Which Home Loan Is Best For Me – Are you in the process of securing your first home? Explore the differences between HDB loans and bank loans to help you make an informed decision.
When preparing to buy your first home, start by considering your financing options. Would you choose an HDB loan or a bank loan? Here are the main differences between the two: Choose the one that best suits your needs.
Which Home Loan Is Best For Me
HDB loans require a down payment of at least 10% of the purchase price. This can be paid in full in cash using ordinary savings on account (OA) or a combination of cash and OA savings. The savings available in the OA must be used to purchase a flat before an HDB mortgage is provided for the remaining amount. However, you have the flexibility to leave up to $20,000 in OA for future needs. These savings will not only keep you enjoying OA’s attractive interest rates, but also act as an emergency buffer to cover your monthly installments when you need them!
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If you choose a bank loan, you will have to pay an advance payment of 20% of the purchase price when signing the lease agreement. 5% can be paid in cash and the remaining 15% can be paid in cash or a savings account. The maximum amount you can borrow from a financial institution is 75% of the property’s value or the purchase price (whichever is lower), so you’ll need to pay the remaining 5% in cash or when you collect the keys. to your apartment. You are also free to contribute any amount you wish and can pay your mortgage in cash instead.
Interest rates for bank loans may vary depending on market conditions, but interest rates for HDB loans are currently fixed at 0.1% higher than the prevailing OA rate of 2.6% per annum. If you want lower interest rates to boost your retirement savings, bank loans usually offer lower interest rates than HDB loans. But be sure to look into refinancing options to get the best interest rate possible!
HDB loans have no lock-in period, so there are no penalties if you want to pay off the loan early. This means that you always have the option to refinance your loan with your bank if you want to take advantage of lower interest rates. However, once your bank refinances your HDB loan, you will not be able to switch back to an HDB loan.
On the other hand, most banks have a lock-in period, usually 2-3 years. If you want to pay off your loan early or refinance it with another bank within the lock-in period, you will usually be charged a penalty of 1.5% of the loan amount. Likewise, if you choose to take out a bank loan for your mortgage, you will no longer be able to finance your home with an HDB loan.
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The type of loan you choose and other factors such as the type of property and remaining lease will determine how much savings you can use to buy a home.
Find out how much you can save on your home purchase with our home calculator.
As you plan your home buying finances, remember that your savings will help you in retirement. When you consider paying for part of your home in cash, your OA savings can continue to grow at an attractive interest rate of up to 3.5% per annum to support your retirement plans!
Remember that you need to consider not only your current financial situation, but also your future needs.
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*Includes additional interest. Members under the age of 55 will be paid an additional interest rate of 1% per year on the first $60,000 of their total balance. Members aged 55 and over will be paid an additional interest of 2% per annum on the first $30,000 and 1% per annum on the next $30,000 of their total balance. Terms of use apply. A mortgage is one of the best things you should have. It secures your family’s future and provides the greatest wealth you could ever have if you can pay those loans on time.
There are several options to choose from when getting the perfect mortgage option. In this blog we discuss HSBC’s mortgage options and their respective interest rates.
HSBC or The Hong Kong and Shanghai Banking Corporation offers a wide range of financial products and services. Specifically, HSBC branches in the country offer various types of loans, mortgages, savings, investments and credit cards to Singaporeans.
HSBC’s Home Loan Program is proud to offer fixed rate, SIBOR-linked home loan rates and term deposit-linked home loan rates to choose from. HSBC also claims to save even more by taking advantage of HSBC’s premium bonuses and benefits through the HSBC Smart Mortgage Program. That being said, HSBC has many attractive options for customers in Singapore.
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As mentioned earlier, HSBC mortgages are very flexible. For further illustration, let’s look at fixed mortgage rates, SIBOR-linked mortgage rates, and term deposit-linked mortgage rates.
The HSBC Fixed Rate Mortgage explains its name. Enjoy the stability of easily paying off your mortgage without the added worry or hassle. While this is helpful most of the time, it can backfire if something related to a mortgage, such as property values, falls under any circumstances. Still, most people prefer safety over worry and stick with this easy-to-understand interest rate without further worry.
On the other hand, SIBOR fixed mortgage rates are pegged to the market via the Singapore Interbank Rate (SIBOR). To explain what SIBOR is, it is the interest rate charged by banks in Singapore to each other. It is called the “interbank rate”. This is the best option for fixing interest rates as it is highly dependent on market changes. Given that Singapore’s economy is getting stronger by the minute, you can be confident that interest rates will remain stable or even fall on good days.
Finally, interest rates linked to term deposits set interest rates next to HSBC’s popular 24-month term deposit interest rates. Simply put, you pay interest equal to the interest rate on your personal bank term deposit. This can be difficult as it puts the interest rate in the hands of the bank. This can prove dangerous if problems arise and interest rates can rise. Still, HSBC is a bank with a very good reputation, so we won’t see such a scenario in the near future.
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You may also be interested in HSBC’s Smart Mortgage Lending Programme. The Smart Mortgage program is designed for HSBC current account holders. The purpose of this mortgage program is to lower your mortgage interest rate by offsetting the interest earned on your checking account. This is tied to SIBOR and is generally the better way to process mortgages with HSBC.
Contact an advisor today for free referrals to find the best mortgage option for you! Get the best mortgage options at your fingertips now. Make an inquiry for the lowest prices at this link.
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Wayne is a Chartered Financial Analyst (CFA) and holds a Bachelor of Business Administration (Finance) from Singapore Management University (SMU). A successful relationship manager at DBS and HSBC, Wayne uses his experience in the financial markets to help clients build comprehensive investment portfolios. The entrepreneur is also the founder of Home Loan Whiz, a mortgage consulting firm that helps customers choose the perfect mortgage to meet their needs.
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We’re not there now Whether you’re a first-time home buyer or a seasoned home lover, you’ll likely come across multiple types of mortgages when considering a home purchase. Understanding the six most common types of mortgages and the options they can offer can be very helpful when negotiating one of the more complex purchases.
Editor’s note: Credit Karma receives compensation from third-party advertisers, which does not influence editorial opinion. Our third-party advertisers do not review, approve or endorse our editorial content. Accurate to the best of our knowledge at time of publication.
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