5 Things to Consider in Choosing Your Home Loan in Singapore

Deciding on a home loan can be a tough decision. Some factors you need to consider are the penalties, subsidies, lock-in periods, loan term, floating interest rates, fixed-rates, and other special features. Don’t be easily fooled by the “best” mortgage shown to you: your home, your rules.

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Keep the following in mind when planning on a home loan in Singapore:

  1. The Loan Package’s Pricing

The banks assess your capability to pay with your financial standing. They determine your ability to pay before giving the loan up to 75%. That is the initial loan offers for first-time buyers. But the final decision will appear after the assessment.

With the latest TDSR regulations, the buyer should not exceed 60% of the total sum of loans for credit cards, car loans, educational loans, and more. The Mortgage Servicing Ratio (MSR) and Total Debt Servicing Ratio (TDSR) will determine your capability to pay for a house mortgage.

  1. The Fixed-Rate and Floating Rate

When you are seeking security and stability, the recommended loan termis the fixed-rate. When the interest rates are currently low, you will pay almost the same amount after a few years. The only disadvantage is that the interest rates for a fixed-rate are higher compared to the floating rate.

With the floating rate, most borrowers believe that interest rates will remain smaller even after some time. However, there would be no guarantee of how much you need to budget for the next months with fluctuating interests.

The changes in the floating rate have a connection with the US interest rates and the system liquidity of Singapore’s banking system. The two significant benchmark rates are linked with the Swap Offer Rate (SOR) and Singapore Interbank Rate (SIBOR).

  1. The Length of Loan Term

The loan term’slimit is up to 65 years old. So, if your age is currently 50 years old, your loan term should be fully paid in a 15-year time.

Mostly, the loan term lasts from 10-35 years. Younger individuals can apply for a home loan with a 25-35-year period.

  1. Penalties, Lock-In Periods, and Subsidies

These three factors are crucial in taking a home loan. You will pay the penalty from approximately 0.75% to 1.5% if you repay the mortgage within the lock-in period. Also, the lock-in period is up to you, considering when you will sell the property or how you view the future interest rates.

Some of the additional subsidies included in your home loan could be fire insurance, valuation, and legal fees.

Ensure the clause and agreements whether the bank will waive the penalty once you sell the house.

  1. Other Extraordinary Features

Banks offer other loan package promotions, such as:

  • Interest offset—you only pay the interest on the difference where deposits at your bank account will go directly as the offset loan amount.
  • Interest-only packages—where you will only pay the interest amount in the specified time.

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