Deciphering home loan packages and interest rates

Deciphering home loan packages and interest rates

Whether you are a first-time homebuyer or looking into investing in a property, securing the right housing loan package that suits your financial needs is of utmost importance.

In Singapore, the major banks offer highly competitive housing loan interest rates and packages.

Understanding the differences between these packages and their impact on your financial commitment will help you decide on the most suitable housing loan package.

What are the different housing loan packages available, and who is more suitable for each type of package?

Fixed rate packages

For fixed rate packages, the interest rates indicated are fixed and guaranteed for the initial few years. Specifically, there are packages with fixed rate for the first year only or with fixed rates for up to two to four years.

Fixed interest rates for the initial years are calculated by the bank based on the cost of getting the funds to lend to the customer plus a spread.

For most banks' fixed interest rates housing loans packages, the fixed rate is for the specific number of years stated in the Letter of Offer.

Thereafter, the rates will be based on the bank's Board Rates minus a discount stated in the Letter of Offer.

Fixed rates housing loans are more suitable for individuals who want their monthly instalments to remain stable.

As the interest rate is fixed for the lock-in period, the monthly instalments will be fixed and will not change at all.

This will allow the individual to plan their finances in advance with more accuracy and stability.

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