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How to choose a Housing Loan in Singapore |
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There are many housing loan packages in Singapore. Most of the loans are offered by banks such as DBS, OCBC, UOB, Citibank, etc.
So, how do you choose a housing loan that is best suitable for you? The followings are some points that you should consider when applying for a housing loan:
(1) Pre-approval: Before you decide to buy a house, it is advisable for you to first get pre-approval from the bank. Banks usually check your credit records (based on your borrowing history) to determine whether or not to approve a housing loan for you. If your credit rating is not favourable (for example, you may be late in your credit card payments), the banks may not approve the housing loan. Hence, it is advisable to get pre-approval from the bank.
(2) Loan duration (tenure): You must decide on how long you want the loan to be. The shortest loan duration is five years and the longest is 30 or 35 years, or till you are 65 or 70 years old, whichever is lower. The shorter the loan duration is, the lower the total interest amount that you have to pay to the bank. Likewise, the longer the loan duration is, the higher the total interest.
(3) Fixed or floating interest rate: Fixed interest rate is where you have to pay the same rate throughout the loan duration. (Example, 3% every year for 30 years) Floating interest rate is where the rate can go up or go down, depending on the economy. (Example, if the economy is doing well, the rate can go up, and vice versa.) You may need to consult the bank whether the fixed rate or floating rate is good for you.
(4) Penalties: Check whether there will be any penalty if you make a full payment of your loan before the loan duration is up. For example, let’s say, you win TOTO one million prize and want to make a full payment. Will there be any penalty charge? Currently, there are some housing loan packages with zero penalty period while most loans typically have a penalty period of one to three years.
(5) Promotion: Sometimes, banks will offer special promotional packages. For example, if the bank is celebrating its 100th anniversary, it may give a promotional housing loan package with lower interest rate. Banks usually advertise such promotions in newspapers, or you may need to check the individual bank’s website.
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