Choose the right home and mortgage loan with Loan City. Compare interest rates, loan tenures, fixed vs floating packages to find the best home loan in Singapore.
Buying a home is one of the biggest financial decisions you will make and choosing the right mortgage and housing loan in Singapore can save you tens of thousands of dollars over the life of your loan.
Whether you are considering an HDB loan or exploring bank options in Singapore. In this guide, we break down everything you need to know from understanding how housing loans work, to comparing the best housing loan in Singapore.
What Is a Mortgage in Singapore?
A mortgage in Singapore, often called a housing loan, is a type of secured loan that lets you borrow money to buy residential property. The loan is secured against your property. This means the bank can repossess the property if you fail to repay the loan.
Most homeowners in Singapore repay their mortgages over a long term (usually 25–30 years), which gives them predictable monthly payments. However, it also makes their interest rate and loan terms critical to long term affordability.
Types of Housing Loans in Singapore
Singapore offers various housing loan packages from banks and financial institutions. Choosing the right type largely depends on your financial situation and risk appetite.
- Fixed Rate Mortgage
A Fixed Rate Mortgage is a housing loan where the interest rate remains constant for a specified lock-in period, typically between one and five years. This means your monthly repayments stay the same during that period, giving you certainty and stability in budgeting. It is especially suitable for borrowers who value predictability and want protection against rising interest rates.
In Singapore, loans for public housing such as those from the Housing & Development Board (HDB) often offer fixed-rate options, making them attractive to homeowners who prefer steady and manageable instalments without worrying about market fluctuations. - Floating or Variable Rate Mortgage
A Floating or Variable Rate Mortgage has an interest rate that fluctuates according to market benchmarks. These loans are now commonly pegged to the Singapore Overnight Rate Average (SORA), which is the main interest rate benchmark used in Singapore today, replacing Singapore Interbank Offered Rate (SIBOR).
The market can push the rate up or down, so borrowers need to prepare for changes in their monthly payments. Whether that means paying more or enjoying lower instalments. - Cashout Refinancing
A Cashout Refinancing allows homeowners to refinance their existing mortgage for a higher loan amount than what they currently owe and receive the difference in cash. This option helps homeowners unlock the equity in their property. They can use the funds for renovations, investments, or debt consolidation. While it can improve cash flow or provide funds for major expenses, borrowers should carefully assess the new loan terms, as extending the tenure or increasing the loan size may result in higher total interest costs over time.
Some loans with attractive headline rates may come with stricter lock-in periods, higher legal or administrative fees, penalties for early repayment or less flexible terms. Borrowers should evaluate the overall package rather than focusing solely on the advertised interest rate.
How Do I Choose the Right Mortgage Rate?
Choosing the right mortgage rate depends on your financial comfort level, income stability, and outlook on interest rates.
If you prefer predictable monthly repayments and want protection from rising interest rates, a fixed-rate mortgage offers stability during its lock-in period. On the other hand, if you are comfortable with some fluctuation and believe interest rates may stay stable or fall, a floating-rate mortgage could offer lower initial repayments and potential savings.
Fixed vs Floating Rate Comparison
| Feature | Fixed Rate Mortgage | Floating (Variable) Rate Mortgage |
| Interest Rate | Stays the same for a set tenure | According to SORA market benchmark |
| Monthly Repayment | Stable during lock-in | Can increase or decrease over time |
| Risk Level | Lower risk during fixed period | Higher risk due to rate fluctuations |
| Flexibility | Borrowers who value certainty and stable budgeting (Repayments is fixed until repricing) | Borrowers comfortable with market movements (Repayments may increase or decrease) |
The key is to balance certainty versus flexibility, and consider how much change in monthly instalments you can comfortably manage.
What Determines Your Housing Loan Eligibility in Singapore?
Before applying, you should review the key criteria banks and financial institutions use to assess if you are eligible for a mortgage.
- Age: Most banks and financial institutions prefer applicants aged 21–65. Some lenders require the loan to be fully repaid by age 65–70.
- Income: Your income is necessary to determine how much you can borrow. They look at salary, bonuses, and other regular income.
- Credit Score: A strong credit history will improve your chances of approval and help secure lower interest rates.
- Loan-to-Value (LTV) Limits: In Singapore, the LTV ratio determines how much you can borrow relative to the property value. Current guidelines from the Monetary Authority of Singapore (MAS) show that LTV can be up to 75% for first time borrowers with a good credit history, meaning you need at least 25% down payment with part in cash and part in CPF.
- Total Debt Servicing Ratio (TDSR): Your monthly loan repayments (including the new housing loan), does not exceed a certain percentage (usually 55%) of your monthly income.
When Is the Right Time to Consider Mortgage Refinancing?
You should consider mortgage refinancing when there is a clear financial benefit or a change in your circumstances. For example, refinancing may make sense if current interest rates are lower than your existing loan rate. In this case, you may reduce your monthly instalments and lower your overall interest costs.
1. End of Lock-In Period
If your lock-in period is ending, this is the most strategic time to refinance. You can switch to a more competitive package without incurring penalties, as most floating-rate packages typically run on a 2 year structure.
2. Stronger Financial Position
If your income has increased or your credit profile has improved, you may now qualify for better interest rates or more favourable loan terms than when you first took up the mortgage.
3. Market Conditions
When market interest rates are trending downward, refinancing can help you secure a lower rate and reduce your monthly repayments or overall interest costs.
You should note that you cannot refinance an HDB loan into another HDB loan. However, you can refinance it to a bank loan if market conditions are favourable and banks offer more competitive rates.
How To Choose The Best Housing Loan in Singapore
Here are practical ways to reduce long term costs and pick the right loan:
- Assess Loan Eligibility with Loan City: Start by checking your eligibility to get a realistic idea of how much you can borrow. Loan City can help you compare multiple lenders at once, showing you different loan packages, interest rates, and repayment options.
- Get an Approval-in-Principle: Securing an in-principle-approval (IPA) from a bank or HDB before you commit to a property.
- Lock in Lower Interest Rate Early: Interest rates can fluctuate over time. Locking in a competitive rate early can protect you from future rate increases during the initial years of your loan.
- Maintain Excellent Credit: Keeping your credit score high and managing debts responsibly can help you qualify for better loan packages.
- Refinance if Market Rates Drop Significantly: If you already have a mortgage and interest rates decline substantially. Refinancing can save you money by switching to a new loan package with a lower rate.
Your Path to the Right Mortgage with Loan City
Choosing the right mortgage and housing loan in Singapore can affect your financial wellbeing for decades. By following the steps above, you will be well positioned to secure a housing loan, whether you are a first time buyer or an experienced investor.
With the right guidance, the process becomes far more straightforward. At Loan City, our team is committed to help you secure a housing loan that aligns with your long-term financial plans.
