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Best Home Loans Singapore (2019) – Most Affordable Housing Loans Reviewed

best mortgage home loans review

Peter Lin

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Just bought a property and looking for the best home loan in Singapore? We review the most affordable bank loans as of Feb 2019, based on different types of properties – HDB BTO flats, private property and resale flats. 

The one factor that will impact your home loan package the most is whether your property is: (a) under construction (i.e. HDB BTO or private property that’s still being built) or (b) completed (i.e. HDB resale or a built private property).

Given the ubiquity of BTOs (and popularity of new condo launches) in Singapore, we’ll cover the best home loans in Singapore for BTOs and BUC (uncompleted private property) first.

If you’re planning to buy a resale flat or an already-built private property, click here to skip straight to the best home loans in Singapore for completed property section.

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.

 

Best home loans in Singapore for HDB BTOs

Bank Current rate Interest rate calculation
DBS 1.95% FHR 8 + 1.275%
OCBC 2% MBR + 0.45%
Standard Chartered 2% 36M FDR + 1.03%
Citibank 2.02% 1M SIBOR + 0.2% (increases every year up to 0.6%)
Standard Chartered 2.07% 1M SIBOR + 0.25% (increases to 0.3% after 2 years)
HSBC 2.07% 1M SIBOR + 0.25% (increases to 0.7% after 3 years)
UOB 2.15% MR + 1.3%

In the case of young couples getting a BTO, the standard route is often an HDB loan as it doesn’t require a cash downpayment. However, it also comes with various eligibility conditions (income ceiling, for example) and there’s that 2.6% interest rate to contend with.

You used to be able to find much better interest rates (well below 2%) with a bank loan, but this is no longer the case. As you can see, most banks are now offering 2% or more for HDB BTOs, with the exception of DBS (though there’s a minimum amount of $500,000 for that preferential interest rate).

Unfortunately, there’s an element of risk as banks typically only offer floating rate packages for uncompleted properties. That’s bad news for those who would like the certainty of a fixed rate.

If you do qualify for an HDB loan, you’ll have to decide whether this risk is worth taking on for the relatively small savings. It’s possible to start with the HDB loan and refinance with a bank later on if rates improve.

As for which home loan package is best out of the lot, we’d go with Citibank, StanChart or HSBC’s SIBOR-linked packages, even though the rates are a little higher. Why? Because SIBOR is a transparent, inter-bank rate and you can check the rate any time. It’s also said to be stabilising.

Packages pegged to any other acronym, such as “FHR 8” or “MBR”, are typically the bank’s internal rates. You do enjoy lower rates at the moment, but it also means you’re basically at the bank’s mercy should they choose to raise the rates overnight.

 

Best home loans in Singapore for BUC (private property under construction)

Bank Current rate Interest rate calculation
DBS 1.95% FHR 8 + 1.275%
OCBC 1.95% MBR + 0.4% + $50 processing fee
UOB 1.95% MR + 1.1%
Maybank 1.95% SRFR – 2.55%
Standard Chartered 2% 36M FDR + 1.03%
CIMB 2.02% 1M SIBOR + 0.2% (increases every year up to 0.55%)
Citibank 2.02% 1M SIBOR + 0.2% (increases every year up to 0.6%)
HSBC 2.07% 1M SIBOR + 0.25% (increases to 0.7% after 3 years)
Standard Chartered 2.07% 1M SIBOR + 0.25% (increases to 0.3% after 2 years)

If you’re financing a private property that’s still under construction, you obviously don’t qualify for an HDB loan, so you’ll need to choose a floating rate package from one of the private banks.

Fortunately, the home loan packages for BUC are more competitive than that of BTOs, with the market rate being 1.95% currently. However, the sub-2% rates are pegged to internal bank rates rather than SIBOR, so the same caveats apply.

If you don’t mind paying more for more visibility on your interest rates, the SIBOR-linked packages are pretty good right now, because banks are charging low spreads (that extra “+ X%” tacked on to SIBOR) at the moment.

Watch out, though, for rates that climb up year after year. (For more on why this is bad, read the next section.) To avoid this, go with StanChart’s or HSBC’s packages, which remain stable for at least 2 or 3 years.

 

How do you choose the best home loan for BTO/BUC?

When comparing the best home loan packages from different banks, there are 3 things to consider: when is the TOP/CSC of your property, what is the monthly instalment of the loan, and whether there is a lock-in period.

When is the TOP/CSC expected?

TOP stands for Temporary Occupation Permit, which marks the earliest the property can be occupied. For HDB BTO flats, the TOP date is typically 3 years down the road. Your home loan is fully disbursed on the TOP date.

CSC stands for the Certificate of Statutory Completion. This certificate is issued when properties are considered completed. For private property, CSC takes about 1 year from the TOP date. When CSC is obtained, the bank will disburse the remaining amount of the home loan to the developer.

It is therefore important to consider how long you need to wait before the TOP and CSC are issued.

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.

So a package like UOB’s, where interest rates start out low but climb up in year 3, may be less appealing than that of DBS or Maybank, which maintain the same 1st year rate thereafter.

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. Because these loans are all floating rate packages, your monthly instalment will vary.

While the amount of the principal you repay is the same month to month, what causes the fluctuation is the interest rate. For example, the DBS home loan interest rate is based on FHR 8 + 1.275%.

The first half (FHR 8) 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 8-month average fixed deposit rate of that month. This changes often and you’ll need to monitor the fluctuations. It has been as low as 0.2% and as high as 1.5% in the past couple of years, and it can change for no rhyme or reason.

The second half (+ 1.45%) is known as the “spread” and represents the bank’s “profit”. In this case, it is 1.45% and doesn’t change throughout the year. The “spread” typically increases significantly after 2 to 3 years. Ideally, you want them to be low for as long as possible.

Is there a lock-in period?

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

So, try to go for something you’re fine with committing to… at least until the building is completed.

 

Best home loans in Singapore for HDB resale or completed private property (fixed rates)

Bank Current rate Lock-in period
DBS 2.4% (HDB resale flat only) 5 years
OCBC 2.48% 2 years
Bank of China 2.5% 2 years
UOB 2.58% 2 years
Maybank 2.58% 2 years
Citibank 2.6% (private property only, >$500K) 2 years
HSBC 2.7% 2 years
Maybank 2.78% 5 years

For completed properties, be it an HDB resale flat or a completed private property, buyers have a lot more options, including the more stable fixed rate home loan packages.

A fixed rate package 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, OCBC is offering the best fixed rate package (for private properties) on the market, where the interest rate stays at 2.48% for the first 2 years. This is higher than the projected 2.05% to 2.07% of the best floating rate home loans. However, some people are willing to pay a bit more for that peace of mind, and it makes managing your cash flow easier.

The one big caveat is that fixed rates only last as long as the lock-in period. After that, fixed rate packages revert to floating rate packages, so the stability does not last forever. 

In many cases, the interest rate will rise after the lock-in period. 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. To avoid this, you need to learn how to refinance your home loan. (It’s easier than it sounds!)

 

Best home loans in Singapore for HDB resale or completed private property (floating rates)

Bank Current rate Interest rate calculation
Maybank 2.05% SRFR 2 – 2.45%
Standard Chartered 2.07% 1M SIBOR + 0.25% (increases to 0.3% after 2 years)
HSBC 2.07% 1M SIBOR + 0.25% (increases to 0.65% after 3 years)
CIMB 2.07% 1M SIBOR + 0.25% (increases every year until 0.6%)
Hong Leong Finance 2.08% HHR-2.57% (increases by 0.8% from Year 3 onwards)
Citibank 2.12% 1M SIBOR + 0.3% (increases to 0.4% after 2 years, then 0.65% subsequently)
DBS 2.20% FHR 8 + 1.525%
UOB 2.22% 1M SIBOR + 0.40%
HSBC 2.27% 1M SIBOR + 0.45%
OCBC 2.30% 3M SIBOR + 0.35% (increases every year until 0.6%)

If you’re willing to take on the risk of a floating rate home loan, these are the best floating packages on the market right now.

The monthly instalment for a floating rate is usually based on either SIBOR, or an internal rate set by the bank (either a board rate or the bank’s fixed deposit interest rate). In general, SIBOR is more volatile, but on the positive side it’s visible to anyone, whereas with a bank rate there’s always the chance that the bank will raise it at random.

Another thing to pay attention to is the spread: The “+ 0.5%” part added to the end of the benchmark rate. One trick banks like to use is to make this really low in the first year, then slowly but surely increase it every year. So even if the benchmark remains stable, you’ll end up paying more year after year.

Most floating home loan packages for completed properties have a 2-year lock-in period. So make your decision wisely, since there is a heavy penalty if you change your mind during the lock-in period. (Some banks do offer “no lock-in” home loan packages, but they are understandably more expensive.)

 

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. 

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.

Banks do change their interest rates and home loan packages every month or so, so be sure to check MoneySmart’s Home Loan Calculator for the latest rates.

 

Related articles

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

Applying for HDB Loans in Singapore – The Ultimate Guide to How Much It Will Cost You

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

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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.