Length of loan is not the issue: Mah Bow Tan

Perverse Logic!

Length of loan is not the issue: Mah Bow Tan
by Ansley Ng
04:46 AM May 01, 2011

It is not the length of the loan but the percentage of monthly income repayable to the housing loan that matters, said Minister for National Development Mah Bow Tan in response to an Opposition point that paying for a HDB flat on a 30-year loan makes it unaffordable.

The length of the loan varies and is up to the home buyer, Mr Mah said. They are free to take up 30-year loans, or even 25- or 20-year loans, he added.

To ensure that the length of the tenure, the interest rates and loan repayment are within the means of young people to buy their flats, his guidance to the HDB "is usually 30 to 35 per cent (of monthly income)".

For a 30-year loan, the instalment payment is about 25 per cent of monthly income, depending on the type of house, Mr Mah said.

"But if people are not happy with the 30-year loan for whatever reason, they can always take a smaller loan," said Mr Mah, speaking to reporters during a walkabout at the Tampines Round Market yesterday.

Calling it "election rhetoric", Mr Mah said the Opposition always warned people about getting "stuck for 30 years".

But a longer loan actually helps people to pay less, he added.

"Most people who do that, for cash flow reasons (and) never really go the whole 30 years. After 10 years, 15 years, they sell off, and that's it. They make a profit ... keep the profit, and then they use that to upgrade." Ansley Ng

i think what he say makes sense, but completely takes away the fact that a long loan you actuallypay more interest.

but isn't the mantra to make servicing housing mortgage as small a part of your disposable income as possible?

This kind of speech is irresponsible and trying to play away with the issue,
How can the people be happy if they are to carry debt all life long? When he mention sell for a profit and upgrade to a better home, isn't it entering into debt again? It may not matter to rich people but it is an issue for the mass people.

(02-05-2011, 10:30 AM)iff Wrote: This kind of speech is irresponsible and trying to play away with the issue,
How can the people be happy if they are to carry debt all life long? When he mention sell for a profit and upgrade to a better home, isn't it entering into debt again? It may not matter to rich people but it is an issue for the mass people.

Actually 30 year mortgages are common the world over. A house is a major capital investment for most middle class people where ever you are. A 30 year mortgage isn't even the longest tenure you can get for a loan in some parts of the world.

For the average "mass person", the key is to only buy what you can afford and not buy for the sake of hoping to make a gain. For example, buying a executive flat when a 4/5 roomer will do.

It is easier to put the blame on the government. Not that the government has no responsibility over the shortage of new HDB flats in the last few years.
Ultimately, most people will try to leverage as much to get something they want. I suppose, even if the price of HDB is half of the current price, most people will try to get a bigger flat with a maximum housing loan.

The kind of flat, amount of monthly payment and loan period must be taken into consideration together.

I feel the aspiration of the people has not changed that is seeking better life whereas the shortage of flat goes right in the opposite way of having Million Dollar Salary/Bonus at the other end. If we keep comparing with past, and try to justify current dismay situation, why not let Opposition be the government.

Increase in Migrants/Resident at such scale we have, is simply inexcusable not planning for obvious even with Median salary grade professionals. An Average Management will have plan for it. Something is seriously wrong.


Cory

Quote:It is not the length of the loan but the percentage of monthly income repayable to the housing loan that matters, said Minister for National Development Mah Bow Tan

"But if people are not happy with the 30-year loan for whatever reason, they can always take a smaller loan," said Mr Mah

But a longer loan actually helps people to pay less, he added.

This is the kind of statement similar to banks whom advertises upfront benefits like vacation, laptop etc and not about the loan that u need to repay in the end.

I am completely baffled that a minister actually thinks it this way. He sounds like a courts salesman.

Is there any proof that people can get consistent salary increment each year that can significantly offset the interest accumulation for next 30 years?

If I were a resident of tampines grc, voting is a no brainer. We need to get him out: the inventor of BTO & ERP.

let be clear that we are talking about public housing as a basic necessity for the masses, and not so much for capital investment purpose..to me 30 years tenure is way too much..
HDB has lost its focus in providing basic necessity for the people

(02-05-2011, 01:06 PM)mrEngineer Wrote: He sounds like a courts salesman.

Is there any proof that people can get consistent salary increment each year that can significantly offset the interest accumulation for next 30 years?

If I were a resident of tampines grc, voting is a no brainer. We need to get him out: the inventor of BTO & ERP.

Good 1 from Engineer san....he can only con the malay voters...i got a malay friend flat furnished with branded quality furniture, but month end borrow $100 bucks from me to pay PUB's bill....dat Y most of this peop;e retire poor..

If u have deep tot on compounding and focus on it this is a powerful tool to make u rich.....remember compound interest works on both sides...it similar to the Rule of 72..

I also urge the voters from Tampines to vote out MBT...this short arse is harmful to our next generation...trust me.

Just some of my thoughts over this issue,
The gov is supposed to take good care of its people. If it has done a great job, I think people won't really mind if they take a big salary.
Let's compare 10 years ago and now,
a fresh graduate earns $2700 10 years ago, a 4 room at SengKang was about $170K (using my friend's example, he bot from HDB as first time buyer),
now a fresh graduate earns $3000 per month, a 4 room at SengKang costs about $350K,
Apparently the gov is doing worse in terms of performance now,
while how about their reward? That's one reason why people are so unhappy about housing prices and negative sentiments towards gov.