Best Home Loan in Singapore 2025

SIBOR (Singapore Interbank Offered Rate)

SIBOR is the rate at which banks lend to one another. It is influenced by global interest rates and economic conditions. Home loans pegged to SIBOR typically have a more transparent and predictable rate as it reflects the cost of borrowing among banks in Singapore.

Key Points:

• Transparent and reflective of the interbank lending rate.
• Suitable for those who prefer stability and predictability in their mortgage rates.
• Commonly used for both fixed and floating rate packages.

SOR (Swap Offer Rate)

SOR is based on the exchange rate between the USD and SGD, factoring in the cost of borrowing USD swapped to SGD. Due to its linkage to forex rates, SOR can be more volatile compared to SIBOR.

Key Points:

• Includes an element of currency exchange rate risk.
• Can be more volatile, thus posing higher risks for borrowers.
• Typically less popular for home loans due to its complexity and volatility.

SORA (Singapore Overnight Rate Average)

SORA, overseen by the Monetary Authority of Singapore (MAS) since 2005, is the average rate of unsecured overnight interbank SGD transactions. It is part of a global shift towards more robust and transparent benchmarks. The transition from SIBOR and SOR to SORA is aimed at creating a more stable and resilient financial system.

Key Points:

• Reflects the average rate of overnight transactions, providing a more stable and transparent benchmark.
• Supported by the Monetary Authority of Singapore (MAS) as a reliable benchmark.
• Expected to be the main benchmark for home loans moving forward.

Comparison

Unlike SIBOR, which relies on estimated rates provided by Singapore banks, SORA is derived from actual transaction data and is updated daily on the MAS website at 9am.

SORA loan packages are calculated using the compounded average of the daily SORA rates over periods of one, three, or six months. This averaging method results in less volatile interest rates compared to daily fluctuations.

On the other hand, SIBOR-based and SOR-based loan interest payments are set by the rate on a specific day, making them susceptible to abrupt changes whenever interest rates fluctuate on reset dates.

At a glance:

Factors Influencing Home Loan Interest Rates

Understanding the factors that influence home loan interest rates can help you make informed decisions when selecting a mortgage. Here are the key elements that affect the rates you might be offered:

Loan Type

The type of home loan you choose significantly impacts the interest rate. Fixed-rate loans typically have higher initial rates compared to floating-rate loans, but they offer stability by keeping the rate constant over the loan term. Floating-rate loans, on the other hand, can start with lower rates, which may fluctuate over time based on market conditions.

Credit Score

Your credit score is a crucial factor in determining your home loan interest rate. Lenders use your credit score to assess your creditworthiness. A higher credit score generally leads to a lower interest rate, as it indicates a lower risk of default. Conversely, a lower credit score may result in higher interest rates or even difficulty in securing a loan.

Loan Amount and Term

The total amount you borrow and the length of your loan term also influence the interest rate. Larger loan amounts can sometimes qualify for lower interest rates due to economies of scale, but they also pose a higher risk to lenders. Longer loan terms typically come with higher interest rates because the lender's risk extends over a more extended period.

Financial Institution Policies

Each financial institution has its own set of policies and criteria for determining interest rates. These can include the institution's cost of funds, profit margins, and competitive positioning. Some banks might offer lower rates to attract new customers or retain existing ones, while others may adjust rates based on their financial health and market conditions.

How To Choose The Best Home Loan?

Selecting the best home loan requires careful consideration of several factors to ensure it aligns with your financial goals and circumstances. Here’s a guide to help you make an informed decision:

1. Assess Your Financial Situation

Start by evaluating your current financial health, including your income, expenses, savings, and credit score. Understanding your financial position will help determine how much you can afford to borrow and repay comfortably.

2. Determine the Loan Amount and Tenure

Decide on the loan amount you need and the tenure of the loan. Remember that a longer tenure may result in lower monthly repayments but higher overall interest costs, while a shorter tenure could mean higher monthly payments but lower total interest paid.

3. Compare Interest Rates

Research and compare the interest rates offered by different lenders. Consider both fixed and floating rate options:

• Fixed Rates: Provide stability with predictable monthly payments.
• Floating Rates: May start lower but can fluctuate based on market conditions, potentially saving you money if rates decrease.

4. Evaluate Loan Features

Look at the additional features and benefits offered by various loan packages, such as:

• Flexible Repayment Options: Ability to make extra payments or adjust the repayment schedule.
• Offset Accounts: Link your savings account to reduce the interest payable on your home loan.
• Redraw Facilities: Access extra payments you’ve made if needed.

5. Consider Fees and Charges

Take into account all associated costs, including processing fees, legal fees, valuation fees, and any early repayment penalties. These can significantly impact the overall cost of your loan.

6. Check Eligibility Criteria

Ensure you meet the eligibility criteria for the loans you’re considering. This includes age, residency status, minimum income requirements, and other lender-specific conditions.

7. Seek Professional Advice

Consult with a mortgage advisor or financial planner to get personalized advice based on your financial situation and goals. They can help you navigate through the various options and find the best deal.

8. Read the Fine Print

Carefully read the terms and conditions of the loan agreement. Understand the implications of clauses related to interest rate changes, default penalties, and any other contractual obligations.

Requirements for a Home Loan

Securing a home loan involves meeting specific eligibility criteria and providing various documents to verify your financial status. Here are the key requirements:

Eligibility:

• At least 21 years old. Some lenders may have an upper age limit, usually around 65 to 70 years, at the end of the loan tenure.
• For HDB Loans, at least one applicant must be Singaporean or Permanent Resident Residency Status.
• Some banks may offer private property loans to foreigners, but the terms and conditions might be more stringent.
• The minimum income amount varies between lenders and depends on the loan amount and tenure. For HDB Loans, the applicant's average gross monthly household income must not exceed the following limits:
  • $14,000 for families
  • $21,000 for extended families (for more details, please refer to the guide)
  • $7,000 for singles purchasing under the Single Singapore Citizen (SSC) Scheme

Requirements:

• A copy of your NRIC, driver’s license, or passport
• Income documents can include recent 6 months’ worth of payslips, income tax returns, and employment letter.
• For self-employed individuals, financial statements and tax returns for the past two to three years may be required.
• Recent bank statements (usually the last three to six months) to demonstrate your financial health and ability to manage existing debts and expenses.