Deciding on the best bank housing loan is one of the most weighty decisions you may make in your life. A wrong choice can result in regrets that span decades. 

While deciding whether to buy a home is rather straightforward, settling on the most appropriate housing loan package can be confusing and challenging. 

There are so many questions to consider when it comes to home financing. 

These include: Which bank housing loan is best? What is the right loan amount? How do you figure out the best interest rates? 

Our article sheds light on these concerns, and more. After you finish reading this blog post, you should be able to easily determine the answer to the question “which housing loan is best?”

How To Get A Bank Home Loan

Getting a bank home loan in Singapore can be a daunting process. Before starting the process of getting a home loan, it is important to establish the kind of home you want.

If not, it might be hard to establish which bank would offer the best deal.

There are two ways of going about identifying the right home loan package. One, you can decide to rely on the expertise of your property agent. Two, you can work with a mortgage broker. 

A mortgage broker can help you identify the best home loan and point out the right bank to work with. 

He or she does this by comparing home loans in terms of their lock-in periods, interest rates, and other variables.

After selecting the bank of choice, it is time to determine the maximum loan amount. Make these calculations with a home mortgage loan calculator using either the Mortgage Servicing Ratio (MSR) or the Total Debt Servicing Ratio (TDSR). You can also use a TDSR calculator. 

The next step is to get the In-Principle-Approval (IPA) issued by a bank. It indicates the maximum amount it is willing to lend for your property purchase. It also shows the loan tenure and expected monthly repayments. 

Finally, it is time to pay the Option To Purchase (OTP) fee and commence the loan application process. 

Since the bank has already assessed your credibility during the IPA application, approving the loan is much easier. 

Types Of Home Loans

In Singapore, homes fall into either of the two main categories: private properties and HDB flats. These are the three sub-categories for private properties: 

• Condominiums
• Executive condominiums
• Homes built on private land

Similarly, a HDB flat could be a: 

• Resale flat
• Build-to-Order (BTO)
• Sale of Balance Flat (SBF)

There are different loans for acquiring homes in either of the two categories. If you intend to buy a private property, you can consider getting a bank loan. 

If you are considering buying a HDB flat, you can apply for a HDB or bank loan.    

Home Loans For HDB And Private Properties

To buy a HDB flat in Singapore, you have the option of applying for the HDB housing loan. However, you have to meet its conditions to qualify for the loan. 

For example, the loan is only available to Singapore’s citizens. For married couples, at least one spouse should have Singapore citizenship to qualify. There are also income ceilings with this option.  

To buy a private property, you can get a loan from banks and other financial institutions. 

There are several existing loan packages to choose from in the market. If your home has yet to be built, consider choosing a loan package that does not have a lock-in period to make refinancing easier after your home is ready. 

For completed properties, you can choose from an array of packages with floating or fixed interest rates in the market. We’ll explain these later. 

HDB Loan Vs Bank Loan

Deciding between a HDB loan and bank loan depends on your risk profile and financial capabilities.

If you’re doing well financially, you may not qualify for HDB even if you apply. To qualify for a HDB loan, your monthly income should not exceed $7,000 if you are single. The income ceiling for a family is $14,000, and $21,000 for an extended family. 

HDB loans have a fixed interest rate of 2.6%. Also, they do not penalise early repayments and allow you to borrow up to 80% of your property’s value as of 30 Sep 2022. 

In contrast, bank home loans start with an interest rate of between 1.55-1.85%, depending on the lender. 

Banks also charge a 1.5% penalty on early repayment and can lend up to 75% of the property’s total value. 

While HDB loans seem to offer better terms than bank loans, they are rather restrictive. For example, they are only available for HDB flats. 

If you’re thinking of buying a private residence, you’ll have to go the bank loans route.  

Also, to qualify for a HDB loan, you should not own any private residential property. Disposing of a private property within 30 months before the time of the application also disqualifies you. 

Furthermore, the HDB eligibility criteria dictates that a borrower cannot apply for a third loan. With bank loans, you can apply as many as your credit score allows.

In terms of payment leniency, the HDB option is the way to go. 

For banks, a late repayment attracts a $50 fee per payment. So if your monthly repayment is $1,000 and you fail to pay on time, the bank will charge you $1,050. 

For HDB, you will be charged a 7.5% per annum late payment fee.   

Fixed Home Loan Rates Vs Floating Home Loan Rates

For fixed home rates, the lender determines and sets the interest rate of the facility before the loan tenure commences. In other words, you already know the interest to pay on a loan beforehand. 

This option makes it possible for you to enjoy equated monthly installments throughout the repayment period. The interest rate remains constant for the entire period, regardless of market shocks.

For floating home loan rates, the interest rate changes in response to the market fluctuations. 

With floating home loan rates, it is impossible for you to determine the exact cost of a loan before the tenure begins. To ease the inconvenience, banks provide fixed interest rates for the lock-in period after which floating rates will apply. 

In Singapore, there are two types of floating interest rates: board rates, and Singapore Overnight Rate Average (SORA) floating rates.      

How To Choose The Best Home Mortgage Loan in Singapore

Choosing the most appropriate home mortgage loan in Singapore can be challenging and confusing. 

There are so many factors to consider: type of rates, different lock-in periods, fee penalties, loan terms, and other variables. 

Here are three factors that can help you to make the best mortgage loan. 

1. Loan Duration

The repayment period determines the total profit for the lender. From the borrower’s perspective, affordability matters. 

Unfortunately, most people assume that low monthly repayments equal affordability. Not so – you actually end up paying more interest. 

For a home loan of $500,000 with an interest rate of 2.5%, a tenure of 10 years will result in $65,560 in interest costs. 

The same loan amount spread over 30 years would give a lender $211,360 profit in interest costs.  

1. Duration Of The Lock-In Period

During the lock-in period, interest rates remain low and predictable. This is when banks actually offer lower rates than HDB loans. 

It is important to note that these rates will start rising as soon as the lock-in period ends. Banks use low rates in these periods as indicators of “affordability” to entice prospective borrowers. 

Once the borrower has taken the bait, the lender increases the rates after the lock-in period expires. 

In this regard, ensure that you choose the package with the longest lock-in period and the lowest interest rates.

1. Early Repayment Fees

Since longer tenures benefit the lender at the expense of the borrower, try to repay your loan in the shortest time possible. 

For this reason, shop for the package with the lowest early repayment fees.   

Which Bank Has The Best Floating Home Loan in Singapore?

In the table below, you can see a list of bank housing loans* and their respective interest rates:

Bank	Loan PEG	YR 1	YR 2	YR 3	YR 4	YR 5	YR 6
DBS	FHR6 +	2.70	2.70	2.70	2.70	2.70	2.70
Standard Chartered	3M-SORA+	2.78	2.78	2.88	3.53	3.53	3.53
Standard Chartered	3M-SORA+	2.83	2.83	2.88	3.53	3.53	3.53
Maybank	3M-SORA+	2.83	2.83	2.98	3.43	3.43	3.43
OCBC	3M-SORA+	2.83	2.83	2.98	3.18	3.18	3.18
Standard Chartered	3M-SORA+	2.83	2.88	2.98	3.53	3.53	3.53
Citibank	3M-SORA+	2.88	2.88	2.98	3.28	3.28	3.28
DBS	3M-SORA+	2.93	2.93	2.93	3.43	3.43	3.43
OCBC	3M-SORA+	2.83	2.83	3.18	3.18	3.18	3.18
HSBC	3M-SORA+	2.98	2.98	2.98	3.43	3.43	3.43

*Information correct at time of publication  

Choose A Bank Housing Loan That You Can Repay

So which bank housing loan is best?

This is not an easy question to answer, as it is an equation with several variables. You need to understand how the process goes. 

Moreover, be clear about the pros and cons of the various options available. You may need to engage a housing agent or mortgage broker to choose the most appropriate deal for you. 

There will never be the most appropriate time to take the first step towards home ownership. 

If you do not have the funds to commence your home ownership journey immediately, talk to BST Credit, a trusted licensed money lender in Singapore. We offer expert advice and affordable loans. 

Get help from our friendly loan officers or get started by applying for a loan now.