There are 5 ways you can lower your home loan interest rates.
1. Refinance your mortgage
If you are currently paying high interest rates, the first thing you should do is refinance your mortgage. Especially if your lock-in period with your current bank is about to expire or has expired. In Singapore, current loan rates are lower than the inflation rates; hence having more loans is actually advantageous to the Borrower. By large, mortgages are the cheapest means of financing available as compared to personal loans and other types of loan.
You can use online tools like the MoneySmart Refinancing Wizard to compare your current rates with the latest offerings from banks.
2. Interest-offset mortgage
Interest-offset mortgages allow you to earn interest is (albeit only a certain fixed portion, usually 2/3 of the deposit amount) on your loan deposit to help offset the interest on the mortgage. The remaining of the deposit earns a lower rate. If you have a significant amount of cash in banks that earn lower deposit rates, you may want to consider an interest-offset mortgage. You can contact a SmartLoans mortgage specialist to find out which banks offer interest-offset mortgages.
3. Interest-only mortgage
This is where your monthly repayments cover only the interest portion. The principal repayments are made only at the end of the loan term. Usually, this option applies if you intend to refinance your loan at the end of the loan term. Some Singapore banks offer this option from time to time.
4. Loan to Value (LTV)
A percentage figure indicating the size of the housing loan on a property in relation to its value. For example, a house worth S$500 000 with a mortgage of S$400 000 would have a loan to value of 80%. Most banks have better housing loan deals for LTV 80% and below. The maximum LTV that lenders can legally go to in Singapore is 80%.
5. Loan Quantum
The loan amount that you borrow from a bank is known as the Loan Quantum, which can be up to 80% of the property price. Sometimes banks may lower your interest rates if your loan quantum is lower as it is less risky for them.
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Tags: Home Loans