A Mortgage Loan is financing obtained from a bank or credit union for the purpose of purchasing or building a property. Such loans are secured against the said property in that the bank holds the title of the house until the mortgage is in effect and reserves the right to sell the property if the borrower fails to make payments.
A fixed interest rate Mortgage Loan has a predictable monthly repayment schedule throughout the loan tenure as rates are not affected by fluctuations in Board Rates or SIBOR. Interest rates are calculated based on the cost of acquiring the funds to lend to the borrower plus an interest premium imposed by the bank.
There are two variants of floating interest rate Mortgage Loans offered by banks in Singapore; the first being a variable interest rate Mortgage Loan whereby interest rates are calculated based on the bank’s <h3″>Board Rate
minus a discount stipulated in the Letter of Offer.
The second variant of floating interest rate Mortgage Loan is one with an interest rate that fluctuates in tandem to changes to the <h3″>Singapore Interbank Offered Rate (SIBOR).
These loans uses a 1 month or 3 months SIBOR rate as a benchmark to determine the final interest rate charged to customers.
Floating interest rate packages are suitable for buyers who want to capitalize on the current low interest rates but also open themselves to the risk that market interest rates may increase in the future.
A promotional interest rate for every new package is usually offered for the first few years of the loan tenure. This rate is generally lower than the rate that applies to the remainder of the loan tenure (i.e. the period after the promotional period). It is important to be aware of the increase in monthly payment after the promotional period.
The first step to apply for a Mortgage Loan in Singapore is to approach a bank to perform your Loan Eligibility Check (AIP) which will give you a clearer idea as to whether you are eligible for a loan.
Afterwards, you can use Mortgage Loan calculator to check all the possible options.
Upon application, the bank will perform the following due diligence which will determine whether your loan application is approved or rejected:
As a general rule, your monthly long-term repayment commitment must not exceed 40% of your monthly income.
Banks usually grant loans with a minimum tenure of 5 years up to a maximum tenure of 30 years subject to the condition that you must not exceed the age of 70 years old at the end of the loan tenure.
Interest rate on loans vary according to the type of property and the type of Mortgage Loan package a borrower takes up.
To get a banker to speak to you regarding the Mortgage Loan fill up the Contact form below.