MoneyDigest - Personal Finance, Lifestyle, Money Saving Tips

Fixed or Floating Rate, Which is Better For Your Home Loan?

Your home is often the biggest purchase you ever made in your life, however that also means landing yourself the biggest debt you ever had.

Properties in Singapore are expensive – be it HDB flats, excecuive condos, or bungalows. It’s not uncommon to have a million dollar price tag onto it. And often, taking up a mortgage loan would also means being in debt for 25, 30 or even 40 years.

Therefore, you want to be careful in choosing the most cost effective lender with the best mortgage terms.

Lenders usually offer many different types of mortgage packages such as interest-only mortgages, off-set mortgages and more. Understanding the difference between a fixed or floating rate loan and which is better is a major financial decision for home buyers.

Fixed Interest Rate

As the name suggests, the interest rate tags to your mortgage is fixed for a specific period and could span 1, 3 or 5 years before reverting to a floating rate once the term is up. For buyers who are risk adverse and want to reduce uncertainties, fixed interest loan is the way to go ask you don’t subject yourself to the fluctuation in interest rates. The cost to it is you have to pay a premium on top of the existing rate (so that lender can hedge the risk of lending you at fixed term) and when interest rate falls, you still pay the same rate when other borrowers on floating terms pay a lower rate.

Floating Interest Rate

On the other hand, floating interest is revised every month or every 3 months.Your repayment amount would therefore change every month. The rate fluctuates according to the Singapore Interbank Offered Rate (SIBOR), Swap Offer Rate (SOR) or the Internal Board Rate (IBR). SIBOR and SOR are more transparent than the IBR which may change according to the company’s discretion, so make your choices wisely. A floating interest rate is more suitable for astute buyers who are able to accurately assess and predict interest rate movement.

Which one to choose?

It’s never easy to decide which rate to choose as it is akin to selecting the correct stock in a market filled with uncertainties. Interest rate movement is volatile and may go up or down without you being prepared for it.

First, ask yourself if you have the financial means to afford a risk in an interest rate hike. If you are someone who just barely scraped through the monthly repayment, you should not be gambling with the interest rate, albeit a lower initial cost. What you need is certainty, so that you would be able to accurately plan and budget your monthly expenses. You don’t want to go around borrowing money to meet other necessary expenses. A peace of mind has a value in itself.

Conversely, if have lots of spare and liquid cash (now and in the future), you may consider a variable SIBOR if you want to take advantage of the low interest rate environment. If you want some degree of certainty, you can consider taking a longer tenor SIBOR rate of up to 12 months, even though it cost a little more than a 1 or 3 month SIBOR.

It is also important to note its correlation with the US’s fed rate and with interest rate hike looming as early as April 2015, it may be wise to time the commencement of your loan.

If you want to reduce your exposure to the US market, you can also consider DBS’s fixed deposit home rate (FHR) which is calculated from the average of DBS 12-month and 24-month interest rate. The FHR is more stable and is not subjected to constant repricing on the daily market movement but that is not to say that it is completely independent of externalities. It is still considered a board rate which DBS has the discretion to adjust the rate to meet their objectives.

There are also other factors to take note of in deciding the right home loan package. One should also consider if there is any prepayment penalty should you decide to pay off your loan early or refinance it in the future. The duration of the loan should also be taken into consideration when deciding whether to take a fixed or floating rate loan. If you take a longer tenor loan, what you need most is stability.

If you are financial savvy, you may want to keep yourself informed of the supply and demand for funds in the interbank market and how it influences interest rate movement.

Lastly, don’t forget to make Janet Yellen your friend.

Starting A New Family? Here’s 4 Tips

It’s not easy starting a new family. While you might be busy dreaming about the warm and fuzzy moments you’re going to have in the future with your spouse and your children, there are some pressing financial issues you would need to face right now. How are you going to use your money wisely on a daily basis? How are you going to safeguard your family future? Don’t fret, we’ve brought to you a few tips, so you can better manage your family finances

Keep Your New Expenses In Mind

Maybe you’ve thought of getting that new TV you’ve been eyeing for a while. Maybe you’ve saved just the amount of money needed to get that massage chair that’s always been at the back of your head. Well, did you take into account all the new expenses you’re going to have to pay for, now that you’re starting a family?

You’re no longer just earning for two, you’re going to have to provide for three, or more (if you struck the twins or triplets lottery). There’s plenty of child related expenses you’re going to have to take note of, such as baby food, diapers and immunisations. It’s best if you lay out all the expenses you would need to care for your baby, so you know for sure what you’re getting into, and to allow you to better budget for the future.

Set Up A Savings Plan

If you hadn’t already done so, you should set up a savings plan so you can better provide for your child’s future. Savings plans are more easily set up compared to investments or bonds. The basic idea is a simple automatic, monthly deduction of funds which will go into a special account, which can only be accessed once your child reaches a certain age. It might be hard to consistently set aside money on your accord, which is why a savings plan would be great as you don’t even have to think about it once you set it up. The “pain” of having less income per month isn’t felt so strongly this way.

Get Life Insurance and Medical Insurance

You always need to be prepared for the unexpected. Insurance acts as a safety net, so you and your family can be protected should anything happen to any one of you. Medical insurance is important as there are many medical issues which your child or any family might face which would require a hefty bill. The presence of a medical insurance plan would help you cover these expenses should the need arise.

Although many modern families are dual-income families, this does not mean the early demise of you or your spouse would not result in a heavy financial burden on your family. Life insurance helps your family deal with the financial needs that would be definitely be harder to attend to with the absence of you or your spouse.

Teach Your Child Good Financial Habits

Financial habits are ingrained from a young age, so make sure your child adopts the right habits that will put him in good stead for a financially stable future. Managing family finances is a team effort which involves every single member of the family, including your children. Little things such as not buying toys they don’t need, turning off the lights, and putting aside a small sum of money each day help your family make better use of your finances.

How to check if your savings are safe

When making an investment, one wants it naturally to be safe. Most investors make their moves only with secure projects that seem unshakable. Some even prefer investments that potentially generate less but are secure than investing in a something that is shaky but could be highly profitable in good circumstances. Surely there are investments, which are stable and generate a favourable income. However, as the international market grows increasingly interconnected, more and more investments and business areas can be effected by daily fluctuations and financial breakdowns. There is one question that rises – how can one be sure that one’s investments are safe?

When the international housing bubble erupted, plenty of people lost their money. However, many more questioned whether their investments were safe or were as well danger. These questions aren’t easy to answer, as obviously each area of investment is different. However, there are a few things to be kept in mind. First of all, the location of your investment is key. It can depend on the country whether your investment is protected or not. For example, if you have savings in the UK, you are covered up to £ 85.000. In case your bank goes bankrupt or fails, your savings are covered up that amount of money. This is however not straight forward, as not all banks in a country are regulated by the same. If you have obtained an account at a foreign bank, you may want to check whether your account is also regulated in your country. Foreign banks may be subject to the controls and regulations of the country of origin.

Although banks have created protections for the accounts of their costumers, it doesn’t mean that each account is safe. In most cases one has a certain protection sum at one particular bank, not for each account at the same bank. If you have a larger amount of money deposited within several different accounts at one bank, it is very likely that one is only protected for a total amount. If one demands better security for the funds, one should shift the savings to different banks. Having one’s savings distributed among the accounts of different banks, one feels surely safer and less paranoid, especially if one fears the next global economic breakdown coming soon.

Having understood these protections schemes and knowing where your money and investments are located, one has taken the very first step to save one’s earnings. For obvious reason, different countries and banks have also varying protection programmes and regulations. Having savings distributed among several accounts, it allows you to freely move the money when needed. In the case of an international crisis or any similar event, the accounts in the various countries are differently affected. This provides the chance to move the funds as desired.

However, one should also know which banks are vulnerable and which aren’t. Keeping one’s funds within the FSCS, the Financial Services Compensation Scheme, one can provide further protection and security. Furthermore, it is important to know who owns the banks in which you have deposited your money. Your bank might have been bought or is owned by another superior bank that could be more vulnerable. Therefore, one should be aware of who owns what bank. Changing owners within the banking system isn’t an uncommon procedure and can sometimes happen faster than one tends to believe. In case you are for some reason not able to distribute your money among different banks, you should consider a joint bank account with your partner, as those are usually covered to higher amount. As the amount can vary though, you should check for the details with your bank.

Many people prefer to keep their money in an offshore saving account, as the interest rates are there significantly higher as with normal banks. Considering the collapse of the Icelandic bank Icesave in 2007, one has a very recent example of large amounts of offshore money that can disappear extremely fast. In any case, banks often don’t require the account holder to live in the country in which the account is situated. Therefore, it is advisable to research the country with the personally most favourable conditions. As different countries have varying amounts and limits that are protected, one can choose and customise one’s own saving accounts around the world. Wherever you decide to keep your money the £ 85.000 limit is a good guideline for an account. If this limit seems for some reason implausible, than one should try to separate one’s saving somehow. Although the limit of approximately £ 85.000 cannot be met, any cut and division will be a further protection.

If one is really scared of another collapse like in 2008, then one should really obey to this limit. The reason is that the governments, which mostly have to deal with the consequences, will prefer a bailout than payouts. Therefore, the FSCS compensation scheme protects certain amounts, but nothing beyond that. In most cases, the governments cannot afford that a bank goes bankrupt. It is often cheaper and more convenient than if a failed bank is saved with public tax money – even though this is not understandable to most of the population.

Another alternative is state-owned banks. However, not every country has this kind of luxury. One has often the chance though that one can use a state-owned bank in a country, which one isn’t living in. State-owned banks have however the advantage of being the first one to be rescued in the case of a heavy situation. If one has money abroad with a state-owned bank, one can relax in most cases. Surely not all state-owned banks are the same. For obvious reasons one should choose a democratic country as well as a bank that really is regulated as a state-owned bank according to international standards instead of a few questionable individuals.

Personal savings and investments surely are tricky issues. Although the international market is more vulnerable than ever before, it doesn’t mean one needs to submit one’s savings to luck. The distribution of wealth between several different accounts is often a stable solution.

* (In Singapore, we are protected by the Singapore Deposit Insurance Corporation, or SDIC, of up to S$50,000)

4 Free Transportation Apps in Singapore

Traveling through bus or train is certainly cheaper than owning a car. But, it is not a problem for commuters in Singapore. Singapore is celebrated by its tourists and residents because of its globally efficient public transportation services. If you think this is an exaggeration, you need to experience it yourself.

To further aid your journey, a number of mobile application rose. As you dove into iTunes and Google Play, here are 4 powerful yet Free Transportation Apps in Singapore.

1. SINGAPORE MAPS

Itunes
Google Play

One of the challenges you will encounter if you are traveling in an unfamiliar place is to find out how to get from Point A to your destination. With Singapore Maps, you will know which route to take through bus, car, taxi or MRT. Slow internet is never a problem because you can download and unitize the maps offline!

For someone who is highly reliant on Transportation Apps, this simplistic app is the way to go. Aside from Offline Maps, it also has real-time bus arrival time when you tap the bus stop icon.

Image Credits: William Cho via Flickr

2. SGNEXT BUS

Itunes

SG NextBus, displays the estimated arrival time of public buses (SBS and SMRT) in Singapore. It can not only display the distance of the bus stop from the user but also display a widget that shows the bus arrival time. To start using it, simply tap the bus number to get its expected time of arrival.

3. SMRT BOOK A TAXI

Itunes
Google Play

If you don’t enjoy busy phone lines and long taxi queues, request taxis right on your fingertips. With the SMRT Book a Taxi app, you can book a cab without even saying your locations to a call agent. Although, booking details to be confirmed at your convenience. You may also add frequent pickup addresses through their “Favorites” feature.

Keep in mind that getting a cab during a heavy rain might be hard so it is best to secure a taxi by tapping the app and by queuing at the same time.

4. MYTRANSPORT SINGAPORE

Itunes
Google Play

The Land Transport Authority itself developed an app called MyTransport Singapore, to empower the traveling experiences of the nation. This award winning app, allows you to locate nearby bus stops and get its real-time arrival information, dial taxi booking services, determine your MRT/LRT journey fare, and receive notifications about expressway traffics.

Since the government focuses of improvements, you may report road defects through its Snap & Send feature.

Thus ends the list of efficient travel Apps in Singapore. Best of all? All of these can be downloaded for FREE in both iPhone and Android hand phones!

Best Credit Card For Petrol

When your car ran out of petrol, have you had problems deciding which petrol kiosks to go to enjoy the most savings? With four petroleum companies in Singapore – Exxon-Mobil, Caltex, Shell and Singapore Petroleum Company, you may at times scratch your head and wonder which petrol companies offer the cheapest petrol.

Owning and driving a car in Singapore is expensive, and it pays to find out how to save on your fuel expenses.

Using the right credit card to make your fuel purchase is important, as you could easily shave off up to one fifth of your petrol costs. The savings is huge! Imagine spending $2,000 on a petrol in a year – you could have saved up to $400 in a year!

There are many credit cards for petrol in the market and while some offer instant site and card discount, there are also cards that offer rebates and rewards to sweeten up the deal.

So which is the best card? Let’s find out! (Scroll to the bottom to see summary)

Esso

DBS Black VISA/AMEX Card & DBS Esso Card

If you own the DBS Black Visa or AMEX card, you can enjoy 18% discount off your fuel if you top up your petrol between 7pm – 7am. (4% cash rebates will end on 31 December 2014)

With the Smile rewards, you can redeem $30 worth of fuel for 750 litres of petrol pumped.That works out to be a 2.5% cut to your fuel expenses after taking into account of the 35% bonus Smile points.

And that’s not all – don’t forget you also earn DBS Points for your fuel top-up, at the rate of 1 Points = S$5 spent. That’s 0.31% on top of all the discounts and rebates!

Total effective discount = 20.81% (Until 31 December 2014)

DBS Esso Platinum Card

Besides their Black Card, DBS also carries the Esso Platinum Card in their product suite, which offers up to 19.81% off your petrol. The only difference is you don’t enjoy the 4% promotional card rebates that the Black card offers. It makes up with a 7% card discount which is higher than the 4% of the Black Card. This will be the card to go for if you don’t want to stick to 7pm-7am rule and if DBS don’t extend the promotional 4% rebate for their Black Card.

Total effective discount = 19.81%

OCBC 365

OCBC 365 is next on the list for Esso’s pump. You can enjoy savings of up to 20.80% effective discount which matches up with the DBS Black Card. Unfortunately, good thing don’t last and the cash rebates of 4.3% will end on 31 December 2014 and you will need a minimum charge of $600 with a $80 cap in rebates for a month.

Total effective discount = 20.80% (Until 31 December 2014)

OCBC Plus!

Good news is you can get a higher discount using a OCBC/NTUC PLUS! Card! That’s because you get Link points when you use the PLUS! card and a $300 spend will get you an additional dollar off your groceries at NTUC FairPrice. That is equivalent to an additional discount of 0.33%.

Total effective discount = 21.13%

Citibank Dividend Card & Other Citibank Cards

Citibank Dividend Card matches up with the PLUS! card of 21.13% for Esso station. As long as you meet a min spend of $50 in a transaction, you will qualify for the cash rebates. You will also earn Citi Dollars for your transaction and 1,500 Citi Dollars can be used to exchange a $5 Shell voucher.

Total effective discount = 21.13%

Caltex

UOB Lady Card

With the UOB Lady Card, get up to 20.75% off from your fuel! It offers a relatively higher card discount to make up for a lesser rebates as compared to the first few cards. Caltex also has it’s own loyalty programme – the Thanks! Rewards. 40 Thanks! points is equivalent to a dollar off and if you add this together with the rewards from UOB (UNI$600=$10 SPC voucher), it sums up to an effective discount of 20.75%!

Total effective discount = 20.75%

UOB One Card

Another product from UOB is the UOB One Card which has higher discount than the UOB Lady Card. With an effective discount of 21.54%, it is the best card from UOB for motorists. That’s because besides the usual Smart$ rebate of 1.68%, you are also entitled to the UOB One Rebate of 2.80%. That’s massive even though you don’t qualify for the UNI$ programme.

Total effective discount = 21.54%

All other cards from UOB may get up to 19.07% off from their fuel purchase.

HSBC Premier MasterCard/VISA Infinite/VISA Platinum

HSBC Premier MasterCard, VISA Infinite and VISA Platinum offers a whopping 23.45% discount to your fuel – and that makes it the best credit card for petrol in 2014. (Ends on 31 December 2014 – This post may come a bit late, but we will keep it updated!) However, it comes with a few conditions to be eligible for the full discount. First, to get $4 off your petrol you will need to spend $80 on gross petrol. (Ends 31 Dec 14) That is equivalent to a 5% cut which is easily achievable should you need to top up a full tank on a RON 98. Next, to get the cash rebates of 5%, you are required to charge $800 a month for all 3 months in a quarter. Otherwise you are only eligible for 3% rebate.

Total effective discount = 23.45% (Ends on 31 December 2014)

All other HSBC cards can get up to 15.06%.

Shell

HSBC Premier MasterCard

If you want to refuel at a Shell station, then coincidentally, the HSBC Premier MasterCard tops the list again with a total effective discount of 21.81%. This time round it offers a higher cash rebates of 6% with a min spend of $800 a month for 3 months in a quarter. Unlike in Caltex, you don’t get the $4 off petrol for a $80 pump, but there is a Shell Escape Rewards where you can exchange 600 Escape points for $20 worth of voucher and you get additional 1 point for every $5 charged to your card. For its own card rewards, you can exchange for a $10 voucher for every 2250 points.

Total effective discount = 21.81%

HSBC VISA Infinite and VISA Platinum gets 5% cash rebates so total saving = 20.91% and all other HSBC cards get 16.61%.

OCBC 365 & Citibank Dividend Card

You can also use OCBC 365 Card to enjoy 16.54% or Citibank Dividend Card for 18.43% discount.

SPC

American Express Platinum Credit Card

If there is only SPC in your vicinity and you happen to own an American Express Platinum Card, you can enjoy the highest discount of 21.64% in SPC as compared to other cards. That’s because of a very generous 7% cashback on the financial charge amount and a 5% site discount. You can also get a $20 SPC voucher once you have accumulated 3,900 reward points from AMEX. (2 Reward Points = S$1.60 spent)

Total effective discount = 21.64%

POSB Everyday Card

Who say you need to be a high-income earner to enjoy exclusive discounts? With the POSB Everyday Card, you can get up to 20.10% discount for your SPC fuel.

Total effective discount = 20.10%

UOB Cards

All UOB cards get up to 20.33% off as there is a $3 petrol discount for every $60 gross spend.

Total effective discount = 20.33%

To summarise everything in a table:

Petrol Company	Best Credit Card	Total Effective Discount
Esso	OCBC Plus! VISA & Citibank Dividend Card	21.13%
Caltex	HSBC Premier MasterCard/VISA Infinite/VISA Platinum	23.45%
Shell	HSBC Premier MasterCard	21.81%
SPC	American Express Platinum Credit Card	21.64%

To see the complete list and calculations:

http://www.moneydigest.sg/best-petrol-credit-card/

Esso

Caltex

Shell

SPC

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