Choosing the right home loan can prove to be a headache with 100 over choices out there. Here are some of the factors which will help you better decide.
Interest rates are usually split into 2. Fixed rates and Floating rates. For fixed rates, monthly instalment amount is fixed for a certain period. This is good if you require stability in your monthly repayments, and also if you forsea interest rates rising in the near future.
For floating rate, this is not fixed but usually varied with a benchmark rate plus a spread.
In Singapore, commonly used benchmarks are SIBOR ( Singapore Interbank Offer Rate ) and SOR ( Singapore Swap Offer Rate)
SIBOR is a rate set by the Association of Banks in Singapore Daily. This is a reference rate used by financial institutions when they borrow or lend money from one another.
SOR is the lending costs and the expected forward exchange rate between the US dollar and Singapore dollar. More will be explained in our next article SIBOR vs SOR rates.
Floating rate loans are usually the SIBOR or SOR rate + x%.
Interest rates, though major in your decision, is only one of the considerations. There are many other things that buyers should take note of when taking a loan.
1. Lock in period, and penalty amount for partial or full redemption.
2. Clawback period if any (legal subsidy, cashback, valuation fees)
3. Free perks (discounted mortgage insurance, fire insurance, additional interest on fix deposits)