It's better to pay a premium than face a huge bill later, says Hong Leong Assurance's CEO
A personal experience of near calamity prompts Mr Kelvin Lim to offer this advice to home owners: Buy a good insurance package to protect your house and its contents against accidents and other risks.
The 38-year-old chief executive of Hong Leong Assurance Singapore was adamant that he was speaking solely as a consumer on this - having witnessed a near disaster.
"One day, my previous maid forgot to pull up the window blinds adjacent to a burning gas stove. A gentle gust of wind caused the blinds to move near the flames and they almost caught fire," Mr Lim recalls.
He still shudders at the thought of what could have gone wrong had no one spotted the incident in time.
Disaster was averted back then, but it made Mr Lim realise that there was no protection for the contents of his house from any kind of risk. The home insurance that is bundled with the company's mortgage package insures only against structural damage and does more to protect the bank than the customer, he pointed out.
It costs a minimal amount to protect your house every month rather than coughing up a much larger sum later. Not doing so is being penny wise, pound foolish.
The father of two fully insured his house, which he upgraded to eight years ago after selling his matrimonial house, his best investment to date.
Being an insurance guy, I prefer the buffer that a property with a lower per sq ft will provide. So, even if the market deteriorates, the risk of a financial loss is minimised. I feel more assured buying a property when I know there is a certain level of "protection buffer" should the market fluctuate.
MR KELVIN LIM, on choosing a property with a lower per sq ft
"As a practical man, I'd rather part with the penny and ensure I do not have to worry about the heavier burdens if they happen," he says.
Q Describe your property.
A It is a 4,200 sq ft semi-detached house in Braddell Road with four bedrooms, a living room, a patio and an outdoor kitchen. I got it for $2.3 million in 2009. It also has a basement, which doubles as a study and entertainment room, and a shared swimming pool outside the main door.
Q Why did you choose this property?
A The house was recommended to us by a family friend who lives in the same area. Based on a per unit price, it cost less that $550 per sq ft, while our existing terrace house in MacPherson was going for $1,395 per sq ft at the time. It was a good deal.
Besides, this house is five minutes from my parents' house in Braddell Road. Our neighbours are awesome, and we love it here.
Q Describe your property-investing strategy.
A My strategy is based on four basic principles: proximity, size, affordability and amenities.
Being near my parents was one of the most important factors. The proximity gives me more family time. It is also not too far from the Central Business District, where my office is located. It is also minutes from the nearest MRT station and foodcourts, and half an hour's drive from the city area.
The home is big enough for our family of four. When my children grow up, they will each have a room of their own. It was also affordable considering the difference in cost compared with my previous home.
Another standard metric for a good property buy is to weigh its cost per sq ft against those available in the neighbourhood. Try to get a property that is below the average.
Being an insurance guy, I prefer the buffer that a property with a lower per sq ft rate will provide. So, even if the market deteriorates, the risk of a financial loss is minimised.
I feel more assured buying a property when I know there is a certain level of "protection buffer" should the market fluctuate.
Q What do you think of the property market now?
A Property has been a popular investment vehicle for most Singaporeans, and it was possible to make a profit in this sector 10 to 15 years ago. But now, you cannot just buy any property and expect to make a profit out of it.
The probability of getting a better price in future is not high. Therefore, most buyers/investors are cautious.
Although the Singapore property market is well managed, it is prudent not to hit the upper limit when it comes to buying property. There are always loans to consider and regulations may change in future. So, it is better not to stretch oneself too thin.
I must also say I am impressed with how the Government has been protecting home owners through regulations. The laws and regulations are the ones that have kept the property market stable.
Q What is your financing strategy?
A For both my properties, I opted for a loan with a bank. I also always have a loan consultant on hand. It is the easiest way to find out about loan packages on the market and how the loan offers compare with one another. This is important as it will determine how much your instalments will cost every month.
For my previous house, I opted for Sibor rates for my mortgage, but the fluctuations were too much. I did not look into refinancing at the time, and a fluctuating Sibor meant I was overpaying by about $1,000 each month for almost a year. The Singapore Interbank Offered Rate (Sibor) is the rate at which banks lend money to one another. Many mortgages here are pegged to Sibor.
The banks have started offering fixed deposit rates, which are popular with consumers. I have opted for a package that charges 1.28 per cent per annum on my outstanding loan of about $1.5 million. I will definitely go for refinancing after the lock-in period. A fixed interest rate affects instalments and can give you peace of mind.
Q Your dream home is...
A My current house is already my dream home. Of course, being a workaholic, I love my home as it is close to town and the CBD area. Coming from a middle-class family, my parents always taught me to plan ahead financially.
Some day, I would love to own a house overlooking gorgeous shorelines with temperate weather all year round. And when I retire, I may leave the house to my kids to start their own families.
My wife and I may downsize and live in relative comfort in a smaller space for financial and mobility purposes.
A version of this article appeared in the print edition of The Sunday Times on August 06, 2017, with the headline 'Insure your home for peace of mind'. Print Edition | Subscribe
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