Which Bank Housing Loan Is Best For You?

 

If you want to purchase a home, you will need a loan from a bank or a lending institution. But with so many different banks and types of loans available, how do you know which bank housing loan is best?

This article will discuss the best home loan in Singapore, different types of housing loans and some factors to consider when choosing the best bank loan for you.

Various Types Of Home Loans Singapore

You must first determine your true financial capacity before choosing a house loan deal. You can use a Total Debt Servicing Ratio (TDSR) calculator to see how much you can borrow to buy the different types of loans in Singapore.

There are two main types of home loans in Singapore. These are:

  • Home loan for private property (bank loan)
  • Home loan for a HDB flat

Home Loans In Singapore For Private Properties And HDB Flats

Home Loan Singapore For Private Properties

Private property in Singapore refers to all residential properties not built by the Housing & Development Board (HDB). If you are looking to buy a condominium, executive condominium (EC), or a landed property such as a semi-detached or terraced house, you will need to take out a home loan for private property.

The loan-to-value (LTV) limit for a home loan for private property is currently 75%. This means that if you are looking to purchase a $1 million condo, the maximum amount of loan you can take is $750,000 from a bank.

The remaining $250,000 will need to be paid in cash or via your CPF savings.

Depending on the amount you are willing to pay per month and your level of risk tolerance, you can choose from a wide range of home loan packages that financial institutions offer to finance your purchase.

Some banks in Singapore that offer home loans for private properties are:

  • DBS Bank
  • OCBC Bank
  • Bank of China
  • Standard Chartered Bank

Home Loan Singapore For HDB Flats

HDB is Singapore’s public housing authority. It is responsible for the planning and construction of public housing in Singapore.

If you want to purchase a new or resale HDB flat, you will need to take out a home loan to finance your purchase.

On 30 Sep 2022, the LTV limit for a home loan for a HDB flat was further lowered to 80%. This means that for example, if the purchase price of your resale flat is $400,000, the maximum amount of loan you can take is $320,000.

The remaining $80,000 will need to be paid in cash or via your CPF savings. The 2.6% interest rate for home loans for HDB flats are currently pegged to the prevailing CPF interest rate. It was obtained by adding 0.1% to the CPF Ordinary Account (OA) interest rate.

For example, since the current CPF OA interest rate is 2.5%, the interest rate for your home loan will be 2.6%. If the CPF OA interest rate changes, the interest rate on your home loan will also change accordingly.

You will also need to pay a monthly mortgage servicing fee to service your home loan. Some banks in Singapore that offer home loans for HDB flats are:

  • DBS Bank
  • Citibank

How To Get A Bank Home Loan: Step-By-Step Procedure

Now that you know the different types of home loans available in Singapore, the next step is to find out how you can get a bank home loan. Here is a step-by-step guide:

Research

Conduct research on the different types of home loans and interest rates offered by various banks in Singapore. This will help you to narrow down the bank that is offering the loan package that is most suitable for you.

There is no need to wonder: “which bank housing loan is best?”. With some thorough research, you will be able to know which bank housing loan is best.

Gather The Necessary Documents

After determining which bank home loan is the ideal one, prepare all the paperwork you’ll need to submit an application for the loan. These include your:

  • NRIC
  • Employment details
  • Bank statement
  • Details of the property you are applying the loan for
  • Income proof

Fill Up The Application Form

Once you have all the necessary documents, the next step is to approach the bank, where you will be required to fill up a loan application form. After which, you will need to attach all the necessary documents.

Process The Fee Payment

After the bank receives your loan application form and papers, you must pay the processing fee.

The processing fee ranges from 0.25-0.50% of the loan amount you are applying for. It is used to maintain your loan account and cover the initial administrative costs.

Loan Approval

The bank will then assess your loan application and let you know if your loan has been approved. If you provide false information or the bank is unsatisfied with your creditworthiness, your loan application may be rejected.

However, if your loan application is successful, the bank will give you a Letter of Offer, which details the amount of loan that has been approved, the interest rate, and the repayment tenure.

Site Estimation

The bank will then send a representative to do a site estimation to assess the value of the property you are looking to purchase. This is to ensure that the property is worth the amount you are taking a loan for.

Signing Of The Loan Agreement And Loan Disbursement

The last step is to sign the loan agreement, after which you will be given the loan via cheque.

HDB Loan VS Bank Loan: Table Analysis

Below is a home loan comparison Singapore between a HDB loan and bank loan that will help you decide if you want a bank loan or a HDB loan.

FeaturesHDB LoanBank Loan
LTV Ratio80% (as of 30 Sep 2022)75%
DownpaymentCPF or cashCash (5%)
Interest Rate2.6%1.9-2.75%

Fixed Home Loan Rates Vs Floating Home Loan Rates

Discover the differences between the two and which one works better for you.

Fixed Home Loan Rates

A fixed home loan rate is where the interest rate remains constant throughout the tenure of the loan, regardless of changes in the market interest rate. This means that your monthly repayments will remain the same for the entire duration of the loan.

This helps you budget your monthly expenses more easily as you know exactly how much you need to set aside each month to service your loan. Another advantage of a fixed home loan rate is that it provides stability and certainty, especially when interest rates are on the rise.

Even though fixed interest rates are usually higher than floating interest rates when the loan is first taken out, it is protected against rising interest rates in the future.

This is because the interest rate on your loan will not increase even if the market interest rates do go up.

Since the interest rate is fixed, it is not pegged to the market or bond rates during the lock-in period. However, after the lock-in period, the interest rate will either be increased or decreased depending on the prevailing market rates.

Floating Home Loan Rates

A floating home loan rate is where the interest rate on a loan fluctuates in line with changes in the market interest rate. This means that your monthly repayments may go up or down depending on changes in the market interest rate.

A decrease in monthly repayments will occur when the market rates drop, where you will save more. Likewise, an increase in monthly repayments will occur when the market rates increase, where you will have to pay more.

Most banks usually inform you at least 30 days before the change in monthly repayments is effected. This allows you to refinance your loan or make arrangements in advance to avoid any financial difficulties.

How To Choose The Best Home Mortgage Loan Singapore For You

There are many mortgage loan products in the market, and choosing the best one for your needs can be confusing.

However, there are some key factors that you need to consider when making your decision to ensure that you choose the best home loan in Singapore for you.

These include:

Type Of Loan

There are two main types of home mortgage loans – fixed rate loans and floating rate loans.

As its name suggests, a fixed rate loan has an interest rate that is fixed for the entire duration of the loan. Your monthly repayments will remain the same throughout the life of the loan.

On the other hand, a floating rate loan has an interest rate that can fluctuate over the duration of the loan. Your monthly repayments can go up or down depending on the movements in interest rates.

Hence, you need to choose the type of loan that best suits your needs and circumstances.

Flexibility

Some home mortgage loans offer more flexibility than others. For example, some loans allow you to make early repayments without penalty, while others do not.

Others also allow you to make partial repayments, while some require you to make full monthly repayments. Hence, you should choose a loan that can offer the flexibility you need.

Fees

When taking out a home mortgage loan, you must pay various fees. These include the application, valuation, and legal fees, and stamp duty. You should compare the different loan fees and choose the one with the lowest fees.

Interest Rate

One of the most important factors to consider when choosing the best mortgage rates in Singapore is the interest rate.

You should compare home loans with different interest rates and choose the one that offers the lowest rate.

This is because a lower interest rate will result in you paying less interest over the life of the loan, saving you money.

Repayment Tenure

Another essential factor to consider is the repayment tenure of the loan. The repayment tenure is the number of years you will need to repay the loan.

A longer repayment tenure will result in lower monthly repayments, but you will end up paying more interest over the duration of the loan tenure.

Conversely, a shorter repayment tenure will result in higher monthly repayments, but you will pay less interest over the life of the loan. Hence, it would help if you chose a repayment tenure that you are comfortable with and that you can afford.

Which Bank Has The Best Floating Home Loan?

In Singapore, many banks offer home loans to individuals.

However, not all banks offer the best home loan rates in Singapore. The interest rate offered by a bank depends on many factors such as the type of home loan, the tenure of the loan, etc.

One interest rate that banks offer for home loans is the floating interest rate. Some of the banks which offer the best floating interest rates* for home loans are as follows:

BankInterest Of The First YearLock-In Period In Years
UOB 3M SORA2.30% per annum2
DBS FHR62.70% per annum2
Maybank 1M SORA3.01% per annum1
DBS FHR62.70% per annum2
DBS 3M SORA2.60% per annum2

*Information correct at time of publication 

In general, UOB 3M SORA offers the lowest interest rate, making it a good choice to take a loan from.

Find The Best Housing Loan Singapore Now

Now you know about the different types of home loans available in Singapore and the key factors to consider when choosing the best home loans.

Hence, you should be able to know which bank housing loan is best.

If you’re seeking a quick loan, look no further than Katong Credit. We are a registered money lender that can assist you with your lending requirements, thanks to our years of experience.

Contact us now, use our loan calculator to determine how much you may borrow, or apply for a loan today.

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