Property & Home Loans

Best Home Loans 2017

Find the Cheapest Home Loans in Singapore

{ "defaultValue": "500000", "clearOnFocus": true, "label": "Loan Amount", "name": "loanAmount", "symbol": "$", "symbolLocation": "left", "showLabel": false }

We've collected and analysed hundreds of data points to help you find the best home loan in Singapore. Because Singapore has one of the highest real estate prices in the world, you are going to need some financial assistance when buying a home. When choosing a home loan, you should decide very carefully because the size and duration of home loans can put an enormous pressure on your monthly finances. Read our analysis below to find out which is the best home mortgage loan for you.

Our Picks for the Best Home Loans in Singapore

Choosing a home loan can be a very difficult process. First, most banks in Singapore change their home loan interest rates on a monthly basis. Not only that, interest rate is not the only thing you should care about given that many people decide to refinance their home loans every 3-4 years. While interest rates for home loans do change periodically, we think the below set of home mortgage loan offerings represents the best deals available for people in Singapore given that most loan rates move in tandem with reference rates like SIBOR and SOR. Below, we summarise the lowest interest rates from the best home loans by major categories. Also, because rates are constantly changing, we show a list of banks that tend to have one of the best offerings in Singapore at any given time.

As of September 2017Best BanksBest Fixed RatesAvg Fixed RateBest BanksBest Floating RatesAvg Floating Rate
HDB Home LoanMB, Citi, UOB, DBS1.48%-1.58%1.76%DBS, SCB, UOB, OCBC1.30%1.68%
Private Property Home LoanBOC, UOB, DBS1.48%-1.58%1.6%SCB, DBS, UOB, OCBC1.3%1.67%
Refinance LoansUOB, DBS, MB1.48%-1.68%1.78%DBS, UOB, OCBC, SCB1.3%-1.4%1.63%
HDB Under Construction Home LoanN/AN/AN/AUOB1.72%1.88%
Prviate Property Under Construction Home LoanN/AN/AN/ASCB, UOB, OCBC1.3%1.62%
*SCB: Standard Chartered, BOC: Bank of China, MB: Maybank

Best Home Loans for HDB

Find the Cheapest Home Loans in Singapore

{ "defaultValue": "500000", "clearOnFocus": true, "label": "Loan Amount", "name": "loanAmount", "symbol": "$", "symbolLocation": "left", "showLabel": false }

The Singapore government began providing HDB flats to its citizens to help improve home affordability, and they are hugely popular in Singapore, representing about 80% of the market. This is because HDB flats are on average 80% cheaper than condos. However, HDB flats still cost hundreds of thousands of dollars, and most people would need to take out a home loan to finance their purchase. Below, we discuss different options available in Singapore, mainly fixed rate HDB home loans and floating rate HDB home loans.

Best Fixed Rate Home Loan for HDB

As of September 2017, we found that the best fixed rate home loans for HDB charge around 1.5% in annual interest. This compares to 1.76% for the average of fixed rate home mortgage loans. For a loan of S$500,000 over 25 years, this translates to roughly S$2,000-S$2,200 of monthly installments, and means that it will cost the borrower around S$150,000 just in interest expense. Therefore, choosing one of the options at the top of the list below can help you save up to S$30,000 compared to the average offerings. Fixed rate loans in Singapore typically have fixed interest rates for up to 3 years, after which interest rates become "floating," meaning they change as reference rates like SIBOR change day to day. Calculations below assume a loan of S$500,000 with a tenure of 25 years.

Fixed Rate Mortgages for HDBsInterest RateLock-InMonthly InstalmentsTotal Costs
MB Fixed Rate Home Loan1.48% - 1.88%2 yearsS$1995 - S$2084$123,340
MB Fixed Rate Home Loan1.5% - 1.99%1 yearS$2000 - S$2104$127,720
UOB Fixed Rate Home Loan1.58% - 1.68%2 yearsS$2019 - S$2040$111,496
UOB Fixed Rate Home Loan1.88% - 1.88%2 yearsS$2090 - S$2090$127,000
CITI Fixed Rate Home Loan1.52% - 2.05%2 yearsS$2004 - S$2121$133,492
HLF Fixed Rate Home Loan1.58% - 3.25%2 yearsS$2019 - S$2389$203,824
DBS Fixed Rate Home Loan1.58% - 1.8%2 yearsS$2019 - S$2067$118,948
DBS Fixed Rate Home Loan1.68% - 1.8%3 yearsS$2042 - S$2068$119,464
HLF Fixed Rate Home Loan1.7% - 3.25%3 yearsS$2047 - S$2399$209,068
CITI Fixed Rate Home Loan1.85% - 2.1%2 yearsS$2083 - S$2138$140,080
HLF Fixed Rate Home Loan3.03% - 3.58%2 yearsS$2379 - S$2517$252,556
Average1.76% - 2.3%S$2063 - S$2183$151,544

When choosing a fixed rate loan, it's important to consider a few major factors. The most obvious part is calculating how much the loan will cost you in monthly installments and how much the loan will cost you in interest over time. You should also consider the flexibility of a loan in terms of getting a refinancing after a few years. Some loans will let you refinance after just 1 year, while some other banks have a "lock-in" period during which you are unable to renegotiate your terms.

You should also bear in mind that the actual rates that you get may differ from the rates shown above because banks change their interest rates quite frequently. However, the above set of offerings from Maybank, Citibank, UOB and DBS generally tend to offer the lowest fixed rates in the market. You can compare live home loan quotes and consult our brokers here for more details.

Best Floating Rate Home Loan for HDB

As opposed to a fixed rate, you can choose to get a floating rate home loan to fund your HDB flat purchase. Floating rates are pegged to reference rates that continuously move over time, thus getting their name "floating." Reference rates are typically designated as SIBOR, SOR, a combination of SIBOR and SOR or another set of rates determined by banks (typically called board rates or fixed deposit rates). For the last category of these rates, banks often have different names for their own interest rates, i.e. SPFR, FDR, FHR, etc. For SIBOR or SOR pegged rates, you are usually given the option to choose from 1-Month, 3-Months, 6-Months and 12-Months SIBOR or SOR rates.

As of September 2017, we found that the best floating rate home loans for HDB flats charge around 1.3% in annual interest. This compares to 1.68% for the average of floating rate home loans. For a loan of S$500,000 over 25 years, this translates to roughly S$2,000 of monthly installments, and means that it will cost the borrower around S$140,000 just in interest expense. Therefore, choosing one of the options at the top of the list below can help you save up to S$50,000 compared to some of the average offering in the market. Calculations below assume a loan of S$500,000 with a tenure of 25 years.

Floating Rate Mortgages for HDBsInterest RateLock-InMonthly InstalmentsTotal Costs
SCB FDR Floating Home Loan1.3% - 1.3%2 yearsS$1953 - S$1953$85,900
DBS FHR 9 Floating Home Loan1.3% - 1.3%2 yearsS$1953 - S$1953$85,900
UOB FDPR_15M Floating Home Loan1.28% - 1.38%2 yearsS$1948 - S$1970$90,472
OCBC 36mth FDMR Floating Home Loan1.3% - 1.4%2 yearsS$1953 - S$1974$91,444
OCBC 15mth FDMR Floating Home Loan1.3% - 1.4%2 yearsS$1953 - S$1974$91,444
DBS FHR 9 Floating Home Loan1.38% - 1.38%2 yearsS$1972 - S$1972$91,600
UOB FDPR_15M Floating Home Loan1.38% - 1.38%2 yearsS$1972 - S$1972$91,600
SCB 3 Mth SIBOR Floating Home Loan1.38% - 1.48%2 yearsS$1972 - S$1993$97,396
UOB 1 Mth SIBOR Floating Home Loan1.55% - 1.65%0 yearsS$2011 - S$2032$109,096
MB FDMR36 Floating Home Loan1.28% - 1.89%3 yearsS$1948 - S$2079$119,788
UOB FDPR_15M Floating Home Loan1.8% - 1.8%0 yearsS$2071 - S$2071$121,300
Average1.68% - 2.11%S$2043 - S$2140$139,067

When choosing from our list, bear in mind that the actual rates that you get may differ from the displayed rates above because banks change their interest rates quite frequently. However, the above set of offerings from Standard Chartered, DBS, UOB and OCBC generally tend to offer the lowest floating rates in the market. You can consult our brokers for more details, but we have prepared a guide on fixed vs floating rate below.

Best Home Loans for Private Properties

Private residences account for about 20% of properties in Singapore. These include condos as well as landed properties, which can easily cost millions of dollars on the island. Typically, only Singaporeans with low income qualify for a HDB flat, so private residences are quite popular among foreigners and permanent residents. Below, we discuss different options available in Singapore, mainly fixed rate home loans and floating rate home loans.

Best Fixed Rate Home Loan for Private Residence

As of September 2017, we found that the best fixed rate home loans for private residences charge around 1.5%-1.6% in annual interest. This compares to 1.61%-1.88% for the average of fixed rate home loans. For a loan of S$500,000 over 25 years, this translates to roughly S$2,100 of monthly installments, and means that it will cost the borrower around S$140,000 just in interest expense. Therefore, choosing one of the options at the top of the list below can help you save up to S$30,000 compared to the market average. Fixed rate loans in Singapore typically have fixed interest rates for up to 3 years, after which interest rates become "floating," meaning they change as reference rates like SIBOR change day to day. Calculations below assume a loan of S$500,000 with a tenure of 25 years.

Fixed Rate for Pte PropertiesInterest RateLock-InMonthly InstalmentsTotal Costs
UOB Fixed Rate Home Loan1.58% - 1.68%2 yearsS$2019 - S$2040$111,496
BOC Fixed Rate Home Loan1.48% - 1.82%3 yearsS$1995 - S$2069$118,852
DBS Fixed Rate Home Loan1.58% - 1.8%2 yearsS$2019 - S$2067$118,948
DBS Fixed Rate Home Loan1.68% - 1.8%3 yearsS$2042 - S$2068$119,464
BOC Fixed Rate Home Loan1.58% - 1.82%2 yearsS$2019 - S$2071$120,052
MB Fixed Rate Home Loan1.48% - 1.88%2 yearsS$1995 - S$2084$123,340
UOB Fixed Rate Home Loan1.88% - 1.88%2 yearsS$2090 - S$2090$127,000
MB Fixed Rate Home Loan1.5% - 1.99%1 yearS$2000 - S$2104$127,720
CITI Fixed Rate Home Loan1.52% - 2.05%2 yearsS$2004 - S$2121$133,492
CITI Fixed Rate Home Loan1.85% - 2.1%2 yearsS$2083 - S$2138$140,080
Average1.61% - 1.88%S$2027 - S$2085$124,044

When choosing a fixed rate loan, the most important part is minimizing total interest paid while keeping your monthly installments manageable. You should also consider the flexibility of a loan in terms of getting a refinancing after a few years, as refinancing can help you reduce your monthly installments. When choosing from our list above, bear in mind that the actual rates that you get may differ from the rates shown above because banks change their interest rates quite frequently. However, the above set of mortgage loan offerings from Bank of China and Maybank generally tend to offer the lowest fixed rates in the market. You can compare real home loan quotes using our tool as well.

Best Floating Rate Home Loan for Private Residence

As opposed to a fixed rate, you can choose to get a floating rate home loan to fund your private property purchase. Because banks typically charge a "spread" on top of reference rates (i.e. SIBOR and SOR), they continuously move over time, hence the name "floating." Typically, you can choose from 1-Month, 3-Months, 6-Months and 12-Months SIBOR or SOR rates (or other bank-designated rates like FDR), and you should choose based on your expectations on how market rates will move. As a rule of thumb, you should go with a long-term rate in a rising rate environment; in a declining to flat environment, go with a short-term rate.

As of September 2017, we found that the best floating rate home loans for private residences charge around 1.3% in annual interest. This compares to 1.67% for the average of floating rate home loans. For a loan of S$500,000 over 25 years, this translates to roughly S$2,000-S$2,100 of monthly installments, and means that it will cost the borrower around S$140,000 just in interest expense. Therefore, choosing one of the options at the top of the list below can help you save at least S$50,000 compared to some of the other offerings available in the market. Calculations below assume a loan of S$500,000 with a tenure of 25 years.

When choosing from our list above, bear in mind that the actual rates that you get may differ from the rates shown above because banks change their interest rates quite frequently. However, the above set of home loan offerings from Standard Charterd, DBS, UOB and OCBC generally tend to offer the lowest floating rates in the market. You can use our live home loan comparison tool to find the best deal in Singapore.

Best Refinance Home Loans

According to our sources, most people in Singapore refinance their homes every 2-4 times a year. While this might be due to the fact that rates have been declining, home loan refinancing certainly can be a great tool for homeowners. When refinancing your home loan, banks will often ask about the the interest rate you are currently paying on your home loan, and quote you a rate lower than that to win or maintain your business. Because of this dynamic, refinancing your home loan can help you get lower interest rates and thus reduce your monthly installment. However, you should also consider other factors like legal subsidies that can offset the savings you get from a lower interest rate. For details, you can look at our summary table at the bottom that shows different kind of fees associated with refinancing.

As of September 2017, we found that the best fixed rate home loans for refinancing charge around 1.58% in annual interest. This compares to 1.78% for the average of floating rate refinancing loans. For a loan of S$250,000 over 15 years, this translates to roughly S$1,600 of monthly installments, and means that it will cost the borrower around S$40,000 just in interest expense. Therefore, choosing one of the options at the top of the list below can help you save up to S$40,000 compared to some of the other offerings available in the market. Calculations below assume a loan of S$250,000 with a tenure of 15 years. When choosing from our list below, bear in mind that the actual rates that you get may differ from the rates shown above because banks will adjust their offer depending on what you are currently getting. You can also use our refinance home loan comparison tool to see the best deals currently available in the country.

Fixed Rate Refinance LoansInterest RateLock-InMonthly InstalmentsTotal CostsCategory
UOB Fixed Rate Refinance Home Loan1.58% - 1.68%2 yearsS$1561 - S$1571$32,540 HDB & Private
DBS Fixed Rate Refinance Home Loan1.58% - 1.8%2 yearsS$1561 - S$1583$34,412 HDB & Private
DBS Fixed Rate Refinance Home Loan1.68% - 1.8%3 yearsS$1572 - S$1583$34,544 HDB & Private
MB Fixed Rate Refinance Home Loan1.48% - 1.88%2 yearsS$1550 - S$1590$35,360 HDB & Private
MB Fixed Rate Refinance Home Loan1.5% - 1.99%1 yearS$1552 - S$1598$36,104 HDB & Private
UOB Fixed Rate Refinance Home Loan1.88% - 1.88%2 yearsS$1595 - S$1595$37,100 HDB & Private
HLF Fixed Rate Refinance Home Loan1.58% - 3.25%2 yearsS$1561 - S$1719$53,936 HDB
HLF Fixed Rate Refinance Home Loan1.7% - 3.25%3 yearsS$1574 - S$1727$56,276 HDB
HLF Fixed Rate Refinance Home Loan3.03% - 3.58%2 yearsS$1730 - S$1791$71,264 HDB
Average1.78% - 2.35%S$1584 - S$1640$43,504
Floating Rate Refinance LoansInterest RateLock-InMonthly InstalmentsTotal CostsCategory
DBS FHR 9 1.3% - 1.3%2 yearsS$1529 - S$1529$25,220 HDB & Private
UOB FDPR_15M 1.28% - 1.38%2 yearsS$1527 - S$1537$26,420 HDB & Private
OCBC 36mth FDMR 1.3% - 1.4%2 yearsS$1529 - S$1538$26,516 HDB & Private
DBS FHR 9 1.38% - 1.38%2 yearsS$1538 - S$1538$26,840 HDB & Private
UOB FDPR_15M 1.38% - 1.38%2 yearsS$1538 - S$1538$26,840 HDB & Private
SCB 3 Mth SIBOR 1.38% - 1.48%2 yearsS$1538 - S$1548$28,400 HDB & Private
SCB 1 Mth SIBOR 1.44% - 1.55%2 yearsS$1545 - S$1555$29,660 HDB & Private
OCBC 48mth FDMR 1.48% - 1.52%2 yearsS$1550 - S$1554$29,672 HDB & Private
SCB FDR 1.48% - 1.58%2 yearsS$1550 - S$1559$30,296 HDB & Private
OCBC 1 Mth SIBOR 1.55% - 1.65%2 yearsS$1557 - S$1568$32,108 HDB & Private
MB FDMR36 1.28% - 1.89%3 yearsS$1527 - S$1585$33,584 HDB & Private
UOB FDPR_15M 1.8% - 1.8%0 yearsS$1586 - S$1586$35,480 HDB & Private
Average1.63% - 2.14%S$1573 - S$1617$39,687

Best Jumbo-Size Home Loans

If you are looking to purchase a very expensive property, you may need to take out a jumbo home loan. Many banks in Singapore offer special rates for large loans, and sometimes they even have minimum loan requirements of S$1,000,000 or more. Loans above S$1,500,000 to S$2,500,000 could qualify for even better interest rates. Below, we feature some of the best jumbo home loans in Singapore for various categories. We break these out into HDB vs private residences, and also into fixed vs floating rates.

Best Jumbo-Size Home Loans for HDB

As of September 2017, we found that the best large home loans for HDB flats charge around 1.3% in annual interest. This compares to 1.6% for the average of jumbo home loans. For a loan of S$2,000,000 over 25 years, this translates to roughly S$8,000 of monthly installments, and means that it will cost the borrower around S$500,000 just in interest expense. That's a lot of money, so only those with very high income level can afford these loans (and the properties to go along with it). Savings from choosing one of the best loans is also gigantic, with savings up to S$200,000 compared to some of the other offerings available in the market. Calculations below assume a loan of S$2,000,000 with a tenure of 25 years.

Large Fixed Rate Mortgages for HDBsInterest RateLock-InMonthly InstalmentsTotal Costs
UOB Fixed Rate Home Loan1.58% - 1.68%2 yearsS$8074 - S$8162$446,488
DBS Fixed Rate Home Loan1.58% - 1.8%2 yearsS$8074 - S$8268$475,744
DBS Fixed Rate Home Loan1.68% - 1.8%3 yearsS$8169 - S$8271$477,628
MB Fixed Rate Home Loan1.48% - 1.88%2 yearsS$7980 - S$8336$493,348
UOB Fixed Rate Home Loan1.88% - 1.88%2 yearsS$8361 - S$8361$508,300
MB Fixed Rate Home Loan1.5% - 1.99%1 yearS$7999 - S$8418$511,396
CITI Fixed Rate Home Loan1.52% - 2.05%2 yearsS$8018 - S$8484$534,016
CITI Fixed Rate Home Loan1.85% - 2.1%2 yearsS$8332 - S$8553$560,596
HLF Fixed Rate Home Loan1.58% - 3.25%2 yearsS$8074 - S$9557$815,512
HLF Fixed Rate Home Loan1.7% - 3.25%3 yearsS$8188 - S$9596$836,296
HLF Fixed Rate Home Loan3.03% - 3.58%2 yearsS$9515 - S$10067$1,009,936
Average1.76% - 2.3%S$8253 - S$8734$606,296

Best Jumbo-Size Home Loans for Private Property

As of September 2017, we found that the best large home loans for private properties charge around 1.3% in annual interest. This compares to 1.6% for the average of jumbo home loans. For a loan of S$2,000,000 over 25 years, this translates to roughly S$8,000 of monthly installments, and means that it will cost the borrower around S$500,000 just in interest expense. As with HDB loans, choosing one of the options at the top of the list below can help you save up to S$200,000 compared to some of the other offerings available in the market. Calculations below assume a loan of S$2,000,000 with a tenure of 25 years.

Large Private Fixed LoansInterest RateLock-InMonthly InstalmentsTotal Costs
UOB Fixed Rate Home Loan1.58% - 1.68%2 yearsS$8074 - S$8162$446,488
BOC Fixed Rate Home Loan1.48% - 1.82%3 yearsS$7980 - S$8277$475,636
DBS Fixed Rate Home Loan1.58% - 1.8%2 yearsS$8074 - S$8268$475,744
DBS Fixed Rate Home Loan1.68% - 1.8%3 yearsS$8169 - S$8271$477,628
BOC Fixed Rate Home Loan1.58% - 1.82%2 yearsS$8074 - S$8286$480,712
MB Fixed Rate Home Loan1.48% - 1.88%2 yearsS$7980 - S$8336$493,348
UOB Fixed Rate Home Loan1.88% - 1.88%2 yearsS$8361 - S$8361$508,300
MB Fixed Rate Home Loan1.5% - 1.99%1 yearS$7999 - S$8418$511,396
CITI Fixed Rate Home Loan1.52% - 2.05%2 yearsS$8018 - S$8484$534,016
CITI Fixed Rate Home Loan1.85% - 2.1%2 yearsS$8332 - S$8553$560,596
Average1.61% - 1.88%S$8106 - S$8342$496,386
Large Private Floating Rate LoansInterest RateLock-InMonthly InstalmentsTotal Costs
SCB FDR 1.28% - 1.28%2 yearsS$7794 - S$7794$338,200
SCB FDR 1.3% - 1.3%2 yearsS$7812 - S$7812$343,600
DBS FHR 9 1.3% - 1.3%2 yearsS$7812 - S$7812$343,600
UOB FDPR_15M 1.28% - 1.38%2 yearsS$7794 - S$7879$361,660
OCBC 36mth FDMR 1.3% - 1.4%2 yearsS$7812 - S$7895$365,512
OCBC 15mth FDMR 1.3% - 1.4%2 yearsS$7812 - S$7895$365,512
DBS FHR 9 1.38% - 1.38%2 yearsS$7886 - S$7886$365,800
UOB FDPR_15M 1.38% - 1.38%2 yearsS$7886 - S$7886$365,800
SCB 3 Mth SIBOR 1.27% - 1.47%2 yearsS$7785 - S$7957$382,972
UOB 1 Mth SIBOR 1.55% - 1.65%0 yearsS$8042 - S$8130$436,888
MB FDMR36 1.28% - 1.89%3 yearsS$7794 - S$8315$478,912
Average1.64% - 2.03%S$8132 - S$8480$533,223

Best Home Loans for Property Under Construction

If you are looking to purchase a new property that's still under construction, you can still take out a home loan from banks. Banks offer a special kind of home loans for properties under construction that have zero lock-in period, so that you can refinance whenever you want. This feature could come in particularly handy when your property construction is complete and you want to get a better interest rate on your home loan. This is because home loans for properties under construction typically charge low interest rates in the first 2-3 years, but in later years charge rates that are higher than rates for normal home loans.

Best Home Loans for HDB Under Construction

As of September 2017, we found that the best home loans for HDB flats under construction charge around 1.72% in annual interest. This compares to 1.9% for the average of home loans for HDB flats under construction. For a loan of S$500,000 over 25 years, this translates to roughly S$2,000 of monthly installments, and means that it will cost the borrower around S$140,000 just in interest expense. Therefore, choosing one of the options at the top of the list below can help you save up to S$60,000 compared to some of the other offerings available in the market. Calculations below assume a loan of S$500,000 with a tenure of 30 years.

Mortgages for HDBs Under ConstructionInterest RateLock-InMonthly InstalmentsTotal Costs
UOB 3 Mth SIBOR Home Loan1.72% - 2.02%0 yearsS$2052 - S$2118$133,708
UOB FDPR_15M Home Loan1.3% - 1.4%0 yearsS$1953 - S$1974$91,444
CIMB 3 Mth SIBOR Home Loan2.62% - 2.87%2 yearsS$2273 - S$2333$198,460
Average1.88% - 2.1%S$2093 - S$2142$141,204

Best Home Loans for Private Property Under Construction

As of September 2017, we found that the best home loans for private properties under construction charge around 1.3% in annual interest. This compares to 1.6% for the average of home loans for private residences under construction. For a loan of S$500,000 over 25 years, this translates to roughly S$2,000 of monthly installments, and means that it will cost the borrower around S$130,000 just in interest expense. Therefore, choosing one of the options at the top of the list below can help you save around S$50,000 compared to some of the other offerings available in the market. Calculations below assume a loan of S$500,000 with a tenure of 25 years.

Floating Rate for Pte Under ConstructionInterest RateLock-InMonthly InstalmentsTotal Costs
SCB FDR 1.3% - 1.3%2 yearsS$1953 - S$1953$85,900
OCBC 15mth FDMR 1.3% - 1.4%0 yearsS$1953 - S$1974$91,444
UOB FDPR_15M 1.3% - 1.4%0 yearsS$1953 - S$1974$91,444
MB FDMR36 1.28% - 1.89%0 yearsS$1948 - S$2079$119,788
DBS FHR 9 1.85% - 1.85%0 yearsS$2083 - S$2083$124,900
BOC 3 Mth SIBOR 1.87% - 1.87%0 yearsS$2088 - S$2088$126,400
SCB 3 Mth SIBOR 1.7% - 2%0 yearsS$2047 - S$2111$130,996
CITI 1 Mth SIBOR 1.45% - 2.1%0 yearsS$1987 - S$2125$132,664
Average1.62% - 2.07%S$2028 - S$2127$135,025

How to Choose the Best Home Loan

Home loans are some of the most complicated financial products for consumers. They may look simple on the surface, a quick research through the market will make you realize that looks can be quite deceiving. Not only are rates constantly changing, the favorable product varies depending on the market environment. Not only that, there are over 15 documents that you need to sign when getting a home loan. Because of these complexities, we highly recommend that you consult a mortgage broker when shopping for a home loan.

However, this doesn't mean that you should blindly follow whatever the broker says. Below, we have prepared a short guide on how to choose the best home loan, so that you can make more informed decision and get more value out of your broker as well.

Choosing a Home Loan: Interest Expense & Refinancing Cost

According to our research, about 80% of home loan shopping decision process is dependent on the interest rate, which is obvious because interest rates account for the vast majority of a home loan's cost. 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.

Comparing average interest rates of home loans in Singapore by property type, categorized by floating rate and fixed rate
Average Interest Rates of Home Loans as of Sept 2017

Besides interest rates, the remaining 20% should dependent on the loan's flexibility in terms of allowing you to refinance at your convenience. According to our research, most Singaporeans refinance their home loans every 2-4 years, likely due to the fact that interest rates have been declining and people have been eager to better rates. This means that you have to watch out for restrictions and fees like lock-in periods, legal fees, valuation fees and fire insurance premiums, which could eat into your savings in interest.

For instance, consider a home loan of S$500,000. You used to pay 2% of interest, but you are getting it refinanced to 1.5% per year, resulting in S$2,500 in annual savings. However, legal fees in Singapore can cost you about S$2,500, while valuation fees can be around S$500 to S$1,000. Some banks even charge you additional fee if you refinance your loan during lock-in or interest-resetting periods. Therefore, it's extremely important that your bank offers subsidies for your legal fees. Some banks even provide their in-house valuer for free, which can save you another S$1,000. Below is a list of fees that you need to watch out for, as well as banks that provide various subsidies for these fees.

Various Fees Involved in Refinancing

Miscellaneous Fees In RefinancingCostBanks That Provide Subsidies
Legal FeeS$2,500DBS, POSB, Citi, UOB, Maybank, OCBC, ANZ, SCB, RHB
Valuation feeS$500-S$1,000ANZ, SBI, HLF
Fire InsuranceS$120/annumANZ, SBI
Partial/Full Redemption Fees1.5%SCB
Cancellation Fees1.5%Only 1% @ SBI, ANZ, 2% @ DBS, POSB
Pricing Reset Date Penalty0.5%-1.5% of amount prepaid*Charged by Citi and Maybank

Fixed Rate vs Floating Rates: Which Is Better?

One of the most difficult questions to answer when choosing a home loan is whether to choose a fixed rate loan or a floating rate loan. It's difficult to say that fixed rate is always better than floating rates, and vice versa. What really matters is how rates will behave in the next 2 to 4 years while your loan is locked up, and how that impacts your overall cost. A longer time horizon is less relevant because you can always refinance your loan after the 3rd year quite easily. Below, we discuss a few possible scenarios that you must consider, and whether fixed or floating rate is more preferable in each of the situations.

Flat to Declining Interest Rates

When overall interest rates are stable or declining, it's generally more advisable to choose a floating rate home loan. Floating interest rates tend to be lower than fixed rates because banks are willing to take a lower rate for the opportunity to charge you higher rates as soon as it begins to move upwards. A fixed rate, on the other hand, will guarantee a certain rate for the borrower for a long time, so banks charge a premium for these in low-rate environments. In the table below, we show the difference in average floating rates and fixed rates for new home loans as of September 2017.

Property TypeAverage of Fixed RateAverage of Floating Rate
HDB2.24%2.07%
Private1.86%2.05%

Rising Interest Rate

When overall interest rates are rising, it's generally more advisable to take out a fixed rate home loan than a floating rate loan. Although fixed rates tend to be a bit higher than floating rates in general, they provide an opportunity to save future cost when market rates rise in a meaningful way. For instance, consider a hypothetical scenario where you have the option of paying 1.5% fixed rate for the next 3 years and another option of paying a floating rate of 1% for now. Soon after you take out the loan, central banks all over the world decide to begin raising their interest rates. This means that, by the second year, you might end up paying 2% to 2.5% in floating rates while your fixed rate is still only 1.5%. A difference of 1% may not sound like a huge difference; however, when you are considering a loan of S$500,000, a difference of 1% can mean difference of S$5,000 annual interest you are paying to the bank.

Comments and Questions