Most Singaporeans long to settle their family in a place they can call home. However, acquiring a HDB flat or a private property is an investment that requires thousands of dollars.
Luckily, banks in Singapore provide several home loans. But which bank housing loan is best for you?
When choosing a loan for your home, there are several factors you should consider to get the best deal.
Our guide will tell you how to get a housing loan in Singapore, the options available, and how to compare them and choose the best loan.
You will also know which bank offers what you need to secure a home for your family.
How To Get A Bank Home Loan
Getting the best home loan in Singapore is a process. You can get the ball rolling by doing the following first:
Calculate Your Maximum Loan Amount
How much can you qualify from a bank? Your maximum loan amount depends on the debts you currently owe lenders.
Banks use the Mortgage Servicing Ratio (MSR) and the Total Debt Servicing Ratio (TDSR) to determine the amount they can lend you. You can use a TDSR calculator to know this amount.
Get The In-Principle Approval (IPA)
After knowing the amount you can borrow from a bank, you can apply for an In-Principle Approval (IPA) if you want a mortgage loan from a bank.
If you prefer a HDB housing loan, you must apply for a HDB Loan Eligibility (HLE) letter.
An IPA or a HLE is a letter from a bank or HDB showing the maximum home loan amount you can borrow.
Apply For A Home Loan
Once you have an IPA, you can proceed with the application process.
You will have 30 days to pay your home’s Option To Purchase (OTP) fee before the letter expires.
Afterward, you will have 21 days to make a downpayment and get your mortgage loan in Singapore approved and submitted before your OTP becomes invalid.
The HLE letter is valid for six months. Once it expires, you have to apply for it again.
Types of Home Loans
You can get a housing loan in Singapore for a private property or HDB flat.
Private properties include executive condominiums (ECs), condominiums, and landed houses. You can also purchase a HDB resale flat, a HDB Sale of Balance Flat (SBF), or a new HDB Build-To-Order (BTO).
In terms of housing loans, you can choose from:
Home Loans For HDB
If you want a HDB flat in Singapore but are short on funds, you can apply for a HDB mortgage loan. To qualify for this loan, you or your spouse must be a Singaporean.
You should not own commercial or private property. Your income also needs to be lower than the maximum household income limit.
As you search for the best deal for a loan to finance your home with, it is critical to check the interest rates.
For HDB, the interest rate is 2.6%., which is 0.1% higher than the current CPF Ordinary Account interest rate.
Home Loans For Private Property
Banks and other financial institutions provide various home loans for private properties. You can choose the best home loan in Singapore by taking your finances and risk appetite into consideration.
Here are some loan packages for private properties:
Building Under Construction (BUC)
If your landed or private property is still being built, it would be wise to take a loan without a lock-in period.
You may have to pay a penalty of 2-5% of your outstanding loan amount if you decide to cancel your home loan or make a prepayment during the lock-in period.
Without a lock-in period, you can refinance your mortgage any time once your home is complete to get a loan at a lower interest rate.
Completed Private Property
If you want to buy a completed private resale property, you can get several options in Singapore from banks.
For example, you can take out a jumbo home loan when buying a very expensive property. This is because banks can provide special interest rates for loans exceeding $1 million.
HDB Loan Vs Bank Loan
When you want to buy a HDB flat in Singapore, you can opt for a HDB loan or bank loan. However, your only option is a bank loan if you want to purchase private property.
Therefore, you need to compare these home loans before approaching a bank. This will depend on your financial status and your risk profile.
If you love taking risks and have a good credit score, you can consider taking any of the banks’ home loans.
This will allow you to refinance your mortgage every few years and enjoy lower interest rates (1.55-1.85%) than those of HDB loans. However, the rate for banks is likely to increase after two to three years.
On the other hand, if you don’t like taking risks, the best home loan in Singapore for you is a HDB loan. This is because the HDB loan interest rate is fixed at 2.6%.
Starting from 30 Sep 2022, the loan-to-value (LTV) for HDB loans decreased from 85% to 80%.
Therefore, when buying a HDB flat, you will have to pay a downpayment of 20%, split into 5% and 15%. On the other hand, you can borrow only up to 75% for bank loans.
Here is a table to help you compare HDB loans and bank home loans better:
| HDB Loan | Bank Loan | |
|---|---|---|
| Interest rate | 2.6% (fixed) | 1.55-1.85% (varies as it will increase after two to three years) |
| Loan-to-value ratio | 80% | 75% |
| Repayment amount | Consistent amount because interest rates are fixed | Varies as interest rate changes after two to three years |
| Downpayment | 15% in CPF and 5% in cash | 20% in CPF and 5% in cash |
| Early payment penalty | No penalty | 1.5% penalty |
| Late payment leniency | More lenient – 7.5% late payment fee per year | Less lenient – $50 late payment fee for every repayment |
Fixed Home Loan Rates Vs Floating Home Loan Rates
As you shop around for the best home loans in Singapore, it is crucial to understand the difference between fixed and floating loan rates.
It will help you to choose the best home loan rates in Singapore.
Fixed Home Loan Interest Rates
When a loan has a fixed interest rate, the rate remains the same during the entire loan tenure. Therefore, the interest rate won’t be affected by market fluctuations.
This is a perfect choice if you have a low risk appetite because you don’t have to worry about changes affecting the financial market.
Besides, it provides consistency and stability when repaying your loan. You can plan your monthly installments because the amount remains specific.
If you get a home loan with a fixed interest rate and a lock-in period, it wouldn’t be subject to market or board rate changes.
However, once the duration is over, the rates change, allowing you to refinance your mortgage for a lower interest rate.
Floating Home Loan Interest Rates
Floating rates or variable rates change depending on market fluctuations.
They depend on the Singapore Overnight Rate Average (SORA), Fixed Deposit Home Rate (FHR), and Board Rate, which changes according to the index.
These loan types are suitable for borrowers with a high risk appetite. When the rates go low, it saves you money. However, you will need to dig deeper into your pockets when the rates are high.
Usually, a bank should inform you 30 days earlier when the interest rates change. This is to allow you to find another option, such as refinancing.
This means you can repay your existing home loan in full or find the best mortgage rates in Singapore from another lender.
The interest rate for the board rate changes depending on market conditions. Fixed deposit rates do not change frequently.
How To Choose The Best Home Mortgage Loan
Selecting the best home loan in Singapore may not be a walk in the park.
This is because the interest rates keep changing and loans vary depending on the market environment.
Also, you have to complete about 10 to 20 documents when applying for this loan type. Therefore, you need to be thoroughly informed to get the best home loans.
You can also work with a mortgage broker to help you through the journey.
So, how can you determine which bank housing loan is best for you? You can consider the:
Interest Rate
Research shows that 80% of home loan shopping decisions depend on interest rates. This is because interest takes up a huge percentage of the cost of a mortgage loan.
Convenience Of Refinancing
How long should you wait before you refinance your housing loan in Singapore?
Usually, most borrowers want to refinance after every two to four years because interest rates have decreased in the recent past. Therefore, loans will be available at a lower rate.
When choosing a home loan, look for a flexible option that can allow you to refinance any time.
Which Bank Has The Best Floating Home Loan?
When getting a home loan, you want to get the best deal in the market. Home loan rates in Singapore vary from one bank to the other.
Therefore, you should compare the rates provided by various lenders to get the best home loan rate. Besides, the loan depends on SORA rates, which keep changing.
So which is the best floating home loan?
If you are buying a private property in Singapore, you can check out the DBS FHR6 loan. Its interest rate is 1.40%+1.75% for the first year and doesn’t have a lock-in period. This is a great deal if you want to refinance your mortgage in a year or two.
The OCBC 3M SORA loan is also a viable option. It has a lower interest rate of 1.60%+0.98% in the first year. However, it comes with a lock-in period of one year.
Here is a table to help you compare more home loan interest rates for various banks in Singapore:
| Bank | Loan Type | Interest Rates (first year) |
|---|---|---|
| DBS | FHR6 | 1.40%+1.75% |
| OCBC | Eco-care home loan (3M SORA) | 1.60%+0.98% |
| Maybank | 3M SORA | 1.60%+0.80% |
| Citibank | 3M SORA | 1.60%+0.78% |
| Standard Chartered | HDB bridging loan (3M SIBOR) | 2.68%+2.00% |
The Best Bank Home Loan For You Is Out There
Do you want to buy a home for your family in Singapore and are wondering which bank housing loan is best? Don’t worry because banks provide several home loans.
If you want to purchase a HDB flat, a HDB loan can be the best alternative, but if you want a private property, you can find several loan packages for such properties.
It is also important to compare home loans to get the best deals in the market. Pay attention to factors such as interest rates and flexibility when you want to refinance.
However, if you do not meet the banks’ eligibility criteria for a home loan, it doesn’t mean you cannot buy a home for your loved ones.
Instead, you can approach a licensed money lender like Credit 21.
Contact our team of loan advisors now or apply for a mortgage loan today. We will help you get a loan with some of the best rates in Singapore.
