Ever since the idea was thrown into the open in March, most observers felt that it was only a matter of time before mortgage deferment became a reality in Singapore.
The unprecedented step to allow homeowners who meet certain criteria to defer their home loan repayments comes on the back of the most drastic measures the city state boldly took to stall the spread of the coronavirus rampaging through the world right now.
With the countless number of businesses the virus has fatally disrupted, governments all over the world are pulling out all the stops to prevent, or minimize, the trickle effect that can drag their whole economies down the drain.
And since the monthly home mortgage payment is probably the biggest financial commitment that burdens households, allowing badly affected families to delay fulfilling their debt obligations can go a long way towards helping them survive the financial fallout that this outbreak would create.
The hope is that this temporary relief scheme would help alleviate the financial stress that thousands of households might be facing amid the crisis.
However, the lack of standardization of the housing loan deferment means that different homeowners would be on different types of mortgage holidays.
This is because it is left to banks to determine how their own deferment policies would be implemented. So a borrower might not be able to choose how their payment deferments would be structured just because they have read about a particular plan offered by a lender.
As local mortgage expert, Elmer Ho, explains: “What options of deferment are available to each individual borrower really depends on what the lender offers.”
For example, some lenders are opening their doors to this special arrangement to all home loan clientele. While others might only make a specific profile group eligible.
Some might allow a total pause on the repayment schedule and resume it at a later date without any major changes except the maturity date of the facility. This implies that the tenure would run past the original completion date.
Others might only defer principal repayments but continue to demand payments for interest. This means that borrower would have to continue servicing the interest expense, but not required to make principal repayments.
For instance, an original monthly payment of $1,000 might consist of $300 in interest and $700 in principal reduction. Under such plans, the borrower would still be required to make payment for the $300 until the deferment period expires.
There’s even talk that some banks would put a freeze on repayment obligations, but would record all the interest accumulated during the deferment period as deferred interest and add the to the loan principal outstanding.
Then there are those who would accrue the interest.
The methodology in which how different lenders are embracing this is turning out to be quite different in approach.
Mr Lim, a resident in Seng Kang whose self-employment income has been gravely affected in recent months added, “At this point, deferring my property loan payment is not absolutely essential. But if the terms are good, why not?”.
The silver lining to all of these is that the deferment program enables homeowners in Singapore some sort of relief to the sudden financial pressure. And it would not have an adverse impact on their credit records.
Household are also advised to check with their own lenders to find out what exactly are their terms of deferment before applying for them.