A Guide to Home Loans in Singapore

Singapore has a number of opportunities for individuals looking at making it big in the business world. Once you’ve zeroed in on your dream home, finding ways to finance it might prove a daunting task, with the sheer number of choices available in the market. When looking for credit to finance your home, you can navigate the sea of options with the handy guide given below. Compare loans and rates offered by different banks so you can find one that comes with a good repayment plan and a low interest rate. The first question in prospective loan seeker’s minds is the amount they can borrow. This would be determined by the income you draw every month. The value of the home you’re considering and its purchase price would also be factors. In Singapore, banks make use of certain criteria when deciding on the house loan amount to be disbursed. These credit assessments, coupled with MAS guidelines, make it difficult to quantify how loan amounts are determined. Fewer expenses per month and a high income would boost a home loan application. Individuals would also want to know about the kind of loans available. This sometimes gets confusing, with the various names and descriptions given to loans. There are basically two categories of loan in Singapore- one with a fixed rate of interest, and the other with an adjustable rate, which would change during the loan tenure. A fixed rate loan is one where the rate of interest remains constant throughout the tenure of the loan. This would be a good idea if you are looking at planning your loan repayments, as you would be able to budget accordingly. Such loans offer the security of an interest rate that would remain constant irrespective of market conditions. However, Singapore has a tenure of 5 years only on such loans. If you choose a longer tenure, the interest rate would change once the 5 year term is up, becoming one with a floating rate of interest. While the rate of interest stays constant, you should check with your bank regarding the details of the loan as the terms and conditions could vary from bank to bank. This is especially true in the case of penalties for late payment. Adjustable Rate Mortgages (ARM’s) are more popular when it comes to loans. The interest rates change over the period of the loan tenure in such a loan. Some loan seekers prefer such a loan to a fixed rate loan as there is a possibility of the rate going lower as the time period progresses. However, the flip side of this is the interest rates could increase significantly, which could make repayment difficult. Depending on the amount of risk you are willing to take, you could choose a property loan with a fixed interest rate or one with a fluctuating rate. The above points provide information on housing loans in Singapore in a nutshell. You should always contact the bank for further details and understand the terms of the loan you would be applying for. Please share your points and add value. Thanks :)