When you are looking around for the best house loan Singapore that suits you, the natural first thing that comes to your mind would be the interest rates that you are going to pay for the Singapore house loan.
Before you go about deciding that you only want the lowest housing loan interest rates in Singapore, it would help you a lot in your search by having a little knowledge about how housing loan interest rates can work.
Generally, there are 2 types of interest rates. There is the fixed interest rate and the floating interest rate. Fixed interest rates are easier to comprehend for the layman. It basically means that interest rates will be fixed for the life of the mortgage.
Because of the fluctuation of the market interest rates, many people are going for floating interest rates when it comes to their housing loan in Singapore. Depending on the loan package that you decided to take up, the period of housing loan interest rates can vary according to the stipulated terms of the mortgage loan offer.
The market interest rates that your house loan is benchmarked to is most commonly the SIBOR or SWAP rate. These are rates determined by the Association of Banks in Singapore. The rates are publicly available. So don’t have to worry about whether your bank is pulling a fast one on you. When your home loan is pegged to SIBOR or SWAP, a margin will be added onto the pegged interest rate. An example is SWAP + 0.5%. In this case the interest will be the SWAP rate + 0.5%. Note that there are also different variations on SIBOR and SWAP. They are categorized from a time frame. You can be on a 1-month SIBOR or 3-month SIBOR, etc. So be aware of which variation your housing loan is structured.
You may also come across the term “board rate” in your search for the best housing loan. The board rate is the rate that the bank has to charge you at the minimum so that they do not make a loss. So if you are a premium customer and lucky enough to get a house loan Singapore on only the board rate, you will be the envy of a lot of people. There can also be instances where your interest rate is charged at a stated premium above the board rate. Example Board Rate + 0.5%. Ask the banker what is the board rate, pull out the housing loan calculator and you will find out your house loan interest rate by adding the premium.
If you are eligible for a HDB concessionary loan, the interest is 0.1% above the CPF rate. The CPF rate has not been amended for a number of years.
Knowing the housing loan interest rates that you will be paying, the next step you can do is to use the home loan calculator to calculate the interest portion and principal portion of the monthly installment that you will be required to pay. With a proper home loan calculator, you should be able to tell how much total interest you will be paying at different periods of the loan tenure.
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