Bank Loan Rates
 

Bank Loan Rates

 
If you are making a property purchase in Singapore, unless you are very cash-rich or CPF-rich, you are most likely taking up a loan from the banks or financial institutions.

While it may be tedious to get past all the confusing financial jargon, it is nonetheless important that you understand and choose the best loan package for your needs. After all, besides the property purchase price, it is the loan package, and the accompanying interest rate, that is the most important factor in determining your monthly installments.

Comparison of Bank Loan Packages

 
Banks update their loan packages regularly, roughly once every month. Loan packages are also subject to change at the banks’ discretion at any moment.

 
The following chart is meant as a rough guide for comparing the loan packages of the various banks. These loan rates and packages are for new projects under construction.

 
Banks sometimes offer special packages for certain projects, or have certain promotions. So, always do check with us and our bankers for the latest loan rates and packages!

Terms used in Bank Loans

1. Interest Rates:

The lower the interest rates, the more money your monthly installment goes into paying the principal amount. As such, with lower interest rates, you can either take a higher loan, or shorten the loan tenure.

 

2. Floating Rates:

Floating rates are rates with adjust according to a pre-determined factor. This is in contrast to fixed rates.

• SIBOR Rate:

SIBOR (Singapore InterBank Offer Rate) is a floating rate that tracks the interest rate in which banks lend unsecured funds to other banks. It is a transparent rate, as the current SIBOR rate is published freely available in the newspapers and SIBOR online sources. Banks normally use the 1 month SIBOR rate(1M SIBOR)(average of the past 1 month SIBOR rates), or the 3 month SIBOR rate(3M SIBOR)(average of the past 3 months SIBOR rates).

 

• Variable Board Rate:

Variable Board Rates is a floating rate that is unilateratelly set by each bank, taking into account several factors which the banks are not obliged to reveal. As such, variable board rates are regarded as not transparent, as the how the rate is derived is not revealed.

 

3. Fixed Rate:

Fixed rates are interest rates that do not fluctuate. Fixed rates are usually higher than prevailing float rates, but they offer stability and predictability. Banks do not offer fixed interest rates for Buildings under Construction (BUC), or what is knowned as new projects.
 

4. Lock in Period:

Some loan packages have no lock in period, and some have lock in period. If the loan package has lock in period, the borrower cannot make repayments (partial or full), more than the stipulated monthly installments. Moreover, the borrower cannot re-finance the loan with another bank.

If the borrower decides to re-finance or do a partial/full repayment within the lock-in period, a penalty is chargeable, which is usually 1.5% of the outstanding amount. The bank may also claw back (reclaim) any subsidy which it has given the borrower, such as legal subsidy, insurance etc.

 

5. Tenure::

The tenure is the number of years in which the borrower has to make installment payments. The shorter the tenure, the higher the monthly installments.

The maximum loan tenure in Singapore is 35 years, or 75 years minus the borrower’s age, whichever is lower. However, to encourage financial prudence, the Singapore Government does not encourage borrowers to borrow at the maximum tenure. Borrowers can take a higher loan amount if they take a loan with a tenure 30 years or less, or 65 years minus the borrower’s age, whichever is lower. More information can also be found here.

In the event where two or more persons are borrowers for a property, different banks gauage the maximum tenure differently. Some banks take age of the older applicant into consideration, some take the age of the youngest employed, and some use the average ages of the borrowers.

*NEW: As of 29 June 2013 onwards, the new MAS Regulation mandates that in the event of two or more borrowers, the average age of the borrowers shall be used.

Documents needed to Process a Bank Loan

 
When you have chosen one or more banks for consideration, the next step will be to contact the respective bankers for a Letter of Offer (LO).

A Letter of Offer is a formal invitation from the bank to you, to take up a loan with the stipulated loan conditions (loan amount, type and amount of interest, subsidies etc). You can get multiple banks to issue you a LO each, and only sign on one once you have made up your mind. However, do note that a LO has an expiry date, as prevailing loan conditions fluctuate.

 
Documents needed for a Letter of Offer:
 

• NRIC of all applicants (front and back)
• Proof of Income:
1. For salaried persons:

Notice of Assessment (NOA) for income tax for year 2012 OR Past 15 months CPF Contribution Statement, AND Latest 3 months payslip.

2. For self-employed persons:

Notice of Assessment (NOA) for income tax for year 2012 AND 2011.

Contact Us

 
Buildings under construction can only use floating interest rates (SIBOR or variable board rate), but completed properties can use both floating and fixed interest rates.

Do contact us if you require the bank comparison chart for fixed interest rates.