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

best home loans singapore

Peter Lin

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Just bought a property and looking for the best home loans in Singapore? We review the most affordable bank loans of 2018 based on different types of properties – HDB BTO flats, private property and resale flats. Scenarios depicted here are not meant to be a one size fits all calculation, but rather just a common scenario and the rules and loans that apply to it.

We will also take a look at some of the things you need to consider when getting a home loan for each property type, as there are different regulations and details to consider based on what you are buying.

 

Contents:

 

Best Home Loans for Uncompleted Property – HDB BTOs and Private Property (BUC)

Because HDB BTOs and private property that is still under construction has not been completed, banks do not offer fixed rate home loan packages to them. Other than that, rates do not differ greatly between HDB and private property.

Some banks might have a slightly different loan package based on your loan amount, but generally, packages offered are the same.

To show how your home loan impacts your total interest payable, we’ve used a simple scenario of someone buying an HDB BTO flat. Home loan rates are generally similar across different BUC property types but as we mentioned above, this scenario will only take into account floating and fixed deposit linked packages.

best home loans singapore uncompleted properties

 

Example 1: For an HDB BTO, Building under Construction, with a purchase price of $350,000, loan tenure of 25 years

 

Best 6 home loan rates – Floating and Fixed-Deposit Linked (as of 7 March 2018)

Bank Home Loan Package Notes
Standard Chartered Estimated monthly instalment: $1,133

Year 1: 9M FD + 1.30%

Thereafter: 9M FD + 1.30%

9M FD currently @ 0.30%

No Lock-in

No penalty for partial or full prepayment

Cancellation fee applies to undisbursed loan

Documents to be submitted by 28 Mar 2018

Maybank Estimated monthly instalment: $1,139

Year 1: Maybank FDMR36 + 0.22%

Year 2: Maybank FDMR36 + 0.25%

Year 3: Maybank FDMR36 + 0.28%

Thereafter: Maybank FDMR36 + 0.59%

Maybank FDMR36 currently @ 1.40%

No Lock-in

No penalty for partial or full prepayment

Cancellation fee applies for undisbursed loan

No valuation report needed for under construction property

Free change of interest rates package before TOP or 3 months after TOP

Maybank Estimated monthly instalment: $1,139

Year 1: 1.62%

Year 2: 1.65%

Year 3: 1.68%

Thereafter: 1.80%

No Lock-in

No penalty for partial or full prepayment

Cancellation fee applies for undisbursed loan

No valuation report needed for under construction property

Two free conversions applicable

Uses the bank’s Internal Board Rate Singapore Residential Financing Rate of 4% to calculate interest rates

DBS  Estimated monthly instalment: $1,140

Year 1: FHR8 + 1.45%

Thereafter: FHR8 + 1.45%

FHR8 currently @ 0.20%

2-year lock-in

No penalty for partial or full prepayment

Cancellation fee applies for undisbursed loan

Required to buy Mortgage Insurance from bank

OCBC Estimated monthly instalment: $1,146

Year 1: OHR + 0.65%

Year 2: OHR + 0.70%

Year 3: OHR + 0.75%

Year 4: OHR + 0.80%

Thereafter: OHR + 0.90%

OHR currently @ 1.00%

No Lock-in

Free change of interest rates package 6 months from TOP or if OHR increases

1.5% penalty for full prepayment during first 1 year

Cancellation fee applies for undisbursed loan

OCBC Home Rate (currently at 1%) uses the long-term average of 1M and 3M Sibor to calculate interest rates

UOB Year 1: 14M FD + 1.35%

Thereafter: 14M FD + 1.35%

14M FD currently @ 0.25%

No Lock-in

2 free conversions

Only for private property above $500K

 

What should you look for when choosing a home loan for a building under construction?

When comparing the best home loan packages from different banks, there are 3 things to consider:

  1.     When is the TOP/CSC expected?
  2.     What is the monthly instalment?
  3.     Is there a lock-in period?

 

When is the TOP/CSC expected?

CSC stands for the Certificate of Statutory Completion. This certificate is issued when properties are considered completed and allows the bank to disburse the remaining amount of the home loan (typically 15% of the purchase price) to the developer.

TOP stands for Temporary Occupation Permit, which marks the earliest the property can be occupied. For HDB flats, the loan is fully disbursed on the TOP date.

It is therefore important to consider how long you need to wait before the TOP and CSC are issued. Typically, for private property, CSC takes about 1 year from the TOP. For HDB BTO flats, the TOP date is typically 3 years.

So, depending on how long you have to wait, a package like OCBC 1-mth SIBOR’s, which states lower interest rates for 1 year followed by a higher thereafter rate from year 2 onwards, may be less appealing than DBS’s FHR package, which maintains the same 1st year rate thereafter. Basically, you want to make sure you are not choosing a package that changes interest rates too quickly each year as you would be using all the best years of the package on the small amounts disbursed to the developer prior to CSC.

 

What is the monthly instalment?

After considering the period before the CSC, your next priority is of course the monthly instalment of the home loan package.

There are often two main components to a monthly instalment. Let’s look at OCBC’s for example: 1-mth SIBOR + 0.60%.

The first half is the “floating” portion of the home loan package. In this case, it means that your home loan interest rate for that month is determined by the 1-mth SIBOR of that month. This changes often (every month to be precise) and you’ll need to monitor the fluctuations.

The second half is known as the “spread” and represents the bank’s “profit”. In this case, it is 0.60% and doesn’t change throughout the year. The “spread” typically increases significantly after 2-3 years. Ideally, you want them to be low for as long as possible.

Or, at least, for the length of the lock-in period.

 

Is there a lock-in period?

These days, for buildings under construction, banks typically don’t enforce a lock-in period. However, as I mentioned above, there are usually penalties – i.e. the cancellation fee – for trying to switch home loans while the building is still under construction.

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Home Loans for Completed Property – HDB Resale and Private Property

For completed properties, buyers are able to choose from all the different home loan packages banks offer. Take note that for completed properties, there is usually a lock-in period for your mortgage, and in the event that you want one without a lock-in period, expect interest rates to be higher.

Once again, some banks might have a slightly different loan package based on your loan amount, but generally, packages offered are the same.

To show how your home loan impacts your total interest payable, we’ve used a simple scenario of someone buying a completed condo unit. Home loan rates are generally similar across different completed property types but do note some of the key considerations we’ve highlighted above.

best home loans singapore completed properties

 

Example 2: A completed condominium unit, with a purchase price of $1,000,000, loan tenure of 30 years

Since this is a private property and a completed building, there are more options available. Do note that these packages for completed buildings are slightly different compared to the earlier list for buildings under construction.

 

Best 6 Floating and Fixed-deposit Linked Home Loans (as of 7 March 2018)

Bank Home Loan Package Notes
Citibank

 

Estimated monthly instalment: $2,752

Year 1: 1-mth SIBOR + 0.35%

Year 2: 1-mth SIBOR + 0.35%

Year 3: 1-mth SIBOR + 0.35%

Thereafter: 1-mth SIBOR + 1.05%

2-year Lock-in

Flexibility to switch between 3/6/12-mth SIBOR base rates anytime; switch to 1-mth SIBOR not allowed

Interest offset feature applicable

HSBC Estimated monthly instalment: $2,770

Year 1: 1-mth SIBOR + 0.35%

Year 2: 1-mth SIBOR + 0.35%

Year 3: 1-mth SIBOR + 0.50%

Thereafter: 1-mth SIBOR + 0.75%

2-year Lock-in

1.5% penalty for full prepayment during first 2 years

Smartmortgage (Interest offset feature of up to 70%)

Flexibility to choose 1M or 3M SIBOR

Shopping vouchers of $480 for loans above $800k

Only for loan $800K and above

CIMB Estimated monthly instalment: $2,795

Year 1: 1-mth SIBOR + 0.40%

Year 2: 1-mth SIBOR + 0.40%

Year 3: 1-mth SIBOR + 0.60%

Thereafter: 1-mth SIBOR + 0.60%

2-year Lock-in

1.5% penalty for full prepayment during first 2 years

No partial redemption penalty

Standard Chartered Estimated monthly instalment: $2,800

Year 1: 9M FD + 1.30%

Thereafter: 9M FD + 1.30%

9M FD currently @ 0.30%

2-year lock-in

1.5% penalty for full or partial prepayment during first 2 years

Documents to be submitted by 26 Mar 2018

Maybank Estimated monthly instalment: $2,818

Year 1: 1.62% (variable)

Year 2: 1.65% (variable)

Year 3: 1.68% (variable)

Thereafter: 1.80% (variable)

3-year Lock-in

1.5% penalty for full or partial prepayment during first 3 years

Uses the bank’s Internal Board Rate Singapore Residential Financing Rate of 4% to calculate interest rates

Maybank Estimated monthly instalment: $2,818

Year 1: Maybank FDMR36 + 0.22%

Year 2: Maybank FDMR36 + 0.25%

Year 3: Maybank FDMR36 + 0.28%

Thereafter: Maybank FDMR36 + 0.59%

Maybank FDMR36 currently @ 1.40%

3-year Lock-in

1.5% penalty for full or partial prepayment during first 3 years

Best 3 Fixed Rate Home Loans (as of 7 March 2018)

Bank Home Loan Package Notes
BOC Estimated monthly instalment: $2,855

Year 1: 1.65%

Year 2: 1.65%

Thereafter: 3-mth SIBOR + 0.70%

2-year Lock-in

1.75% penalty for partial or full prepayment during first 2 years

Not applicable for HDB; Only applicable for private properties above 500 sqft

BOC Estimated monthly instalment: $2,857

Year 1: 1.70%

Year 2: 1.70%

Year 3: 1.85%

Thereafter: 3-mth SIBOR + 0.70%

3-year Lock-in

No commitment penalty if due to sale of property

1.75% penalty for partial or full prepayment during first 2 years

Not applicable for HDB; Only applicable for private properties above 500 sqft

UOB Estimated monthly instalment: $2,870

Year 1: 1.70%

Year 2: 1.80%

Thereafter: 14M FDPR + 1.60%

2-year Lock-in

1.5% penalty for full prepayment during first 3 years

Choice of Fixed Deposit or SIBOR rates for the Thereafter Rates

 

What should you look for when choosing a home loan for a completed property?

When it comes to completed properties, here’s what you should look out for:

  1.     Should you go with a fixed or floating rate?
  2.     What is the monthly instalment?
  3.     Is there a lock-in period?

 

Should you go with a fixed or floating rate?

Choosing a fixed or floating rate depends on your risk profile and your cash flow. A fixed rate is always priced higher than floating rates, but with the assurance that your monthly repayment amount will not fluctuate during the fixed duration.

For example, HSBC is offering a floating rate package of 1-mth SIBOR + 0.35% in the first and second years, as well as a fixed rate package of 1.75% in the first and second year.

If the 1-mth SIBOR ever goes above 1.40% within the next two years, you will be paying more per month if you take the floating rate over the fixed rate. Currently, the 1-mth SIBOR is still below 1.40%, but it could easily rise above it in 2018. In this case, choosing the fixed rate may be a better idea. 

In general, floating rates are better if you expect interest rates to go down or stay low. Fixed rates are better if you expect interest rates to go up. However, do note that eventually, fixed rate packages will still revert to floating rate packages, so the stability does not last forever.

Since there is no real right or wrong answer to this, choose what you are comfortable with financially in terms of monthly instalments.

 

What is the monthly instalment?

This is of course how much you need to pay the bank each month for the loan that you have borrowed. Depending on the nature of the home loan you are on, the exact amount you have to pay each month may change slightly – or in the case of a fixed rate home loan, it will not change at all for the duration of the fixed rate.

The monthly instalment for a floating rate is often based on SIBOR or pegged to a fixed deposit interest rate. In general, SIBOR is more volatile, and while it has been relatively low over the past decade, it has slowly been rising since 2015, and does not look like it’s going to drop below 1%.

On the other hand, fixed deposit-linked home loan packages are relatively new innovations from banks. In fixed deposit-linked home loan packages, your home loan interest rate is pegged to a bank’s fixed deposit interest rate. For example, Standard Chartered currently pegs its home loan package to the 9-month fixed deposit interest rate of 0.3%.

Fixed deposit-linked home loan packages are seen as more stable compared to SIBOR-linked packages. This is because when a bank increases the interest rate of a fixed deposit, it represents a cost to them – something they will not do lightly. That said, banks are likely to raise fixed deposit rates as their cost of funds rises.

When choosing a home loan package, of course the cost of the monthly instalment is important, but you should also consider whether you want to go with a SIBOR-linked home loan or a fixed-deposit linked home loan, or a fixed rate home loan.

 

Is there a lock-in period?

All but one of the above packages have a 2-year lock-in period. UOB has a 1-year lock-in period. This implies that if you don’t go with UOB, any decision you make will affect you for at least 2 years, since there is a heavy penalty if you try to refinance during the lock-in period.

Do notice that in most of the above cases, the interest rate tends to rise after the 2nd year. This means that if you’re unable to find a competitive rate to refinance to after 2 years, you may be stuck with higher rates.

Depending on your risk profile, you may want to consider Standard Chartered, which keeps the 9M FD + 1.30% rate throughout. That said, there’s nothing to stop Standard Chartered from increasing the 9-month fixed deposit interest rate after 2 years, though as I said earlier, it still represents a cost to the bank.

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Final Note – An affordable home loan may not always be the best home loan

While the above examples are the most affordable home loans in Singapore for new purchases, they may not necessarily be ideal for your current financial situation, and your personal goals. As SIBOR is expected to rise in the near future, you should be looking for advice that is personalised for your needs.

Also, if you currently own a home already, you might want to consider refinancing your home loan. This allows you to switch over to a new home loan package if you are out of your lock-in period and might potentially help to save quite a bit of money.

Either way, it’s important to make sure you take a home loan package that suits your needs, and not just jump at the cheapest rate available. MoneySmart’s Mortgage Specialists can easily assist you through the entire home loan application process and advise you on what would work best for you. You can simply head over to the MoneySmart Home Loan Wizard and let our team do the rest!

Speak to one of our mortgage specialists to find out which bank is offering the best home loan in Singapore for your particular needs.

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Peter Lin

I am the poster boy for reinventing one's self. I've been a broadcast journalist, technical writer, banking customer service officer and a Catholic friar. My life experiences have made me the most cynical idealist you'll ever meet, which is why I'm also the co-founder of a local pop culture website. I believe ignorance is not bliss, and that money is the root of all evil only if you allow it to be.