Many home buyers look for a mortgage loan with the lowest interest rate. They should look at the other details of the mortgage packages and choose a package that is most suitable for their needs.
Different types of mortgages
Here are three common packages:
• Floating rate package
• Fixed rate package
• SIBOR /SOR package
More details can be found at:
http://www.mortgagesense.com.sg/home-loan-packages
Floating rate package
The interest can be adjusted at the bank's discretion. It is usually calculated on the board Mortgage Rate less a fixed discount (which can vary for each of the first three years). The board rate may be changed at the bank's discretion, which will change the interest rate payable by the borrower.
For example, if the board rate is 4.5% and the fixed discount in the first year is 3.82%, the borrower pays a discount interest rate of 0.68%. If the board rate is increased by 0.5%, the discounted rate will also increase by 0.5%
Fixed rate package
The Interest rate for the first few years is upfront fixed by the bank. The borrower is not affect by interest rate adjustment. The interest rate is usually higher compared to the floating rate package.
For example, the interest rate for the first three years can be fixed at 1.18%, 1.68% and 1.98% respectively and thereafter 3.75% for another three years with a 3 year lock-in period.
SIBOR / SOR package
The interest rate is calculated on the base rate plus a fixed spread. The base rate is available for 1, 3, 6, 9 or 12 months. At the end of each period, the interest rate is recalculated according to the market rate.
For example, the borrower may pay the 3 month SOR rate plus a fixed spread of 0.75%. If the SOR rate is 0.5%, the borrower pays 1.25% for 3 months. This rate will be revised every 3 months. There is no lock-in period under this arrangement.
Lock in period
The borrower should take note of the lock in period. If the loan is terminated earlier, e.g. due to sale of the property, the borrower has to pay a penalty, which is usually 1.5% of the outstanding home loan.
Clawback period
Many banks provide a subsidy to cover the legal fee, valuation fee and fire insurance, which could be as much as $4,000. If the loan is terminated within the claw back period of 3 years, the borrower usually has to repay the subsidy in full (i.e. not pro-rated) to the bank. The actual terms may vary from one bank to another.
Borrow what you need
You should borrow only the amount of loan that you need. If you borrow less, you will pay less in interest.
Keep some money for rainy days
You should have liquid savings at least 12 months of your installments. This may be needed to meet the mortgage payments, in case you lose your job.
Websites
Here are some websites for you to find the mortgage packages that are available. You may find it easier to go through to these aggregator websites, rather than try to call or visit the banks individually. You can engage the service of the website owner to advise you and help you to apply for the loan.
www.smartloans.sg
This is a self-service website. The home seeker keys in the details and see the details of available home loan packages.
www.housingloansg.com
The owner of the website is a pioneer of mortgage broking. He has given many seminars and talks.
www.mortgagesense.com.sg
This website aims to provide a personal touch. It engages the clients and understand their needs before recommending any package. It educates the consumers and compares the packages for them. For every successful closure, it promises to makes a donation to charity.
