Choose Best Home Loan | Bank Loans vs HDB Loans in Singapore

Home Loans | Loans

Have you set your sights on a new house? Looking for the finest Singapore home loan? Are you evaluating interest rates on the market and preparing to lock in the best deal? Given that a house loan is the largest and longest-term financial obligation that you will face, you must prepare well beforehand. In this blog, we tell you how to choose the best home loan in Singapore. When it comes to picking a home loan, a crucial factor is the type of property you own. There are four types:

• HDB BTO (under construction)
• HDB flat (resale / completed BTO)
• Private property (under construction)
• Private property (built)

Private v/s Public Property

Of course, most of us are aware of the HDB Housing Loan. And it is the “default” choice for many Singaporeans purchasing their first house. If you have enough CPF funds, it is arguably the most forgiving of house loans. HDB loans need you to pay practically nothing in cash. However, it only applies if you are purchasing public housing. Although HDB apartment purchasers can take out a bank loan. If you’re purchasing a home on your own, your options are limited to bank loans. And if the property is still under construction, whether HDB or private, the only bank loans accessible to you are floating loans.

Choose Best Home Loan in Singapore

Home Loans – HDB BTO 

The typical path for young couples looking for HDB BTO is generally a HDB concessionary loan. As this does not need a cash downpayment (if you have enough CPF). However, it comes with many qualifying requirements. For example, a combined income cap of $14,000, as well as a 2.6 percent interest rate. On the other hand, banks have minimal eligibility requirements. They are mostly concerned about your ability to repay them. Unfortunately, because banks generally only offer variable rate packages for unfinished homes, there is a risk.

A variable rate is exactly what it says on the tin: The interest rate is variable and is tied to either the bank’s fixed-rate or the SIBOR interbank rate. So, not only will you have to pay more in cash and CPF for a bank loan downpayment. But also your monthly repayments will be susceptible to all kinds of volatility. When it comes to floating interest rates, the lower the peg, the better. But keep in mind that if something can go down, it can also go up. So, if you qualify for a HDB loan, you’ll have to determine whether the risk is worth it for the amount of money you’ll save.

Home Loans – HDB resale / built BTO 

You have a lot more alternatives if you’re purchasing a completed HDB flat (i.e. resale) — or if you’re refinancing for a newly-built BTO, for example. When purchasing a HDB resale property, you may or may not be qualified for a HDB loan, depending on your income. If you qualify, the HDB loan is typically an excellent choice since it needs a lesser downpayment and is much more flexible — you may, for example, borrow a modest amount and make partial or whole repayments without penalty if you repay early. When it comes to bank loans, a finished HDB apartment also permits you to borrow at a fixed rate.

Home Loans for Private Property (BUC) 

If you’re financing a private home that’s still under construction, you won’t be able to get a HDB loan. Therefore you’ll have to go with a floating rate package from private banks. Banks only provide variable rates for buildings under construction (BUC) – you won’t have the security and predictability of a fixed rate.

You’ll probably be asked to pick between a house loan package that’s (a) linked to the SIBOR or (b) pegged to a bank-set rate (commonly abbreviated as “MBR” or “FHR”). It’s more crucial to choose an underlying interest rate structure that you’re happy with, regardless of whether the bundle offers the best rate right now. Interest rates are often constructed as [benchmark] + [spread], where [benchmark] is either SIBOR or a board rate, and [spread] is the bank’s “profit.” Understand all the factors and options to choose best home loan in Singapore.

Personal loans in Singapore