2% p.a., which is currently considered high. With banks charging as low as 1.23% p.a., you could potentially save hundreds of dollars every month. For convenience, you can compare Singapore mortgage rates via PropertyGuru Finance (ranked by interest rate).
#2. Defer home loan and insurance premium payments to ease cash flow
Here’s one that’s particularly helpful for those facing financial hardship (e.g. pay cut, retrenchment, LOA): The Monetary Authority of Singapore (MAS) has worked with banks and insurance companies to offer loan deferment and insurance premium deferment to Singaporeans. Find out more details about MAS’ home loan deferment options and whether you qualify for it.
This is meant to help you cope with your financial obligations without defaulting on them because of your current financial hardship. Hopefully, as our economy starts to reopen, your financial situation will improve and you can then better manage your financial obligations like home loan repayments and insurance premium payments.
#3. Earn extra income by renting out your property
Apart from reducing your expenses, another way to improve your finances to increase your income. You can choose to take on part-time jobs like freelance projects or temporary gigs such as being a COVID-19 swabber.
Alternatively, you can rake in some side income by renting out extra rooms in your property. This is a great way to maximize the earning potential of your existing property without having to sacrifice a great deal on your own way of life.
Just remember, you will need to have met the minimum occupation period (if applicable) before you rent out your room(s). You don’t want to risk breaching HDB’s minimum occupation period rule and end up getting fined or worse, get your HDB flat confiscated.
That’s really not money savvy at all.
#4. Buy property at low prices and await the rebound
Investing in property amidst the COVID-19 situation might sound counterintuitive, and is definitely not for those who are already struggling to make ends meet. However, if you have spare cash and savings and play your cards right, it could actually be a really money savvy move.
At the moment, mortgages have returned to a low interest environment, just like during the Global Financial Crisis in 2009. This means that the long-term cost of owning a property now will be much lower than during “normal” times. In addition, in the near term, property prices may dip further. So far, the price index on non-landed private residential homes has dropped 1.1% since Q4 2019.
This means that right now, you have a better chance of scoring cheaper homes that you can own for less money, and finance with cheaper interest rates.
It’s natural to fret about property prices plummeting, but here’s some reassuring news: According to PropertyGuru’s research, property prices are unlikely to stay low for long. During the last recession, property prices rebounded in the span of a few quarters from the low in Q1 2009.
For the most part, you shouldn’t have to worry too much as long as your property has the right attributes (e.g. near MRT, located at the right estate). As such, you should always do your estate research using PropertyGuru’s AreaInsider guide.
You can also read the PropertyGuru guide on navigating the property market during these strange times.