When researching home loans in Singapore, you may find yourself overwhelmed at the options available, and concerned about the rates that you will have to pay on the loan. Purchasing a home is an exceptionally large financial commitment – probably the largest that you will personally make over the course of your lifetime. As a result of this fact, it is imperative that you understand what type of loan will best suit your financial needs, and understand a few of the special features that will allow you to save money on the loan that you elect to utilize. When searching for home loans in Singapore, you must consider your income, any and all debt obligations that you currently have, your present expenses, as well as any savings that you have at your disposal. Once you have evaluated all of these important factors, it is time to research the available features that will permit you to save money on your loan. In this comprehensive guide, we will outline these features.
SIBOR and SOR Loan Package
When researching home loans, you will find that the ones in Singapore are either SIBOR or SOR. SIBOR stands for “Singapore Inter-Bank Offer Rate” and SOR stands for “Swap Offer Rate”. The SIBOR loans are effective in tracking the rate that various local banks charge when lending. The SOR loan rates are based on the rates associated with the foreign exchange. If given the option, you will want to opt for loans in Singapore that are SIBOR. This is because of the fact that the interest rates stays about the same on a consistent basis. SOR loans have rates that may rise or fall quickly. If the rates fall quickly, you will save a tremendous amount of cash, but, if they rise quickly, your rates will increase. In order to experience the best of both worlds, opt for loans from banks that offer a mutually beneficial loanpackage that includes both SIBOR and SOR; otherwise, simply opt for SIBOR home loans.
Fixed Caps on Interest Rate
The next way to save money on home loans in Singapore is to ensure that you opt for loans that include a fixed cap on the interest rate. This means that if the interest rate does fluctuate, you are protected from it exceeding the “cap” that is in place. Based on the housing market in the United States experiencing financial complications, most rates in Singapore do not exceed 4%; however, this may prove to be a very high increase if you are on a limited income. Therefore, it is imperative to opt for loans that have a mortgage interest rate protection plan in place. For example, many offer terms that state if a housing market goes up, the mortgage rate may not exceed 1.75%.
Avoid Partial Prepayments
The next way to save money on home loans in Singapore is to ensure that you avoid buying into partial prepayments on your contract. While it is true that it is often perceived as beneficial if you have the ability to pay off your home sooner than the contract outlines, you could incur higher costs. Most banks include a pre-payment penalty in the documentation that could result in additional fees, which could result in your paying more in the long run by paying off your home early. Each bank generates interest on the loan that you are paying on. They want you to pay for the duration of the loan so that they acquire additional cash. By attempting to pay off the home quicker, you may actually end up paying more if you have a partial prepayments penalty in your loan agreement.
Conclusion
If you are planning on taking out one of the many home loans in Singapore to purchase a residence, it is essential that you work to ensure that you are not only getting the best deal, but that you pay attention to the features that are included in the loan. In doing so, you will be able to save the most amount of money possible. This guide outlines some of the most popular features available that result in saving cash. By following the steps contained here, you are sure to save a tremendous amount of money on interest, fees, and other expenses associated with your loan.
