There are two main categories of home interest rates; floating interest rates and fixed interest rates. Fixed rates mean the rate remains the same over the duration of the loan term. The fixed rate is higher than variable rates as bank take on the risk of inflation.
Fixed Rate Mortgages
These types of loan plan have a period of up to 5 years to clear. Depending on the plan you choose, you will incur a 1% plus rate. Payment is made monthly regardless of the interest rates fluctuation. Fixed rate mortgage offers predictability and stability especially in a country such as Singapore where the inflation rate is projected early and in most time, constant.
SOR Pegged Mortgages
SOR abbreviation stands for Swap Offer Rate.
To spare you the jargons of the whole meaning, SOR is a UD dollar funding where there is swapping of Singapore dollar funds for US dollar at a specific cost for a certain tenor, usually 1/3/6/12 months. The mortgage benefits from advantages given by the US Federal Reserve at a rate of between 0 and 0.25%. The only disadvantage of this type of mortgage is that the funds are in foreign currency and can influence the SOR rate.
Sibor Pegged Mortgages
SIBOR is an abbreviation for Singapore Interbank Borrowing Offer Rate. This is a transparent borrowing rate that gives inform the consumer what the interbank market interest rate us and the cost of borrowing. The SIBOR is publicly available on the web, Business Times and Teletext. Sibor rates are regarding 1/3/6/12 months. The longer the tenor, the higher the interest rates.
Combination of Sibor and SOR mortgages
The mortgage offers a unique proposition of using both SOR and Sibor mortgages. Some banks will switch between the two while they take advantage value of the mortgages plus a certain spread of your mortgage plan.
HDB loan mortgages
The loan is offered to HDB properties only. The current HDB mortgage rate stands at 2.6%, higher than plans provided by banks in Singapore. However, HDB mortgage offers a higher financing quantum compared to banks.
Interest only mortgages
This mortgage service the only interest on the mortgage. It is not allowed for residential properties. The financing of this type of loan s higher than standard mortgage plan. It is also available for commercial and International property loans
Board Rate mortgages
The mortgage is a bank own internal interest rate mechanism. Compared to SOR and Sibor, there is less transparency on how the bank arrived at the mortgage rate and pricing of your mortgage. Considering the insufficient mortgages transparency, some Singapore banks no longer offer Board Rate. Other have adopted standard universal Board rate system to improve transparency. In the recent past, the board rate mortgage packages have stabilized and may offer consumer with a value proposition for consideration.
If you plan to take a loan in Singapore, it’s advised that you compare all the rates using home loan interest calculator. Put the principal into consideration plus the monthly installment and see how much in total you will pay at varying loan terms. You can use the calculator only if you know the current rate offered on a different type of loans.