Best Home Loan Rates

It’s the amount a bank lends you in order for you to buy a home. Unless you have millions stashed away in the bank, you’re going to have to take a home loan of at least several hundred thousand dollars from the bank to gradually pay off the property. There are official guidelines on the minimum and maximum amount that you can borrow. The amount you borrow is known as the principal amount. Banks charge interest rates on the home loan amount you borrow and the total amount (approved home loan amount + interest rate charged) needs to be repaid in a stipulated number of years, usually over 20 or 30 years.

In Singapore, there are two broad types of home loans – fixed rate home loan and variable rate home loan.

The fixed option means your interest stays constant throughout your lock-in period, which is usually about two to three years. The main advantage is that if banks increase home loan interest rates, you aren’t affected. It’s also better for budgeting as the repayments are fixed for the first few years.

A variable rate home loan is the opposite of the fixed rate option. You get to make the best of the current home loan interest rates should they drop. You can also decide to repay more than the fixed monthly repayment amount without being charged a fee.

You will need the following documents:

NRIC

IRAS My Property Portfolio (if owner-occupied)

Latest Notice of Assessment or 12 months CPF contribution history (Last two years if you are self-employed)

Last three months’ payslips

Latest credit facilities statements (including existing credit cards, car and personal loans)

Credit report from the Credit Bureau that will be obtained by the banks

First, decide if you want to go with a fixed rate or variable rate home loan. Some basic research will give you an indication if the housing loan interest rate in Singapore is more likely to rise or fall. Your banker will also be able to advise you.

The next consideration will be the tenure of the home loan. There are arguments for and against stretching out the repayment period. If you’re the sort who doesn’t want to have a mortgage hanging over your head and hate paying interest over a long period, go for a shorter loan tenure.

However, if you’re savvy with money management and investments, you might want to take a longer loan tenure and a lower monthly repayment. This allows you to invest the extra funds and generate returns that can offset the home loan interest you will pay. The lower monthly repayment also works better for those who do not want to stretch their finances in the short term. General wisdom is to try and get a loan for about 80% of the value of the property to ensure you are not overly burdened with a huge monthly repayment.

Pay attention to the lock-in period too. Banks have a hefty penalty for early repayment. Beware of floating rates that are not pegged to SIBOR or SOR. Banks can unilaterally raise the home loan interest rates for loans that are pegged to the bank’s internal board rates.

Finally, take note of any jump in home loan interest rates after the lock-in period. The best solution is to keep refinancing every few years to continue enjoying the lowest possible home loan interest rates.

You can take up to 30 years for a HDB flat and up to 35 years for a private property. However, banks will consider your age and other factors before approving your loan tenure. For example, some banks prefer not to extend loan tenures past your 65th birthday.

The eligibility criteria differ between HDB loans and bank loans.

HDB Loans:

You must be a Singapore citizen

You must have previously taken only one housing loan from HDB

Gross monthly household income must not exceed $12,000 for families, $18,000 for extended families and $6,000 for singles

Your last property must not have been a private residential property

You must not currently be owning a private residential property

You must not have sold a private residential property in the last 30 months

You must not own more than one market/hawker stall or commercial/industrial property. The one other property must be a business operated by you

You must not have any other source of income if you own a commercial/industrial property

Bank Loans:

You must be at least 21 years old

You must have a minimum annual income of $24,000