Which home loans should you choose when interest rates are low?

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People who would want to purchase their own homes should be very interested in understanding the constant state of flux that Singapore interest rates are in. As everyone may know, they would often fluctuate between high and low depending on the economic situation. When things are high, purchasing and loaning may be not palatable, but the other side of the coin, it can be low, which is an advantage for people as they would be able to get low home loan interest rates.

Most people who dream of purchasing their own homes in Singapore would most probably need to get a loan because the pricing of Singaporean homes are infamously high especially in this environment of a growing population and tighter areas for putting up residential structures. With the high cost, those families who want to purchase homes would want to structure their home loans in such a way that they would not be overburdened by the high cost of the home and the interest rates that they need to pay off as well.

The different types of loans available:
There are two main types of loans that Singaporeans can avail off when they find the need for that extra financial assistance for purchasing their dream homes. One is the home loan from a bank, and the other one is the HDB Loan.

Understanding Singaporean Bank Home Loans:
The first type is the Home loan from a bank. A bank loan is one that most Singaporeans are familiar with. This is because this is the common way of getting your funds from a bank. The only difference between this and other types of bank loans is that the bank would review documents that are related to getting a home (the type of property that you are getting, the cost of the property etc.).

Fixed Rate:
Under the bank loan are other sub types which you should also look into. One type of home loan that banks offer is the fixed interest rate home loan. In this type of home loan, the calculation is based on the cost of acquiring the funds to lend to the borrower plus an interest premium imposed by the bank. This type of loan is more predictable as they are not affected by the fluctuations of the Board Rate.

Floating Rate:
The other type of bank loan is called, floating interest rate home loan. In this type of home loan, the calculation is based on the bank’s board rate less a discount based on the letter of offer. Another variant of this calculates the interest rate based on the Singapore interbank offered rate. This is actually a great option for people who want to take advantage. In a Floating interest rate setup: When the entire economy has low interest rates then Singapore home loan interest rates would also be lowered.

HDB home loans:
If you’re not looking at bank loans, then you can try getting an HDB loan. The Housing and development Board actually provides housing loans at concessionary interest rates to eligible buyers. The HDB would first assess your status and then provide you with an assessment as to how much you could loan to get your flat.

Which one to Choose?
Given the variety of options, people can get confused as to which type of home loan they should get. Financial article writers advice that in a low interest situation, the bank loans would often have lower interest rates compared to the HDB concessionary loan.

Of course, it would depend on the type of bank loan that you choose as well. A floating-rate loan would be the best option for a low interest environment as it would mean that your interest rates would be on the lower end of the fluctuation. Of course, you still run the risk of it growing if the interest rate would suddenly sky rocket.

That is why it would be wise to be prudent and review all of your options before selecting any of them. Doing prior research as to what kind of loan you need would help you get a better handle on the loan that is best for you.


hdb.gov.sg, sg.finance.yahoo.com, homeloanwhiz.com.sg, en.wikipedia.org

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Peng Hsueh

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