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DBS Home Loan vs OCBC Home Loan vs UOB Home Loan – Which Local Bank Is Best?

dbs vs ocbc vs uob home loan

Clara Lim

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When the time comes to buy a home, most Singaporeans go straight for the HDB loan as if on autopilot. It’s only when we’re ineligible for it that we realise that we can take up a DBS home loan, OCBC home loan or UOB home loan for lower interest rates. Wah, rebel sia.

Singapore might fancy itself the financial hub of Southeast Asia… but the truth is, most Singaporeans’ exposure to banks are limited to the big 3 local banks. The competition between them is fierce, but does any one of them have an edge over the rest?

 

DBS home loan vs OCBC home loan vs UOB home loan packages

Let’s take a quick look at the cheapest home loan packages offered by DBS, OCBC and UOB at the moment (valid as of 13 Aug 2018). These are split into built and unbuilt properties as banks offer different rates and packages for them.

Property type BTO or private property under construction HDB resale or completed private property
DBS home loan FHR 8 + 1.4% (i.e. 1.6%) FHR 8 + 1.55% (i.e. 1.75%)
OCBC home loan Year 1 & 2: MRP + 0.05% (i.e. 1.55%)

Year 3: MRP + 0.2% (i.e. 1.7%)

Subsequent: MRP + 0.3% (i.e. 1.8%)

Year 1: 3M SIBOR + 0.1% (i.e. 1.72%)

Year 2: 3M SIBOR + 0.2% (i.e. 1.82%)

Year 3: 3M SIBOR + 0.3% (i.e. 1.92%)

Subsequent: 3M SIBOR + 0.5% (i.e. 2.12%)

UOB home loan Year 1 & 2: MR + 0.7% (i.e. 1.55%)

Subsequent: MR + 0.85% (i.e. 1.7%)

MR + 0.9% (i.e. 1.75%)

Because we’re looking at the cheapest home loans, we’ve selected floating interest rate packages, which are pegged to moving benchmarks (e.g. “FHR 8” or “MRP” or “SIBOR”). There are also fixed rate packages where the interest doesn’t move for the first couple of years, but they’re generally more expensive.

When trying to assess a floating rate home loan, you need to understand two main components of the package.

First, what is the benchmark that the interest rate is based on? You should understand what exactly the acronym refers to, how transparent is it and whether it’s likely to be volatile.

Second, look at how the interest rate is structured. Is the formula the same each year (like DBS home loans) or does the interest creep up every year (like the OCBC home loans)?

You’re likely to be repaying your home loan for a good number of years, so make sure that the rate past the first few years is something you can live with as well.

 

DBS home loans Singapore – lowest interest rates 2018

Property type BTO/BUC Completed property Completed property
Type of loan Floating rate (FD-linked) Floating rate (FD-linked) 2-year fixed rate
Lock-in period 2 years 2 years
Benchmark rate FHR 8 (DBS’s 8-month fixed deposit rate), currently 0.2% FHR 8 (DBS’s 8-month fixed deposit rate), currently 0.2% FHR 8 (DBS’s 8-month fixed deposit rate), currently 0.2%
Year 1 interest rate FHR 8 + 1.4% (i.e. 1.6%) FHR 8 + 1.55% (i.e. 1.75%) 1.95%
Year 2 interest rate FHR 8 + 1.4% FHR 8 + 1.55% 1.95%
Year 3 interest rate FHR 8 + 1.4% FHR 8 + 1.55% FHR 8 + 1.95% (i.e. 2.15%)
Interest rate thereafter FHR 8 + 1.4% FHR 8 + 1.55% FHR 8 + 1.95%
Partial repayment penalty 1.5% 1.5%
Full redemption penalty 1.5% 1.5%
Cancellation fees 1.5% 1.5% 1.5%
Minimum loan amount $100,000 $100,000 $100,000

Given the long queues at DBS ATMs in today’s cashless world, it’s hardly surprising that DBS home loans are a top choice for many Singaporeans.

DBS floating rate home loans have interest rates that are linked to their own fixed deposit rates. In the past, we thought that FD-linked interest rates could be safer than board rates. Where got bank anyhow increase fixed deposit rates for no reason, right?

Sadly, that’s no longer true – there are no guarantees in banking. However, the one consolation is that the formula for interest rates is the same every year. Of course, that’s only going to be of use if DBS can maintain its fixed deposit rates.

Those financing built properties can opt for DBS’s fixed rate home loan package where the interest rate is 1.95% for 2 years. But this is higher than what the floating rate package is offering (1.75%), and you’ll probably want to refinance at the end of Year 2.

With DBS, look out for full/partial redemption penalties as they don’t offer a waiver. If you think you might sell off your home while still servicing the loan, this is an added cost to bear in mind.

 

OCBC home loans Singapore – lowest interest rates 2018

Property type BTO/BUC Completed property Completed property
Type of loan Floating rate (board rate) Floating rate (SIBOR-linked) 2-year fixed rate
Lock-in period 2 years 2 years
Benchmark rate MRP (board rate), currently 1.5% 3 month SIBOR, currently 1.62% MRP (board rate), currently 1.5%
Year 1 interest rate MRP + 0.05% (i.e. 1.55%) 3M SIBOR + 0.1% (i.e. 1.72%) 2.18%
Year 2 interest rate MRP + 0.05% 3M SIBOR + 0.2% (i.e. 1.82%) 2.18%
Year 3 interest rate MRP + 0.2% (i.e. 1.7%) 3M SIBOR + 0.3% (i.e. 1.92%) MRP + 0.68% (ie 2.18%)
Interest rate thereafter MRP + 0.3% (i.e. 1.8%) 3M SIBOR + 0.5% (i.e. 2.12%) MRP + 0.75%
Partial repayment penalty 1.5% (waived if outstanding loan is min. 50% of original loan) 1.5%
Full redemption penalty 1.5% 1.5%
Cancellation fees 1.5% 1.5% 1.5%
Minimum loan amount $100,000 $100,000 $100,000

After DBS, OCBC home loans are the next most popular choice for Singaporeans.

Some of OCBC’s floating home loan rates are pegged to MRP (Mortgage Rate Plus), which is a board rate. Board rates are set by the bank and are not transparent to the consumer. If you do take a loan pegged to the board rate, you need to be prepared to jump ship if an increase happens. And you’d best hope it doesn’t happen during the lock-in period… or you’re screwed.

OCBC’s floating package for completed properties is linked to SIBOR (Singapore Interbank Offered Rates) instead of MRP. This is an industry-wide and transparent rate, which sounds reassuring. But actually, SIBOR can be quite volatile, especially when there’s global economic instability. You’ll need to buffer for that month-to-month fluctuation when planning your cash flow.

Also, note that OCBC home loan interest rates tend to creep up after the first year or two. In the case of the SIBOR-linked package, you can see how the interest rate can grow from a reasonable 1.72% to 2.12% in just 4 years (and that’s assuming SIBOR doesn’t increase!).

Want to flee to the relative safety of a fixed rate home loan? Look elsewhere, because OCBC’s fixed rate home loan package interest rate of 2.18% is hardly worth locking in.

On the positive side, an OCBC home loan can be more lenient than DBS. They offer a partial repayment penalty waiver in some cases, so you might be able to put your 4D winnings towards reducing your loan tenure.

 

UOB home loan Singapore – lowest interest rates 2018

Property type BUC only. No BTO Completed property Completed property
Type of loan Floating rate (board rate) Floating rate (board rate) 2-year fixed rate
Lock-in period 2 years 2 years
Benchmark rate MR (board rate), currently 0.85% MR (board rate), currently 0.85% MR (board rate), currently 0.85%
Year 1 interest rate MR + 0.7% (i.e. 1.55%) MR + 0.9% (i.e. 1.75%) 1.95%
Year 2 interest rate MR + 0.7% MR + 0.9% 1.95%
Year 3 interest rate MR + 0.85% (i.e. 1.7%) MR + 0.9% MR + 1.1% (i.e. 1.95%)
Interest rate thereafter MR + 0.85% MR + 0.9% MR + 1.1%
Partial repayment penalty 1.5% (waived if outstanding loan is min. $80K (HDB) or $200K (private property)) 1.5%
Full redemption penalty 1.5% (waived if you sell the property during lock-in period) 1.5%
Cancellation fees 1.5% 1.5% 1.5%
Minimum loan amount $100,000 $100,000 $100,000

UOB home loans are not as popular as DBS or OCBC home loans, but they are actually not too bad.

The benchmark for UOB home loans is MR (Mortgage Rate), which is again a board rate. As with OCBC’s MRP, this rate is entirely set by the bank, so there’s no way a consumer can predict what might happen to it. All you can do is hope and pray fervently that the rate stays stable throughout your loan tenure.

If you’re planning to finance an uncompleted property with UOB, note that their home loan package interest rate will step up quite a bit in Year 3.

Currently, UOB’s fixed rate home loan package for completed properties is pretty good. The fixed interest rate of 1.95% is on par with that of the DBS fixed rate home loan.

After the 2-year lock-in period, it goes back to MR + 1.1%. If MR doesn’t increase from now till then, it’s not a bad deal as the interest rate will still remain at 1.95%. In case the interest rate becomes unfavourable from Year 3 onwards, you have the option to refinance your home loan and get a better deal elsewhere.

Among the local banks, UOB is probably the most lenient when it comes to penalties. Depending on your scenario, you might be able to get away with partial or full repayment. If you fancy yourself a house flipper or are the kind of person who always wants to upgrade to the latest model, this is certainly a benefit.

 

Conclusion: how do you choose which bank to get a home loan with?

Unless you’re a die-hard fan of DBS and have a tattoo of POSB mascot Smiley the Squirrel on your back, chances are you wouldn’t mind going with any of the 3 local banks. So which do you choose?

Frankly, it’s really hard to say who is best these days, because almost all floating rate home loan packages are just as difficult to predict. Even the once-lauded FHR (fixed deposit-linked rate) is no guarantee of stability. Whether linked to a board rate or SIBOR, a floating rate home loan is only for those with strong constitutions.

Because these rates can give you a heart attack anytime, it’s super duper important to be (a) very savvy about what you’re getting into and (b) know how to refinance.

Ultimate, you might just have to go for the bank that offers you the most flexibility. For example, one that is more generous with free conversions. This is when you’re allowed to switch to another one of their home loan packages, e.g. if the current package interest rate goes up too much for your tastes. It’s a way for them to retain you as a customer.

If you do not have the constitution of an ox, you might like to opt for a fixed rate home loan instead. At rates like 1.95% for the first 2 years, these packages are not that cheap, but they do give you (temporary) peace of mind.

Remember that DBS, UOB and OCBC are not the only banks in Singapore offering home loans. Check out the MoneySmart Home Loan Wizard to find out which bank is offering the best deal for your needs.

 

Related articles

HDB Loan vs Bank Loan – Which Is Better? 5 Things to Know Before You Commit

Best Home Loans Singapore (2018) – Most Affordable Housing Loans Reviewed

How to Refinance Your Home Loan in Singapore & Save Money on Your Mortgage

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Clara Lim

I used to be MoneyDumb. I hung out at H&M every day and thought that a $50 lunch set was a good deal. These days, I spend my time researching the crap out of life and trying to maximise utility on micro-decisions. I'm not sure if that's an improvement.