Best Mortgage Home Loan Rates in Singapore

How to choose the best home loan?

1. Types of home loans

The first thing that you have to consider is whether you want a loan that has a fixed or floating interest rate, which largely depends on your risk appetite.

Homebuyers buying an HDB flat have the option of taking up an HDB loan as opposed to a bank loan. Although HDB's home loan generally has a higher interest rate, it is maintained at a fixed rate and requires a 20% down payment, compared to the usual 25% down payment for bank loans.

2. Interest rates

Though you may think interest rates make up a very small proportion of the property price, you’ll be surprised at how much extra you’ll have to fork out when accumulated. This is why shopping around for a loan that has a low interest rate can save you up to thousands of dollars.

Interest rates are always changing due to volatile market conditions and differ from bank to bank, so be sure not to settle for the first bank loan you lay your eyes on.

It’s worth noting that banks usually offer lower spreads (the rate you see after “+”) and hence lower “promotional” rates for the first few years before increasing it back to a higher rate thereafter.

3. Lock-in period

With most bank loans, the lock-in period is usually between two to five years. If you decide to make prepayments or cancel your home loan before the lock-in period ends, you’ll be charged a penalty (usually 2% to 5% of your outstanding loan amount)

This is the bank’s way to cover its base as banks typically offer promotional rates in the first few years with a lower interest rate, incentivising buyers to be “locked in”.

 If you’re purchasing a home that is still under construction, also known as Building Under Construction (BUC), consider a bank loan with no lock-in period, so you can decide to refinance any time when your home is completed.

Learn More About Home Loans Before You Apply With Our Guides

• Home Loans In Singapore (2024): Best Mortgage Rates To Consider

• Loan-to-Value Ratio & Limits In Singapore

• Everything You’ve Ever Needed to Ask About HDB Downpayments

Get To Know The Ins and Outs of Home Refinancing Below

• Refinancing vs Repricing Home Loan: What’s The Difference?

• What is Cash Out Refinancing, and How Can Singaporeans Use It?

• Should You Pay Off Your Mortgage Faster, Or Invest Your Money?

Find Out Which Home Loan Best Suits You With These Blogs

• Fixed vs Floating Home Loan Rates: Which One Is Suitable For You?

• Getting A Bank Loan For HDB vs A HDB Housing Loan – What’s The Difference?

• What Is A SORA-Based Home Loan And How Does It Work?

Fixed home loan rates vs floating home loan rates

Fixed interest rates 

Fixed interest rates simply mean that the interest rate will be maintained during the entire period of the mortgage agreement. This gives you stability and consistency, making it handy when you plan out your finances every month since the monthly mortgage repayments are always static at a specific amount.

Fixed interest rates are great for those with a low-risk appetite since the interest rates will not increase due to market fluctuations, though they are usually set higher than floating rates.

Since these rates are fixed, they are not pegged to market or board rates during the lock-in period. However, once the period is over, the prices will be pegged, making it a great time to refinance if you find lower rates in the market.

Floating interest rates 

On the other hand, floating or variable interest rates are subjected to volatile market fluctuations, and are pegged to Singapore Interbank Offer Rate (SIBOR),which will be discontinued after 31 December 2024, Singapore Overnight Rate Average (SORA), Board Rate or Fixed Deposit Home Rate (FHR) that changes according to the index.

They are usually better for those who have a higher risk appetite. Dips in the market interest rates can translate into more savings for the month, while any increase will have you paying higher amounts.

Despite this, do note that most banks will usually inform you 30 days in advance when interest rates change, giving you the option to refinance, which is a full repayment of your existing home loan, or refinance your loan to another competitor lender because of their lower interest rates.

When it comes to SIBOR rates, banks usually offer either 1M SIBOR (1-month SIBOR) or 3M SIBOR (3-months SIBOR), which essentially means that the rates are revised every one or three months, depending on the loan package you choose. If you’re looking for a less volatile package, go for the 3M SIBOR, as rates only change every three months, making it less volatile and less risky.

Frequently Asked Questions (FAQs)

How to apply for a home loan?

HDB loan

As long as you have a successful HFE letter that’s valid, you can easily apply for an HDB concessionary housing loan on the HDB website by logging into your Singpass.

If you’re buying a new flat, the HDB staff will walk you through the process of applying for one when you go down for your appointment.

Do note that if you’re getting a resale flat and are intending to get an HDB housing loan, you must have a valid HFE letter from HDB before the sellers may grant you an OTP.

Bank loan

Once you’ve confirmed your eligibility and shopped around for the best rates, you can either apply directly on the bank’s website or leave your contact details for the bank to get in touch with you. 

Do note that for a resale flat, if you intend to get a bank loan, you must have a valid Letter of Offer (LO) before you exercise the Option To Purchase.

What are SORA and SIBOR?

Both SORA and SIBOR are benchmarks used to determine home loan rates in Singapore.

Singapore Interbank Offered Rate (SIBOR) is the interest rate that banks in Singapore use to lend to one another and is based on the average rates that a panel of banks submits daily. On the other hand, Singapore Overnight Rate Average (SORA) is based on actual transactions in the overnight interbank lending market.

You can find the rates on the MAS website.

What is a bank spread for home loans?

When you take out a home loan, you’ll see that the interest rate consists of the benchmark rate and the bank spread. The benchmark rate is a reference interest rate based on the market, while the bank spread is a fixed percentage that the bank adds on top of the benchmark rate to determine the final interest rate that you’ll pay.

The bank spread for a home loan is the difference between the interest rate charged by the bank and the benchmark rate (such as SIBOR or SORA) that the loan is pegged to. This is the additional amount that the bank charges on top of the benchmark rate and is the bank’s profit margin.

The bank spread is usually indicated by a ‘+’.

What is the difference between an HDB loan or a bank loan?

If you’re buying an HDB flat, you have the option of opting for an HDB loan or a bank loan. While HDB loans are fixed at a specific rate (2.6% p.a. currently) and only require a down payment of 20% of your flat’s purchase price, the interest rate is a lot higher than what banks offer. 

HDB loans also allow you to borrow up to 80% of the purchase price, while banks only loan you up to 75%.

On the other hand, opting for a bank loan will grant you a much lower interest rate, be it fixed or floating rates.

Am I eligible for a home loan?

HDB Loan

To be eligible, you:

• must have not previously taken 2 or more housing loans from HDB
• have an average gross monthly household income of not more than S$14,000 for families, S$21,000 for extended families and S$7,000 for singles buying under the Single Singapore Citizen (SSC) Scheme
• must not own or have an interest in more than 1 local or overseas non-residential private property at and within 30 months prior to the HFE letter application

Read here to find out more about eligibility requirements.

HDB has since revamped the system and come up with the HDB Flat Eligibility (HFE) letter, implemented on 9 May 2023. You’ll need a valid HFE letter when you apply for a new flat and before you option your OTP for a resale flat. It is also valid for 6 months.

Log on to the HDB Flat Portal with your Singpass and provide the particulars of the flat applicants. Once your HFE letter is ready, you’ll be able to take up an HDB loan.

Bank Loan

To be eligible, you have to take note of these things:

• Loan-to-Value ratio — up to 75%
• Your Total Debt Servicing Ratio (TDSR) — 55%
• Your Mortgage Servicing Ratio (MSR) — 30%

The TDSR is limited to 55% of your gross monthly income. This means that you can’t spend more than 55% of your income a month on repaying loans (including car, education, personal loans etc).

If you’re purchasing an HDB flat or an Executive Condominium, the MSR cannot exceed 30% of your gross monthly income.

When should I get a home loan for my BUC?

While you may think that getting a loan after your house is completed might be the best way to go, it is not. 

This is because when you purchase a BUC, the loan disbursement follows the progressive Payment Scheme (PPS), where a certain percentage of the loan is disbursed at each stage of the construction. 

Progressive Payment Scheme (PPS)

1. Pay the 5% OTP fee in cash
2. Sign the Sale & Purchase Agreement and pay off the remaining 15% downpayment (CPF funds can be used)
3. Settle any stamp duties (with CPF or cash)

When your BUC reaches its TOP date, the developer would already have expected to receive 40% of the purchase price. However, do note that the above is just a guide, and the actual completion depends on the project itself, though the amount payable remains the same. This is why getting a BUC home loan early is important.

You’ll also need to get your BUC loan before you can use your CPF savings to pay for the remaining downpayment and other fees.

Can I use CPF to pay for my home loan repayments?

Regardless of whether you take up a bank loan or an HDB loan, you can use your CPF OA funds to pay for your monthly mortgage payments. You can also choose if you want to pay partial or full repayments with your OA funds.

If you’re taking up an HDB loan, you can submit an online application on the HDB website under My Flat > Purchased Flat > Financial Info > Other Related Services> Partial Capital Repayment/Redemption of Housing Loan. Alternatively, you can make an appointment with HDB and complete the CPF withdrawal form (PHS9).

If you’re taking up a bank loan, you’ll need to seek approval from the bank and check that you have enough OA funds and the maximum amount of CPF savings you can use. You can then submit an online application. Do note that if you’re making full repayments, you will need to upload a copy of the bank’s redemption statement and a copy of your lawyer’s legal bill (if any).

Should I use CPF savings or cash to repay my home loan?

There is no right answer to this, as it ultimately depends on your lifestyle needs. 

Some may prefer to use their CPF savings to pay so they don’t have to fork out too much cash out of their own pockets. However, others might choose to pay in cash to let their CPF savings earn compound interest. 

You can also choose to pay some in CPF funds and some in cash. 

When can I refinance my home loan?

You can only refinance your home loan after the lock-in period for your home loan package, which usually ranges between one to five years. Home loan packages for Buildings Under Construction (BUC) usually have no lock-in period, meaning you are free to refinance when you find a better rate.

If you choose to refinance your loan during the lock-in period, you’ll incur a penalty fee.

Will home loan interest rates go up in 2023/2024?

From the start of 2023, home loan interest rates have been slowly declining, while Channel News Asia says that observers are expecting the trend to resume.

Ever since the US Federal Reserve decided to potentially put a halt to the rate increases, banks have been seen to slowly soften their rates on loans. For example, DBS lowered its interest by 0.5% from January to May, while OCBC also cut down their rates from 4.25% to a promotional interest of 3.8%.

According to Mortgage advisory firm Mortgage Master, loan rates are slowly declining to as low as 3.38%.

Mr Pau Wee, Vice-President of PropertyGuru Finance, also added that due to inflation and employment data slowly lowering, the US Federal Reserve loosening its tightening cycle, fixed rates are believed to continue to reduce further.

However, these are all just predictions by experts, and it doesn’t necessarily mean that these forecasts will be accurate. At the end of the day, homeowners still have to exercise discretion and pick a home loan that is best suited to their needs and risk appetites.