A DBS mortgage with an advantage

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#1
Sounds risky? I think it is...... Undecided

Business Times - 08 Apr 2011

A DBS mortgage with an advantage


Property loans with link to multiple currency deposits

By SIOW LI SEN

FOREIGN currency punters who are also keen on property may now be able to have their cake and eat it too.

DBS Bank is offering a mortgage linked to multiple currency deposits where the interest earned can be used to offset the home loan.

The bank's DBS Mortgage Advantage, which is the first mortgage loan in Singapore linked to multiple currency deposits, gives customers full flexibility in managing the interest earned, it said yesterday.

Customers can earn interest on up to five currencies - Singapore dollar (SGD), Australian dollar, renminbi (RMB), euro and US dollar - to reduce their net interest expense on mortgage loans above $1.5 million, said DBS.

They can choose to place their deposits in SGD or a combination of SGD and any other four currencies for higher returns, it said.

Currently, foreign banks Citibank, HSBC and Standard Chartered offer a mortgage interest offset product with only one currency, the SGD.

Lui Su Kian, DBS head of deposits and secured lending, said the new mortgage is to cater to the growing affluent in Singapore.

'Property remains a popular investment option for this affluent segment and we are confident our Mortgage Advantage package will meet their portfolio diversification needs,' said Ms Lui.

Investing in a Singapore property has become increasingly popular with both local and foreign buyers. Many are also currency speculators.

A recent HSBC affluent Asian survey found that one in five Singaporeans holds foreign currency deposits.

Singapore was ranked the best real estate investment destination in Asia, in a survey by Urban Land Institute and PricewaterhouseCoopers, 'Emerging Trends In Real Estate Asia Pacific 2011'.

'The decision to offer a multi-currency deposit link mortgage complements the rising interest among the bank's affluent customers in foreign currency deposits such as the RMB,' said Ms Lui.

Since DBS launched RMB products in February, it has acquired over $700 million of RMB deposits, she said.

'DBS Mortgage Advantage is designed to make such foreign currency deposits work harder for our customers. Depending on the customer's deposit balance and selection of currency, they can offset and even gain returns over the loan interest,' she added.

There is no penalty for early redemption of the mortgage loan and no limit on the interest earned from the deposit balance, DBS said. The loan and deposit interests are maintained separately, giving customers the flexibility in applying the interest earned towards other purposes.

DBS Mortgage Advantage is available for completed properties and is pegged to the Singapore Interbank Offer Rate (Sibor).

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#2
This is just an extension of existing interest offset scheme to currencies other than SGD. For people who are already into foreign currency deposit, this allows them to use those deposits to offset the loan interest. If the loan interest is the same as SGD loan interest pegged to SIBOR, then I think it can be attractive.
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#3
Does that mean interests earned will undergo a currency conversion to pay off the loan at the bank terms ?
Why would one want to suffer more coversions where the interest earned should be compounds instead.

Total Cost maybe Interests + Conversion charge + lost compounding effect or lost opportunity in other investment.

Cory

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corylogics.blogspot.com/


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