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18 Dec 2018

Comparing various mortgage options

SINGAPORE

Taking up a home loan is a huge financial responsibility. Moreover, not every home loan available in the market may be the right fit for you. An ideal home loan should help fulfil your dream of home ownership without straining your budget. On the other hand, choosing the wrong home loan can land you in a precarious financial situation. Hence, it’s always advisable to undertake a thorough home loan comparison and make an informed buying decision. Besides obvious factors like interest rates and loan amount, there are various other considerations that you need to compare in order to choose a loan that fits your budget seamlessly. Here’s how to compare home loans in Singapore:

Compare Mortgage Interest Rates
Home loans generally offer two types of interest rates i.e. fixed interest rate and floating interest rate. If you opt for a mortgage with a fixed interest rate, the rates will stay the same during the entire loan tenure. Alternatively, a home loan with floating rates offers fluctuating interest rates which changes according to Compounded SORA (Singapore Overnight Rate Average) or Bank’s Board Rates. Both types of interest rates have their own advantages and disadvantages.

A fixed rate loan gives you stability and helps you plan your finances better as you’ll know exactly how much to pay each month. However, on the downside, fixed interest rates are usually a little higher than floating rate loans.

On the other hand, floating rate loans generally have lower initial rates as compared to fixed rate loans. However, the rates tend to increase or fall with time as they follow the benchmark rates of Compounded SORA or Bank’s Board Rates. If you are anticipating a fall in the benchmark rates, choosing a floating rate home loan will be a more favourable option.

Compare LTV
LTV or Loan-To-Value is one of the key criteria for mortgage comparison. LTV refers to the quantum of loan that a mortgage lender is willing to offer as a percentage to the valuation or purchase price, whichever is lower, of the property in consideration. While most of the mortgage buyers would want to obtain the maximum allowable loan to value ratio of 75%, the actual LTV offered by lenders will depend on several factors such as quantum of loan, your credit conduct, repayment period etc.

Compare Home Loan Costs and Fees
A home loan entails various costs and fees which may be applied initially or at a later stage of the loan. Therefore, it a wise move to understand and compare the various fees associated with home loans. Look out for costs such as:

Pre-payment Penalties
A few years down the road, you may want to make a partial or full repayment of your mortgage. Certain mortgage lenders impose a penalty for pre-payment of the loans as they will lose out on the potential interest payments for the rest of the loan tenure. The pre-payment penalty can be substantial, up to about 1.5% of the redeemed loan amount.

Refinancing Charges
Refinancing your mortgage can be advantageous, especially if your property has gathered equity. Hence, if you are planning to refinance your home loan in the years to come, make sure to compare the refinancing charges before choosing a home loan.


Disclaimer

The information contained in this document (“Information”) is for general information and/or educational purposes only and does not have regard to the investment objectives, financial situation or particular needs of any specific person. No part of the Information may be reproduced, copied in any manner or distributed to third parties without the prior written permission of Citibank Singapore Limited (“CSL”). The Information is provided “as is”, without warranty of any kind, it has not been independently verified by CSL, its related entities and their respective officers, employees, directors and agents (collectively, the “CSL Group”). Use of the Information is at your sole risk. 

The CSL Group shall not be liable and expressly disclaim liability for any error or omission in the content of the Information, or for any actions taken by you or any third party, in reliance thereon. The Information is not guaranteed to be error-free, or to be relied upon for investment purposes, and the CSL Group makes no representation or warranty as to the accuracy, truth, adequacy, timeliness or completeness, fitness for purpose, title, non-infringement of third party rights or continued availability of the information.

To the maximum extent permitted by law, the CSL Group shall not be liable for any loss or damage of any kind whatsoever (including, without limitation, any special, consequential, incidental or indirect damages, or damages for loss of profits, business interruption, and any and all forms of loss or damage, regardless of the form of action or the basis of the claim, whether or not foreseeable) arising out of the use of the information (provided in any medium), even if any member of the CSL Group, has been advised of the possibility of such loss or damage.


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