Everybody knows that properties in Singapore are very expensive, but we still need a roof over our heads. The best way to get the funding to buy a home is by getting a home loan. There are different types of home loans in the market, and some may suit you (and your financial circumstances) better than others.
For starters, the two general types of home loans are fixed rate loans and floating/variable rate loans. And it definitely pays for you to take your time to compare and shop around for the right home loan. It is never a good idea to act on impulse when it comes to a home loan commitment!
As a rule of thumb, your monthly home loan instalment is part of the Total Debt Servicing Ratio (TDSR) introduced in 2013. With TDSR in place, an individual can borrow only up to a maximum of 60% of his or her gross monthly income - including your housing loan, and all other outstanding debts like personal loans, car loans and credit card debt.
You'll be slapped with overdue interest by the bank if your instalment payments are late. As bad as this may sound, the bank can recall your loan and repossess your property if you fail to pay your instalments.
What Are Board Rates?
Board rates are a type of floating rate. Basically, before SIBOR (Singapore Interbank Offered Rate) and SOR (Swap Offer Rate) were invented, floating rate packages were pegged to the respective banks' own benchmark rate (a.k.a. board rates). In case you're wondering, these board rates aren't as transparent as SIBOR or SOR rates.
Board Rate Home Loans
As mentioned above, board rates aren't as transparent as SIBOR and SOR rates as this up-to-date information is made available to consumers. Nevertheless, you can definitely consider getting a home loan package pegged to the bank's board rates if these rates are lower than SIBOR and SOR rates.
It's only logical that we as consumers benefit more from the lowest possible interest rate out there when we're borrowing to finance our homes. But of course, be sure to take note of all sorts of nitty gritty details, fees, lock-in period (etc.) when you're shopping around for a home loan package.
Also, have you heard of the relatively new jargon by the name of 'fixed-deposit pegged home loan'? Well, this fixed-deposit-linked home loan is considered to be a type of board rate, but it's more transparent than traditional board rates since the fixed-deposit rates are published on banks' websites.
New & Refinance Home Loans in Singapore
Board Rates vs Other Floating Rate Home Loans
Each bank has its own board rate and this board rate is so secret that outsiders like you and I will never know for certain what SIBOR's precise influence is on banks' board rates.
Bear in mind that board rates can change any time, but when interest rates fall, banks may not necessarily lower their board rates. Borrowers of floating rate packages pegged to board rates may thus be paying more than what their counterparts with home loan packages pegged to SIBOR and SOR are paying.
In case you need a quick refresh on rates, remember that the US Fed funds rate has a direct impact on both SIBOR and SOR rates in Singapore and both SIBOR and SOR move in tandem with each other; when SIBOR rises, SOR rises (and vice versa).
Also, when the US Fed funds rate falls, SIBOR and SOR rates will fall, although SOR is known to be more volatile since it is based on both interest and currency exchange rates.
If you're interested to know more about SIBOR and SOR, definitely have a read about them in our easy-to-grasp guide on SIBOR vs SOR home loans. Should you prefer a home loan package with more flexibility, check out home loans without a lock-in period, instead.
Also, it wouldn't hurt to spend some time learning about properties in Singapore so that you can get a good idea of the general pricing by area and type of property.
Your Source For Home Loan Information
Before you plonk down your money, be sure to check these 4 important things to consider before you buy a property and these 5 external factors that affect the value of your property. In case you're looking to make money from your property but you don't know where to start, learn more from our guide to property investing in Singapore.
Also, take a look at our handy home loans guide to learn more about home loan rates and what to look out for! For those of you who need to refinance your home loans, here are 3 things to consider when you're refinancing your home loan.
Are you buying your first home? Here's how much money you need to buy your first HDB flat. In our HDB Grants 101 guide you can find out if you qualify for any grants that can help defray the cost of your home.
Visit GET.com for the latest home loan offers from all the major banks and financial institutions in Singapore, as well as timely news about home loans and the property market here.