Buying any property in Singapore is a big investment. A property for a house loan can be for an investment purpose or for personal lodging. Every decision or move should be considered very carefully and from which bank to take a loan for your house should also be considered with caution.
A bank loan for houses has fewer restrictions as compared to other loans. In any case of taking a house loan from the bank, the bank necessitates borrowers in clearing a check-in credit. This is the only condition that most banks have before lending money.
Moreover, banks generally hold an interest rate that can be fluctuating for house loans. This depends on the current country’s bank rates. The interest rates for bank loans for houses might increase in the coming 3 years.
How are you eligible for a bank loan for a house?
Not getting a proper bank loan for your house in Singapore? Well, you have to calculate the bank loan based on your annual income along with your new house price of purchase and your age. In this way, you will find out whether you are an eligible candidate based on the MSR (Mortgage Servicing Ratio).
MSR is available in all the major banks that will give you housing loans to the maximum amount possible.
A house loan is a secure loan that will require your pledge for the construction, renovation, collateral extension, or purchase of the property. But due to the Loan-to-Value ratio or LVT ratio, you will not get the full amount of the pledged asset as a loan.
LVT refers to that proportion of the asset that you are able to finance through a loan. So, the remaining amount of the asset or house has to be given by the buyer from an own source as a down payment.
Thus, the value of the property is not the only factor that will determine your loan amount. The banks will also take into account your current financial condition, your repayment ability, credit history, debts, assets, location, nearby construction of the house, and age while they decide the whole loan amount.
What are the types of house loans?
A conventional loan is a type of mortgage that the government will not insure. SORA (Singapore Overnight Rate Average) is Singapore dollar transactions borrowed by Singapore’s banks.
SOR (Singapore Swap Offer Rate) is the borrowing rate of SGD (through USD) and swap for SGD. SIBOR (Singapore Interbank Offered Rate) is the amount at which any contributor bank can expect to borrow SGD for one, three, or six months from some other bank.
If you are a home buyer you will have to give income proof (minimum 2 years of proof) so that you can pay for the mortgage, a credit score of 620 at least, and a 3.5% down payment least. But, if you are a first-time buyer then there are few plans that can help you buy a house even if you have a low income ($0 down payment and a low credit score like 500).
Moreover, Singapore banks have a fluctuating interest rate that depends on the current SOR/SIBOR rate. Currently, the interest rate of bank loans is 1.2% – 1.5% (half of HDB interest of 2.6%)
Interest rates can depend on various factors that include a down payment amount, credit score, market condition, and type of loan. You should take time to decide the amount that you can afford to take a bank loan for a house and then sort your finances accordingly.