Singapore Home Loan Comparison: A how-to guide

1. Do you need a new home loan or refinancing?

If you are looking at taking up a new home loan, what is the quantum loan amount do you need? If you need more than 80% loan, Standard Chartered can lend up to 85% while DBS/POSB, UOB and OCBC can lend up to 90% loan (case to case basis).

If you would like to refinance your current home loan, you would need to check if you are still locked in to your current bank. The best option to refinance is 2 or 3 months before your lock-in period expires. This would give you time to send in your cancellation form to your current bank and avoid prepayment penalty charges should you refinance before the lock-in period is over. You should also be aware of the legal fees involved in refinancing when you are crossing over to another bank. Banks usually offer legal fee subsidy of 0.5% (of the loan amount) or up to $2000-$2500 whichever is lower. 

2. What type of rates would you feel most comfortable with?

Choose between fixed rate and floating/variable rate packages.

Fixed rate home loan consists of fixed interest rates that do not fluctuate during the period that you are locked in at. The rates remain the same despite the changes in economy and market conditions. Fixed rate home loans usually have a higher interest rate than floating rate home loans.

Floating rate home loans typically consist of very low interest rates and, in Singapore, usually pegged to SIBOR (Singapore Inter Bank Offset Rate). You will have to keep track on the market conditions as well as SIBOR or SOR (Swap Offer Rate) when taking up a floating/variable rate package. Floating rates fluctuate according to the market condition but in this competitive market, banks are offering very low interest rates for floating rate packages to entice home buyers. A floating/variable rate package would be ideal if you are buying the property as investment or have the intention to refinance your mortgage in the future as there is usually no lock-in period. 

3. Decide on a package with or without a lock-in period

For example, if you would like to sell your property in less than 2 years’ time, you might want to consider a package that does not require a long duration of lock-in period or none at all. Another reason for choosing a package without lock-in period would be if you intend to refinance within the next few years. 

4. Compare the interest rates between the packages that you are keen on

Typically, buyers would choose a package with the lowest interest rate. Do check if the package consists of fixed rates or floating rates. Floating rate packages without SIBOR or SOR would subject to change according to the bank board/prime rate (their rates could be fluctuating) and you would only be informed of the increase/decrease in rates a month in advance.