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Why Lowest Mortgage Rates Are Not the Only Thing Homeowners in Singapore Should Focus On

cherylchiew
Why Lowest Mortgage Rates Are Not the Only Thing Homeowners in Singapore Should Focus On
What’s the best home loan to finance your property purchase? Some may say the mortgage package with the lowest interest rate. While it’s true that having a low interest rate mortgage loan often translates to a lower monthly instalment, it may not be the best home loan for you.
For those thinking of refinancing your home loan, there are various factors to consider when picking the best home loan. From considering home mortgage lending rates to considering housing loan maximum tenures, we’ll explain why you shouldn’t always go for a low interest rate mortgage loan.
Ready to compare loans? Get the latest interest rates on the market via the PropertyGuru Finance mortgage loan comparison tool.

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How to Choose the Best Home Loan in 2024

Mortgage tenureFactor in your debt obligations, financial goals, and cash flow amounts. Take a shorter tenure if you have liquidity and prioritise paying less interest
Fixed vs floating rate mortgage home loanConsider your risk appetite and refinance when you can
Lock-in periodIf you want to refinance often and quickly to take advantage of interest rate fluctuations, you may want a shorter lock-in period
Exclusive discounts and cash rewardsPromotional home mortgage lending ratesand accompanying perks can reduce the cost of refinancing
Mortgage advice and lender reputationCheck on customer service quality, turnaround time, and possible spread adjustment

1. Mortgage Tenure

Your mortgage loan tenure affects your Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR) (for those financing an HDB flat). You want to adjust your loan tenure when refinancing so the monthly repayments are manageable and you can meet your financial needs and goals.
For instance, if you intend to take on a second home loan to finance an investment property or have other debt obligations (i.e., you have a car loan to service), you can go for the maximum housing loan tenure. A longer loan tenure can allow you to meet the required thresholds and have better cash flow.
The shorter your loan tenure, the higher the monthly instalments. If you prioritise reducing total interest costs and have cash liquidity, then having a shorter loan tenure may make sense.

2. Fixed Vs Floating Rate Home Loan

If you do a mortgage loan comparison, you’ll see the lowest mortgage rates on the market are 2.85% for a fixed rate home loan and 3.85% for a floating rate home loan (based on the lowest interest rate offered in the first year, as at 27 June 2024). But that does not mean you should automatically fixed rate home loans.
Floating rate home loans are great for those who have some risk appetite and expect interest rates to trend downwards. While the US Fed will likely only cut rates once in 2024, it is predicted that interest rates will fall in 2025. By taking advantage of interest rate movements, you may score a competitive mortgage package and get a better overall deal.
However, there are benefits to taking on a fixed rate home loan. Not only is it suited for those looking for stability in a volatile interest rate environment, but it is also preferable for those who are on a fixed budget and need certainty. Just remember to refinance your home loan when your lock-in period is up!

3. Lock-in Period

When doing mortgage loan comparisons, you may notice varying lock-in periods for home loans. During the lock-in period, you must stay with your lender and cannot refinance or redeem your loan. If you decide to refinance to a low interest rate mortgage loan when you are within your lock-in period, you will be subjected to a penalty.
But lock-in periods are not always bad. While having a longer lock-in period means you can’t take advantage of interest rate fluctuations, it also means you’re guarded against sudden spikes in home mortgage lending rates.
Additionally, some banks may waive penalty costs if you sell your property. They may also offer free conversions after your lock-in period, saving you the hassle of securing a new, more competitive home loan.

4. Exclusive Discounts and Cash Rewards

Banks often offer promotional home mortgage lending rates and other accompanying perks when you take a home loan with a new bank. From one-time offers of special low-interest rate mortgage loans to legal subsidies and cash rebates, these seasonal deals can reduce the cost of refinancing.
So do mortgage loan comparisons and learn more about the latest home loan refinancing promotions. If you’re unsure where to start, contact our PropertyGuru Finance Mortgage Experts for help on mortgage loan comparisons.

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5. Mortgage Advice and Lender Reputation

With so many mortgage packages on the market, which should you pick? Which bank has the best reputation? For these questions, we turn to our in-house experts.
Ben Goh, Team Lead – Mortgages, PropertyGuru Finance advises it is most important to focus on selecting a loan package that suits your needs.
“All banks and lenders are under the purview of the Monetary Authority of Singapore (MAS) and reputable. Aside from considering the most competitive loan package offered, individuals can weigh in on the turnaround time for refinancing and quality of customer service.”
Apple Tan, Team Lead – Mortgages, PropertyGuru Finance agrees to go for a home loan that aligns with your property planning and financial goals.
“Additionally, it is helpful to know if the banks you’ve shortlisted have a history of adjusting their thereafter spread.”

I Need Help Choosing the Best Mortgage For Me Today

Whether you’re a first-time homeowner or a seasoned investor, you must do your homework before selecting the best home loan. After careful consideration, you may find that the most suitable mortgage package may not be a low interest rate mortgage loan.
If you want to secure a home loan, let our friendly Mortgage Experts help. From giving you tailored home financing advice to doing mortgage loan comparisons, they can guide you and sort out your paperwork every step of the way. The best part is it’s all at no cost!
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Disclaimer: The information is provided for general information only. PropertyGuru Pte Ltd makes no representations or warranties in relation to the information, including but not limited to any representation or warranty as to the fitness for any particular purpose of the information to the fullest extent permitted by law. While every effort has been made to ensure that the information provided in this article is accurate, reliable, and complete as of the time of writing, the information provided in this article should not be relied upon to make any financial, investment, real estate or legal decisions. Additionally, the information should not substitute advice from a trained professional who can take into account your personal facts and circumstances, and we accept no liability if you use the information to form decisions.

More FAQs About Best Home Loans

All banks and lenders are under the purview of the Monetary Authority of Singapore (MAS) and reputable. Choose a lender which offers you a competitive mortgage deal, good turnaround time for refinancing and quality of customer service.

Best is subjective as you should choose a mortgage package most suited for your financial needs and goals. Ask our friendly and knowledgeable Mortgage Experts to guide you in landing the best package for you.

As at 4 July 2024, the lowest promotional rate is 2.85% for a 2-year fixed rate home from HSBC. But mortgage rates are always changing so use our mortgage comparison tool to look up the latest rates.