Singapore Home Loan
Comparing Singapore Home Loans
TYPES OF INTEREST RATES
A) SIBOR - Singapore Interbank Offered Rate is the interest rate at which banks in Singapore borrow funds from other banks. It is set daily at 11am by Associate of Banks in Singapore (ABS) and published in Business Times. Simply put, it is the rate at which financial institutions lend unsecured funds to each other. SIBOR is known to offer full transparency of applied rate.
In the market now, most banks are offering 3-month SIBOR. However, there are few banks that are offering 1 month sibor. They are currently Standard Chartered, Citibank and HSBC. 1-month SIBOR is usually lower than 3-month SIBOR. If you think that SIBOR will remain relatively low in the next couple of years, either 1-month or 3-month SIBOR should be suitable for you. Citibank is the only bank that allows you to have an unlimited switch from 1-, 3-, 6- or 12-month SIBOR. If you are worried about rising SIBOR, do opt for 12-month SIBOR which effectively means you are fixing the rates for 1 year! HDB borrowers, take note: Only HSBC and Standard Chartered offer 1-month SIBOR mortgage. Some SIBOR mortgages allow you to do partial redemption.
B) SOR - Swap Offered Rate is based on a formula that takes into account the current and expected exchange rates of the US dollar against the Singdollar and the local interbank lending rates for the greenback. Thus, a rising US market will definitely inflate SOR in the near future. So far, it remained historically low.
In this market currently, only ANZ offer 3-month SOR mortgage. In the past, Bank of China, OCBC, UOB and DBS offered SOR-pegged home loans. Excitement among borrowers was heightened when 3-month SOR was negative in 2011. ANZ recognized that home owners want a hybrid type of mortgage rates, hence they developed a rate known as 3-month COMBO which is the average of 3-month SIBOR and SOR.
C) Fixed Rates - Fixed rates as its name implies, are fixed and do not fluctuate for a period of time, for example 2, 3 years or 5 years term. It will become a floating rate after the fixed rate term. Unfortunately, there is no fixed rate package for the whole of loan tenor in Singapore. Fixed interest rates charged are generally higher than variable rate packages. It protects against interest rate hikes during fixed interest rate period. Usually it does not allow flexibility to do partial redemption
D) Board Rates - This is the Bank’s own internal board rate, determine by cost of structures and costs in maintaining it. It is influenced by prevailing market conditions. Each bank who offers board rate has their own determined rate and can change the reference rates at its sole discretion. The annual interest rate is calculated by usually deducting a discount rate from the board rate. Discount rate does not change. What will cause your interest rate to moves, is the board rate. Usually, bank will give a 30 days notice if they increase the rate. It typically lags behind interbank rate movements ie SIBOR or SOR, thus it is relatively less volatile. It is not entirely transparent given that it is proprietary to the bank. It continues to remain popular after the introduction of SIBOR and SOR mortgages. Some banks allow flexibility to do partial redemption.
E) Fixed Deposit Rates- DBS pioneered loan products that track fixed deposit rates in early 2014. FHR, which stands for Fixed Home Rates, is a benchmark rate that was the average of 12-months Fixed Deposit rate and 24-months Fixed Deposit rate. It is the first time, that any bank in Singapore is using a saving rate than a lending rate to peg housing loan packages! A premium, or we call it a spread, is added to FHR rate to calculate your final interest rate. It was very popular as everyone knows savings rate is historically lower than lending rate in Singapore. Then FHR was enhanced to FHR18, which is the 18-months Fixed Deposit Rates. This occured in late 2015. In 2016, competitors of DBS also launched similar products too. UOB created loan products that tracks savings rate, known as Fixed Deposit Property Rate (FDPR), Standard Chartered called it Fixed Deposit Rates (FDR), OCBC version is Fixed Deposit Mortgage Rates (FDMR).
IMPORTANCE OF AIP
Approval in-principle (AIP) is the act of seeking pre-approval from banks before you purchase a property. It's also known as in-principle approval (IPA). Banks do not charge fees to process AIP applications. With cooling measures in Singapore, the importance of AIP is much more. We help you compute Mortgage Servicing Ratio (MSR) and Total Debt Servicing Ratio (TDSR), and advise on the mortgage solutions to suit your needs. Remember, the lowest interest rate might not be suitable for you.
COMPLIMENTARY MORTGAGE ASSESSMENT
We are a no-fee business, where we do not charge fees for our services. So what do we really do? We provide mortgage assessment, by listening to your home loan requirements, financial situation, and strategize with you on the options ahead. From the list of options, we will always choose the right home loan that fits your needs. Staying independent and working for you are our utmost goals. In FindAHomeLoan, you can trust!