When it comes to a home, it all comes down to the best of everything – from the best neighbourhood to the best housing loan for you.

In the past, you might have taken loans from different organisations, but when it comes to a housing loan, you ought to only consider the best.

So which bank housing loan is best?

To answer this question, let’s firstly look at rates. You want to pay sensible rates because buying a home is likely the biggest purchase you’ll ever make in your lifetime.

Also, you want to give yourself a chance to save as much as possible.

Hence, considering which bank housing loan is best is a smart move, whether you’re looking for a loan to buy your home or maintain it.

Read on to understand all about bank home loans in Singapore.

How To Get A Bank Home Loan

The process for this is straightforward and precise. You follow these three steps:

  1. Your maximum loan amount. This has its basis on your current loans measured by the Total Debt Servicing Ratio (TDSR) or Mortgage Servicing Ratio (MSR). You can calculate them using the home mortgage loan calculators.
  1. In-Principle Approval (IPA). The next thing to do is get an IPA. This is a term used by most banks to refer to the maximum loan amounts you can receive from them.

If you’re getting a loan from a bank, you need to get approval from the IPA.

  1. Apply for a home loan. Once you’ve got your IPA, you likely have about 30 days to pay the Option To Purchase (OTP) fee for HDB or your private property before the IPA expires. After this, you only have a limited time to pay the OTP, and get your desired home bank home loan accepted and submitted before the time expires.

Types Of Home Loans

It doesn’t matter if you’re a young couple looking for a home or you just need to move out of your folks’ home.

To get a home loan, you need to be aware of two types of home loans in Singapore – fixed home loans and floating home loans.

Fixed home loans – These involve taking a home loan from a bank that has a fixed period. The fixed period can be one to five years.

Floating home loans – They are loans you take from a bank that have fluctuating interest rates. One example is the Singapore Overnight Rate Average (SORA) rate.

Fixed Home Loan Rates Vs Floating Home Loan Rates

Considering you’re looking for which bank housing loan is best for you, home loan interest should be foremost on your mind. The main difference between these interest rates is mainly your situation.

A fixed interest rate remains constant for about two to three years. After this period, the Fixed Deposit Home Rate (FHR) loan relies on SORA or other rates based on bank grounds. Such loans may have the same interest or more depending on the bank spread. Bank spread is the additional percentage a bank takes from you, adding to the cost of lending you the original amount.
Fixed home rates are for:

  • Those with a low-risk appetite
  • Those who want a specific rate in a volatile economy
  • Those with a tight mortgage schedule
  • Landlords who want a fixed rate to make it easier to finance their mortgages

On the other hand, the floating home rate is subject to adjustments depending on the kind of FHR you take. This means that the moment these rates change, your monthly installments also change.

Floating home rates have a lock-in period of around two years. The lock-in period restricts you from paying full or partial home loan prepayment.

Home Loans For HDB And Private Properties

Private properties under construction (BUC) – If your home is still under construction, your best bet would be to take a loan that doesn’t have a lock-in time duration. Doing this will allow you to get a low interest rate payment for the loan.

Completed or resale private properties – If your home is already built or you’re reselling, you can get a fixed or floating loan rate. The only limitation is that you can’t take an HDB loan for private property.

Bank Home Loans For Private Property

However, you can use bank loans to purchase either a HDB flat or private property. Various Singapore banks offer different home loans with varying interest rates.

There are fixed home loan rates, floating home loan rates, or both types.

Bank loans have a loan-to-value (LTV) limit of up to 75% and a downpayment of at least 25% must be paid in cash. Paying a bank loan early might cost you a penalty.

Bank Home Loan Eligibility

To qualify for a bank loan, you must:

  • Have a good credit score
  • Aim to borrow a minimum loan of at least $100,000

HDB Loans For HDB Properties

This loan caters to those looking for HDB properties such as Build-to-Order (BTO) or HDB resale flats. You can’t use this loan to buy private property.

The loan-to-value limit (LTV) of new flats is up to 80% of the purchase price. The resale flats are up to 80% of the resale amount. If the remaining lease cannot cover the youngest buyer at 95 years old, pro-ration of the LTV will be done.

The loan amount you get depends on your age, monthly income, and financial situation.

The HDB housing loan interest rate is 2.6%, calculated by taking the current CPF Ordinary Account interest rate, then adding 0.1%.

These rates may change with your CPF, but in most cases, they’ve remained constant. You can use your CPF to pay up to 20% of the downpayment. Any early payment won’t incur a penalty.

HDB Loan Eligibility

To qualify for a HDB loan:

  • At least one of the buyers should be Singaporean
  • The monthly income ceiling should be $7,000 for singles, $14,000 for families, and $21,000 for extended families
  • You should not have taken two or more home loans from HDB. Your last owned property shouldn’t be private property for residential.
  • You should not have owned or disposed of any private residential property in the past 30 months before you applied for a HDB flat. You should not own more than one market stall or commercial property. You must operate only on one if you own any of the properties.

HDB Loan Vs. Bank Loan

Deciding which type of loan financing to use for your HDB flat can be quite a dilemma.

When deciding to go for a HDB loan or a bank loan, you should consider the risk you are willing to take and your financial capabilities.

So how do the two loans compare?

  1. Generally, HDB loans are less risky than bank loans. If you wish to take a bank loan, you need the financial capacity to pay the loan and the discipline to make the agreed payments on time.
  2. HDB loans require proof of citizenship and a look at your income. For bank loans, a good credit score is usually enough for the bank to grant you a loan.
  3. The maximum repayment duration for a HDB loan is 30 years, while that of a bank loan is 35 years.
  4. For HDB loans, you are limited by the LTV and TDSR when it comes to the loan amount. There is no minimum amount. However, if you’re taking a bank loan, the minimum loan size is set at $100,000.
  5. The interest rate of HDB loans is fixed at 2.6%, while bank loans vary between 1.55-1.85%. In addition, bank loan interest rates increase after a certain period, for example, after two years.
  6. Early repayment of HDB loans attracts no penalty, while paying bank loans early results in a 1.5% penalty rate.
  7. Both types of loans attract late payment penalties. Late payment for HDB loans attracts a 7.5% annual fee, while for bank loans, there is a $50 late payment fee with every repayment.

How To Choose The Best Home Mortgage Loan

So which bank housing loan is best? This depends on several factors, including your financial state, age, nationality, etc.

We’ve compiled a few ways to make choosing the best home mortgage loan easier.

Consider The Type Of Your Home Loan

You first want to consider whether you want a fixed or floating interest rate loan. The kind of rate you prefer depends on your risk appetite.

For instance, if you’re buying a HDB flat, a HDB loan may be the better option compared to a bank loan.

This is because as HDB home loans have higher interest, they have a fixed maintenance rate that requires a 20% downpayment compared to a 25% downpayment for bank loans.

Interest Rates

Interest rates may seem insignificant to the price you’re buying your home at, but they can be a significant determinant of your savings and much more in the future.

This is why going for a low interest rate can save your finances.

Interest rates are constantly fluctuating due to economic changes, but they mostly range from 0.80- 2.5%.

Banks currently offer an interest of 1% or more, so be smart by not settling on the first loan you come across.

Remember that banks offer lower spreads and, therefore, lower promotional rates for several years before they go back up to a higher rate.

Lock-In Period

Most bank loans have a lock-in period of zero to five years. It’s usually the bank’s way of covering its tracks.

Banks offer lower promotional rates for the first several years to attract buyers to lock in.

This is the main reason why you should take a bank loan with no lock-in period when purchasing a home that is under construction.

The reason is that it’s easier to refinance your loan anytime when your home is finally complete.

More on this topic: 

How Do You Pay Back Your CPF Housing Loan?

How Much Housing Loan Can I Take?

How Much Can You Borrow For Your Home Loan?

Which Bank Has The Best Floating Home Loan?

Here are the banks with the best floating home loans.

BankFirst Year Interest RatesLoan Tenure
DBS FHR62.70%3-year lock-in period
OCBC 3M SORA2.58%1-year lock-in period
DBS 3M SORA2.6%2-year lock-in period
Citibank 3M SORA2.38%2-year lock-in period
UOB 3M SORA2.30%2-year lock-in period

Get A Fixed Home Loan Instead Of A Floating Bank Home Loan

In a situation where you have little or no finance knowledge, we recommend you take a fixed home loan. Fixed home loan rates are reasonable when you’re looking to buy a home.

If you’re in a situation where you need financial assistance for your home, contact Lending Bee, one of the best licensed money lenders in Singapore.

We are committed to providing financial assistance to current and potential homeowners.

Get in touch with us now or apply for a loan with us using your Singpass today. It just takes five minutes.

Frequently Asked Questions

Which Is The Best Home Loan Package In Singapore?

There is no definite answer to this because bank interest rates constantly fluctuate.

The best advice we can give you is to go for the loan that best fits your goal, personal needs, and risk appetite.

Also, speak to a mortgage expert to find which bank housing loan is best for you.

Can I Use A Home Loan For A Renovation?

No, you can’t, home loans are for purchasing homes. However, you can get a home renovation loan from most licensed money lenders, including Lending Bee.

Can Foreigners Get A Home Loan In Singapore?

Yes, foreigners in Singapore can apply for a home loan. However, they’re limited to only bank loans for private property, so they can’t acquire a HDB home loan.

About Ashley Sim

Calling herself a “professional multi-tasker”, Ashley worked as a relationship manager in a bank for five years. She left her job just before the pandemic happened and became a freelance writer for about a year. Now, she’s making the most of her love for writing and knowledge of the banking and financial industry in her role as a content marketing lead. She hopes to help people make better financial decisions through her content and campaigns.