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.
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.