Breaking Down: Mortgage Loans in Singapore

For HDB and private residential property owners, there is often a temptation to switch to bank loans, as the current prevailing interest rates have fallen and maintained at an attractive level. While the interest rate is a direct cost to financing your home, it is critical for you to consider just the interest rate and consider your own needs as well. 

In the recent years, many banks have started offering various innovative home loan products that may offer some advantage to consumers. SIBOR, SOR, Fixed rate, Fixed deposit home rates pegged packages are some of the newest packages on offer by banks.

Mortgage Loans

Mortgage Loans

Most interest rates and terms quoted by banks are subject to change without prior notice, usually on a month to month basis.Thus it is important to first check with a mortgage specialist. 
Home loan interest rates are at their lowest point in recent years.  Singapore’s deposit rates are in general lower than SIBOR and fixed rates.

The increased demand for funds when it outstrips the supply will also cause interest rates to rise. However, this is not happening at the moment. There are fever homeowners choosing to peg their mortgage rates to SIBOR or SOR. 

The Sibor rate comes in either of 1/3/6/12 months with most banks in Singapore offering home loans or commercial industrial mortgages in either the 1 month or 3 months tenor.  Borrowing costs can still rise as banks charge a higher margin or spread (SIBOR + X%) to give themselves a buffer against rising interest rates and greater mortgage defaults. 

Although fixed rates tend to be a bit higher than SIBOR is set by the Association of Banks in Singapore (ABS) as a daily rate based on the interest rate which banks offer to lend unsecured funds in between them. They provide an opportunity to save future cost when market rates rise in a meaningful way. 

Before a bank decides to approve your home loan, you need to meet certain eligibility requirements, such as age, annual income and credit score. Not only that, the credit criteria that banks use to approve a home loan application is about 80% similar to one another, thereby eliminating your credit score as a significant factor that influences your decision. 

Reasons why you should purchase in an executive condominium

In 2017, Executive condominiums (ECs) are among the best selling projects. This type of housing is a hybrid residential property between public housing and private housing. ECs are popular among the middle class where the buyer’s total combined income does not exceed $14,000 a month. There are other requirements such as eligibility conditions on Singaporean household and a family nucleus. ECs are made affordable by the lower land prices paid by the real estate developers. The following are the 3 main reasons why you should invest in an EC unit:

Visionaire  EC Landscape

Visionaire EC Landscape

Completed condominium facilities
While ECs are cheaper than condominiums, the facilities provided in ECs are similar and of the same quality in terms of finishings. ECs which are recently launched have come up with innovative ways to differentiate themselves where smart home technology are incorporated into their offerings.

Subsidised condominiums
Due to the restrictions and requirements imposed by HDB on the buyers, ECs have remained affordable over the years. Developers of ECs have paid significantly lesser for the land sold by HDB. Thus, an indirect subsidy is created for the buyers as the EC prices are lower than the price of a condominium in the same vicinity. Grants of up to $30,000 are also available for 1st time eligible buyers.

Privatised condominium after 10 years, profits ensued
An EC development will be partially privatised after the 5 years minimum occupancy period imposed by HDB. Single Singaporean/PR buyers are eligible to purchase such EC unit. Upon the 10th year milestone, Foreigners can then own a unit at the EC turned private condominium. By offloading the EC unit following partial/full privatisation, the owners are able to earn a decent profit (indirect subsidy).
History has shown that investing in an executive condominium is very profitable. We would highly recommend eligible homeowners to take advantage of this opportunity.