Australia residential property market was hot but recent cooling measures have stemmed a prolong rise in prices.
While the price have not collapse, the effects could be devastating.
The main reason is due to the internals. Specifically, the kind of loans that got popular are the interest only lending.
Now, the majority of your Singapore home loans are amortizing debt.
Amortizing debt is a debt that you pay down the principal and interest. At the start, you pay more interest, because the interest is applied on a large loan. At the end you repay more principal because your loan has become small.
As you pay off your principal, you build equity, or you get to own more of your home.
An interest only loan is one where you pay a deposit or down payment. Your subsequent monthly payment is interest only. No principal payment.
The advantage here is that …