housing loan from banks

For those who have read my posts before would know that I have been searching for a flat for more than a year but due to the limited supply of flats in the estates which i like & our rotten luck with BTO ballots, there is a high chance that we will need to buy a flat which requires us to get bank loan instead of HDB loan. Hence, I have been doing some little research about the housing loans offered  by different banks & want to share the information which I have gathered so far.....

Before I share some of the plans which i gathered from the banks, let me explain 4 most important terms which the banks used for the loans.... First = SIBOR. When i spoke to the first mortgage banker, i was like what the hell is SIBOR? It actually stands for Singapore Interbank Offer Rate, in short, is the interest rate in which banks lend each other $ & this rate always fluctuate. Second = fixed rate. I think most of us are familiar with this term. As the word implies, fixed rate means the interest rate will be fixed for certain number of years. Third = floating rate. This is somewhat in between fixed & SIBOR, meaning the interest rates will vary throughout out the years but not as drastic as SIBOR.... Lastly = lock in period. This means the number of years you must commit the loan to. IF let say the package has 2 year lock-in period, it means only 3rd year onward will you be able to make any changes. In the event you want to make any amendments within the lock-in period, i believed penalty will apply..... Now let me share the different packages that the banks offered me... all the information are corrected as of June 2015....

1. DBS/POSB

3month SIBOR

 3month SIBOR would means that you interest rate will be reviewed every 3 months... so the total interest rate for that month will be the rate for 3M SIBOR & the + whatever %. Example, the current 3M SIBOR is 0.4%, your total interest for year 1 will be 0.4 + 0.85% = 1.25%

FHR floating rate

 FHR is something exclusive to DBS banks. It is actually calculated by the average of 12month fixed & 24month fixed deposit interest rate, at the moment FHR is at 0.4%... FHR seem to be quite attractive but do take note that this term was only created in 2012 (if I didnt remember wrongly). So if the banker showed you like FHR values for the passed 10years, that's like total rubbish.... BUT the rate has not changed since the day it was implemented so is still quite safe to trust this value since we all know how pathetic our fixed deposit interest rates are....

fixed FHR

 similar to the previous package, the rate is also based on FHR but varying interest rate is so call fixed. According to the banker, this is like the most popular choice since it offered stability as the rate will be capped at CPF rate....

fixed rate

 fixed package, easy to understand but do take note, the rate isnt fixed forever. The rate is only fixed for 3years but subsequent years will be subjected to FHR......


2. UOB

UOB packages

The UOB staff offered me 12month SIBOR which is somewhat more stable since it doesnt fluctuate that much....

3. citibank

citibank package

I am not very sure about the effective interest rate but I would guess it's the total interest rate???? so for citibank, they provide more variety to the types of SIBOR....

4. standard chartered

standard chartered package

standard chartered offer the most interesting package in which they link it to some credit card & current account..... personally I dont understand fully about the package but according to the staff, you get some rebates of the interest rate if you put in a sum of $ in the bank....

I only went down to enquire from these 4 major banks but as you can see, they offer more or less offer similar stuff.... I would say the most important thing is to decide what do you want in the packages, is it stability? or slightly lower interest rate? fixed interest rate will be the most stable but the interest rate will not be so attractive since the banks have to bear the risk of increasing rates... & nowadays, there isnt any fixed deposit which will NEVER change throughout the term so personally I think fixed rate isnt the best option at the moment....

based on what I read online & understand from the bankers, most people go for SIBOR because of the low rates..... BUT this only apply during time of low interest rate..... my parents told me that when they gotten their first flat in HK, the interest then (like 30yr+ ago) was like 18%!!!! when the global interest rate is so high, SIBOR will definitely increase... so during those time, you WONT want SIBOR cause your interest rate will always vary & it will just keep getting higher & higher..... I am not good with the economic stuff but news have been saying that US will increase its interest rate by end of the year so SIBOR may seem too risky & exciting for me....  I would say SIBOR would be a good choice IF you can finish paying off your loan in a short period of time.... personally out of the 3 options, I feel floating/semi-fixed rates is the safest bet right now since it offers some sort of stability.....but that's my personal preference, so do make your choice wisely...

Despite saying all those things, i would strongly suggest people to take up hdb loan... of cause the interest rate may not be so attractive as the banks BUT it really save you alot of troubles.... i guess most people would have known that bank loan is only up to 80% of the property price while HDB allow up to 90% loan.... i think the additional 10% loan is very crucial for first timer unless you have lots of saving in your accounts/CPF.... another thing is that you dont have to find external lawyer to handle your paperwork!!! cause once you get a bank loan, you cant request for HDB lawyers to process your documents which would mean additional cost.... external lawyers (~$2500) cost about 2x of what you have to pay for HDB lawyers.... i find it dealing with all these property stuff is already troublesome, to involve additional people will only mean more chaos so if possible, by all means get the HDB loan!!!