While looking for your housing loan in Singapore, the first thing you look at is its interest rate. Borrowers normally look for loans with minimum interest rates. So it's never too late to first learn about the different types of home loan interest rates in Singapore, and how they work.
Types of Interest Rates
There are two categories of home loan interest rates; fixed and floating interest rates. The fixed home loan rates remain fixed for a duration of typically few years. They are also priced higher than variable, as banks take on risk in the event market rates go up beyond what they sell to you. On the other hand, the low market interest rates entice many borrowers to choose floating interest rates.
SIBOR and SOR rates
The SIBOR and SWAP (also known as SOR) rates generally benchmark the house loan interest rates, while board rates are fixed by Singapore's association of banks. As SIBOR and SOR rates are publically available, there is no worry of the bank misleading any customer. In the case of board rates, customers may remember the past years where banks had increased the board rates frequently, however they have been stable in the recent years.
Once your housing loan is attached to SOR or SIBOR, a margin or spread is added to the loan's interest rate. So your loan interest rate would be SIBOR or SOR rate + the margin. As there are both SWAP and SIBOR variations based on time frames, you may have a loan with a one month or 3-month SIBOR. A 3-month SIBOR means this rate is priced every 3 months by the bank. For example, as of August 2017, 3-month SIBOR is 1.119%. It will be added to the spread, resulting in a nett interest rate. This rate will remain until 3 months later when a new 3-month SIBOR is used.
Another type of home loan interest rate is the 'board rate' which is the minimum rate the bank charges you in addition to a spread. The loan interest rate is charged at a fixed premium, either in excess or less of the board rate, like board rate plus 0.5% or minus 0.6%.
Fixed deposit saving rates
The latest variable rate is fixed deposit saving rates. Loans are linked to these rates, and will move up or down according to saving rates. Sounds good ya? Then you must learn the types of fixed deposit-linked home loans offered Singapore banks.
HDB concessionary loan rates
In case you qualify for the HDB concessionary loan, its interest is 0.1% above Singapore CPF rate, which is reviewed every year except it hasn't changed for a few years.
Comparing home loan interest rates
Once you know the rates, you can calculate the home loan interest and principal amount for your loan monthly installments using a home loan calculator. You thus know how much you will pay as total interest at varying time spans of the loan term.
You can use the Mortgage Calculator to see how to calculate home loans or compare rates for refinancing, whether they are based on SIBOR, SWAP/ SOR, board rates or fixed rates.