Have you spotted a new home in Singapore and are interested in owning it? If so then luck is on your side. Buying a new home upfront can be a financially demanding affair that requires you to spend hundreds of thousands of dollars, money which you may not have at the moment.
This is where home loans come in. Deciding on which financing option to go for can be a somewhat confusing and overwhelming experience more so if it’s something you have little to no knowledge or experience about.
It’s important to understand that every home loan that’s available on offer is good provided that all its requirements are met by both the lender and the potential homeowner. So don’t be tempted to lock yourself down to one option simply because someone you know used it and it worked for him or her. Maintain an open mind in order to secure the best financing option.
So how do you finance a new home in Singapore? To answer that question, it’s essential that you first understand the types of financing available and how they work:
- Financing Through The Housing and Development Board (HDB) Loan
This is, by far, the most popular home financing option that most Singaporean people are familiar with and use most of the time. It’s considered as the friendliest home loan owing to the fact that it demands that you pay practically zero cash provided that you have sufficient Central Provident Fund (CPF) savings.
This HDB loan is the ideal option to use if you are thinking of purchasing a new public home. If your interest is to purchase a new private home, you’ll be required to get a bank loan and there are plenty of options to choose from.
If you plan to buy a complete HDB flat that is a resale or are planning to refinance a newly-built Build To Order (BTO), there are several options at your disposal to choose from. Your income, for one, is a major determinant of whether or not you will be qualified to receive an HDB loan when buying an HDB resale flat.
If your income makes you eligible, the HDB loan is a perfect choice to go for as it demands a lower down payment and has a higher flexibility.
- Financing Through The Floating Home Loans
There are two options to choose from; the SIBOR and the board rate. SIBOR which stands for Singapore Interbank Offered Rate is an interbank rate that is transparent. It has a high level of volatility and the repayment amounts may fluctuate. The most effective way to avoid these fluctuations is to choose an extended SIBOR package.
Board rates, on the other hand, are attached to in-house bank rates. This is to mean that the bank sets them and can change them at any time and with no valid reason. Even though you may get lower rates from board rates, when the lock-in period sets in, you’ll just have to flow with what the bank sets as the interest rate at that particular time.
- Financing Through BUC Home Loans For Private Property
If you have a home that’s still under construction, you’ll be required to go for a floating rate package from a private bank. Keep in mind that for such a property, you are not eligible for a HDB loan.
Banks in Singapore only offer floating rates for home buildings that are under construction and getting a fixed interest rate will be somewhat of a challenge.
You will have to choose from the available home loan package that is either tied to the SIBOR or tied to the rate at the bank. That being said, the most important thing is to choose an interest rate structure that blends well with you.
The structure of the interest rates is usually a benchmark which is either the board rate or the SIBOR plus the spread which is the bank’s profit.
What If You Are Already Subscribed To A Bad Home Loan?
If you already have a home loan that’s not favorable to you, there is a provision for you to switch to another home loan provided that you have served the required lock-in period of the package you are subscribed to.
Switching requires that you work with a qualified mortgage specialist to help you with the transition process.
Conclusion
The above-stated options are valid and recommended channels to use to finance a new home in Singapore. With that knowledge in mind, the next step is to connect with the right financier. Here’s a list of the highest-rated money lender Singapore to work with.
No Comments