Mortgage Repayments in Singapore: What, When, Why, and How?  

Eugenia Liew
Mortgage Repayments in Singapore: What, When, Why, and How?   
Most home buyers will need a home loan, or mortgage, to finance the roof over their heads. How it works is that you’ll make a downpayment (in cash and/or CPF), and borrow the rest, either from HDB or a financial institution like a bank. The loan quantum is typically in the hundreds of thousands to millions, so you will probably spend the next decade or two slowly repaying this debt. Each month, you will pay a small part of it, together with interest. This is known as your monthly mortgage repayments.
In this article, we will explain all there is to know about mortgage repayments for home loans in Singapore.

What Are Mortgage Repayments?

Mortgage repayments are the amount you pay your lender on a monthly basis, until you’re able to return the loan capital and interest in full. Your mortgage repayments may vary depending on the total amount you’re borrowing, the loan tenure, and the interest rate.

How Often Are Mortgage Repayments Calculated?

You may think that since you are paying for your mortgage repayments on a monthly basis, your outstanding loan balance also reduces every month. But that’s not always the case.
How often your repayments are calculated may depend on the rest period (e.g. daily or monthly rest) and/or the benchmark rate (e.g. 3M SIBOR). For this, it is best to clarify with the lender directly.

When Do You Make Mortgage Repayments?

Typically, homeowners pay monthly mortgage repayments for the length of the home loan. For example, if you take a 25-year loan, you may pay monthly instalments for 25 years or until you finish paying off the debt.
Tip: Check out our mortgage affordability calculator to work out how much you can afford to borrow, based on your monthly income and expenses.

Affordability Calculator

Estimate what you can comfortably spend on your new home


How Are Mortgage Repayments Calculated?

The amount of your mortgage repayments would mainly depend on the amount you’re borrowing (the loan quantum), the annual interest rate, the loan tenure, the number of payments per year (e.g., monthly or semi-annual), the type of loan, the property type, and the building status.
The formula for calculating your mortgage repayments is as follows:
MR = LP / [ (1+r)n-1/r(1+r)n )]
Complex, right? A much easier way is to use PropertyGuru’s mortgage repayment calculator for an accurate, hassle-free estimate of your monthly repayments.

Mortgage Calculator

Calculate your monthly mortgage instalments


What Is Loan Tenure And How Does It Affect Repayment?

Your loan tenure is the length of time that you are given to repay your loan, including the interest. Simply put, the longer your loan tenure, the lower your monthly instalments will be, but the higher your total interest cost will be as a proportion of the loan quantum, and vice versa.
The rule of thumb is, the younger the person is, the longer the loan tenure he/she may be granted, and for a maximum loan-to-value (LTV) limit of 75%, the loan tenure must not extend beyond the borrower’s 65th year of age.
In Singapore, the maximum loan tenure for HDB flats is 30 years, while it’s 35 years for private properties. Assuming we are talking about the initial purchase (i.e. not refinancing), if your loan tenure is longer than 25 years (for HDB flats) or 30 years (for private properties), or if your desired loan tenure would extend beyond age 65, your maximum loan amount may be reduced to 55% of the total property price.

What Are The Main Types Of Home Loans In Singapore?

A home is a big-ticket purchase and getting a mortgage a huge financial commitment. Hence, it is crucial to understand your home loan options in detail. In Singapore, you can choose from two major types of mortgages: HDB loans and bank loans. Your choice can make a big difference on how your mortgage repayments are charged and calculated.
If you’re unsure of which option to choose, PropertyGuru Finance’s Home Finance Advisors can also help explain the best mortgage option that would suit your profile and preferences.

HDB loans

You can apply for a Housing & Development Board (HDB) loan only when buying an HDB flat. This means that this loan isn’t applicable for private home purchases. The interest rate for an HDB loan is currently 2.6% per annum (pegged at 0.1% higher than the current CPF OA rate), and early repayments won’t incur any penalties. It allows you to borrow up to 90% of a new HDB flat’s total price, and up to 90% of the resale price or valuation of a resale property, whichever is lower. HDB loan eligibility is subject to an income cap of $14,000 gross monthly household income for families, and $7,000 for singles.
For example, if you’re planning to purchase a $600,000 flat, the HDB loan can finance up to $540,000 of the flat’s total price. You can pay for the remaining 10% ($60,000) either in cash or using your Central Provident Fund (CPF). *Note: This assumes you meet all other criteria for CPF usage and are eligible to take the maximum 90% loan.

Bank loans

Private financial institutions such as banks in Singapore also offer housing loans. As compared to HDB loans, bank loans currently offer lower interest rates, and their eligibility criteria may be easier to meet also. For instance, bank loans don’t have an income ceiling. However, early repayments for this type of loan may incur a penalty, depending on your contract. Most bank loans have a minimum loan amount required, and they will require at least 25% down payment (due to an LTV limit of 75%).
If you’re leaning towards this type of loan, it’s good to know that there are two main types of bank loans available to choose from: a fixed rate package, and a floating rate package.

Fixed rate package

As its name suggests, a fixed rate package offers a fixed rate interest for a certain time frame, usually between one to five years. Early mortgage repayments for this type of bank loan may incur a penalty. After this period, your interest rate will revert to a floating rate.

Floating rate package

On the other hand, a floating rate bank loan offers a fluctuating interest rate from the start. The interest rates of floating rate packages fluctuates depending on the rise and fall of the interest rate benchmark that the loan is pegged to.

How to Pay Your Mortgage Repayments

There are two ways to pay your mortgage repayments: from CPF or from your bank account. For CPF, you will need to set up an automated deduction. For bank funds, you can choose from…
  • Via automated GIRO bank transfer every month
  • Manual payment via bank transfer, AXS or SAM machine
  • Credit card (beware of your own finances!)
Aside from religiously paying your mortgage repayments monthly, you can also repay your mortgage more rapidly through lump sum prepayments as far as your financial situation (and contract) allows.

Learn More About Home Finance

We hope this guide has given you more insights about home loans, mortgage repayments, and some strategies in paying off your loan. If you found this article useful, you may want to check out some of our other home financing guides.
Alternatively, should you still have questions and need more personalised recommendations, we recommend speaking to our Home Finance Advisors for a free consultation. Meanwhile, we wish you all the best in your home-owning journey!
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