Thursday, December 8, 2016

Redemption of Home Loan in Singapore

I can still clearly remember when we got our Permanent Resident application approval in September 2004. I was heavily pregnant then with Ira, who was due to come out in two months. When we went to get our Permanent Residency documents and our IC, the first thing in our plans was to look for a flat. And so we did. We were lucky to be able to find one that satisfied most of our requirements, sellers who were willing to meet us somewhere in between, and an agent who was very attentive to our needs. So what's the next step?

Fast forward to four years after we started our first mortgage payment in January 2005, we have gone through several revisions of loan period (shortening it from 30 years to 15 years then to 7 years), making capital repayments (using cash 92% and CPF 8% of the time) in addition to the monthly mortgage payments as and when means were available, and witnessing our mortgage interest rates more than double from 1.15% when we started to 4% in 2 years. We then decided, we wanted to settle the mortgage as soon as possible.

I called the bank to ask for the proper procedure in the redemption of loan. I was informed that we needed the services of a lawyer for this because we will be dealing with legal documents. So I called PKWA, the law firm in charge of processing our papers when we bought our flat but their fee was slightly higher. I scouted for other law firms to get a better / lower fee. 

Then I remembered our property agent and asked if he could refer a law firm to assist us in the redemption of our home loan. Four years after he helped us find our flat he was of service to us again in providing a reliable and more cost-effective legal help.

KS Chia, Gurdeep and Param
490 Lorong 6 Toa Payoh
Biz 3 Lobby 2, #09-18 HDB Hub
Singapore 310490
Tel#: 6254-1611

The firm had better rates than other firms I've called for quotation so we hired their services for the redemption process. Our contact from the law firm informed us about the step by step process and the documents needed for redemption. And so our journey to home loan redemption began.

It took around 3 months for the whole process to be done, so we had to call the bank and the law firm again 3 months before our intended settlement date (when we intend to make the redemption payment). 

Here is the step by step process of loan redemption during that time (in case there are any changes to the process, please consult your lawyers and banks for updates):

1. I called the bank and the law firm 3 months before intended date of redemption. 

> It is good to have a date in mind. It may be something meaningful to you or a day when you are sure your funds will be available.

> In our case, we felt that everything fell into place from the moment we received our PR application approval to the time we found our flat and then to the loan redemption that we thought of setting the date of redemption to December 8, 2008 (which was our monthsary).

2. We waited for the bank's letter informing us of the final loan balance.

> From this letter we knew how much money we needed to prepare to pay up the loan and planned the allocation of resources from which we would be paying the loan from. We used cash to pay 77% of the remaining loan and 23% from CPF Ordinary Account.

3. We also received a letter from the lawyers containing the loan balance (a copy from the bank), CPF HBL3 form (for CPF deductions), HPS form (because HDB flats are insured under HPS - Home Protection Scheme) and warrant to act.

> The forms are pretty straight forward. We just completed everything and mailed out to the lawyers.

4. Fill up the forms given by the law firm and mail it back for processing. These were  forwarded to the bank. 

> We attached a copy of the latest CPF statement for the bank's reference

5.  We received another letter from the lawyers containing a copy of redemption statement from the bank and a tax invoice. 

> The letter specified the date when we were supposed to issue them the cheque based on our settlement date.

6. We issued a cheque to the law firm for thr remaining balance of the loan as per bank records plus lawyer fees. 

> there was the option of mailing the cheque or handing it over personally

7. Upon receipt of the cheque, our lawyers waited for the bank notice. 

> Once the law firm was in possession of the legal documents (HDB flat title) from the bank, we received a call from them for the collection date.

> Take note: the lawyers do not mail the documents so you have to make time to come down to their office to do so. I think that is something worth taking a leave for or spending at least a few hours of one's time, isn't it?

By end of 2008, we were mortgage-free. And by  January 2009, we were already in possession of the legal document for our flat. 

Thank you, God! And thank you, hubby, for working hard to make us debt-free :)

It's still a long way to financial freedom but it's a start. 

So what's the next after this? Fast forward to present, eight years after redemption, there are home improvements and DIY renovation. These activities will keep us busy for the next few months. 

Watch out for snapshots of our (mostly, hubby's) DIY projects at home in 2017.


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