FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.

posted on 23 March 2016

Understanding Home Mortgage Financing In Singapore

The Singaporean home financing system can be difficult to understand at the best of times, due to the sheer amount of details that you need to consider when taking out a home loan. Hopefully, through this short guide, you will be able to understand what taking out a mortgage in Singapore entails, and what your options are.


The first thing you need to understand when evaluating a home loan in Singapore via sites like Property Guru is that the process is dependent on LVR (Loan-to-Value Ration) and MSR (Mortgage Servicing Ratio). Based on present day MAS (Monetary Authority of Singapore) regulations, the maximum LVR is 80 percent of a property's current value. Under this process, you need to pay the initial 20 percent cost of the property and only upon completion are you allowed to take out a bank loan for the remaining 80 percent. The reason behind this method of financing is to protect the Singaporean real estate market and banks from over-speculation, as well as to prevent buyers from attempting to purchase a property that they cannot reasonably afford. Calculating the capacity of a person to pay is based on the MSR, wherein the maximum allowed amount that a Singaporean citizen can pay is 30 percent of their monthly income. Utilizing both the LVR and MSR, a local buyer in Singapore can determine the potential monthly mortgage payments for a property, and whether or not they can afford it with their current level of MSR.

Financing Options

There are two financing options that you can choose from when taking out a mortgage in Singapore:

  • HDB Loans. An HDB loan is a state sponsored loan that has a far lower interest rate compared to many Singaporean banks. Done through Singapore's Central Provident Fund (CPF), the interest rate for the loan consists of the current CPF rate and an additional 0.1 percent that is payable within a ten to twenty-year period. Since a bank mortgage under a comparable period often reaches 15 percent or more, an HBD loan is an affordable option for people looking to purchase their first home or apartment.

  • Bank Loans. Bank loans are the second financing option when taking out a mortgage in Singapore and are utilized by people who perceive real estate as a long term investment for their retirement. Bank loans offer five to 20 year rates with varying interest rates; this depends on how many years to pay is indicated in the loan agreement. Determining the amount that the bank is willing to pay for your property is based on an IPA (In-Principal Approval) which allows you to examine the different interest rates and payment options available.

Bank Payments

If you're opting to utilize a bank loan instead of an HDB loan, there are two loan rates that you choose from:

  • Fixed Rate Loans. As its name indicates, this type of loan has a fixed rate that you and the bank agreed on during your loan negotiations. Regardless of fluctuations in home prices or the Singaporean market, the rate will remain the same. The advantage of this particular loan is if the MAS were to increase loan rates, or if the economy continues to expand resulting in the banks increasing the interest rates on their loans. The disadvantage of this method is if there is a decline in home prices, or if the economy contracts due to outside market forces, you will be forced to pay a much higher interest rate, as compared to someone who took out a loan during the period of market contraction. Lastly, fixed home rates have a higher interest rate, as compared to their floating rate counterparts.

  • Floating Rate Loans. Connected to the Singapore Inter Bank Offset Rate (SIBOR), floating rate loans are affected by present day market conditions. While they have very low-interest rates to entice potential home buyers, the fact remains that as market conditions improve, the interest rates tend to increase over time, resulting in you having to pay more than you originally thought. There is, of course, an advantage to choosing a floating rate, since you do pay less over time due to the lower interest payments. Some bank customers prefer having a set rate that doesn't change since this enables them to prepare a budget per month. People under a floating rate have to estimate their payments, and this can sometimes lead to moments of frustration where their monthly budgets are thrown into chaos because the amount to be paid keeps on changing.

Just remember, when taking out a loan, it's wise to only go for what you're absolutely certain you can afford. Yes, a house may look beautiful, and it would seem to be the most ideal for you - but if you can't afford it, then go for the next best alternative.

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical Investing Post Listing

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.

You can also comment using Facebook directly using he comment block below.

Econintersect Investing


Print this page or create a PDF file of this page
Print Friendly and PDF

The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.

Take a look at what is going on inside of
Main Home
Analysis Blog
Comments on Feyerabend’s ‘Against Method’, Part III
Taking a Wrench to Healthcare
News Blog
Higher GDP Growth In The Long Run Requires Higher Productivity Growth
Quantum Encryption Is Secure Because Information Encoded In A Quantum Particle Is Destroyed As Soon As It Is Measured
The Stock Market Is Up, But Mutual Fund Investors Are Fleeing
Infographic Of The Day: Google's Hidden Games
Early Headlines: Asia Srocks Mostly Lower, Energy HY Bonds Surge, Google Fiber Cutback, Shadow Banks Dominate Mortgages, NATO Crowds Russia, Coffee Surges And More
Top 10 American Misconceptions about China (Version 3)
Documentary Of The Week: Job Buffers Are More Efficient Than Unemployment Buffers
Typing Is The New Talking
Outsourcing Viewed As The Top Threat To U.S. Jobs
SOS, Extra Savings Needed For An Adequate Pension
Bob Dylan's Nobel Prize - And What Really Defines Literature
What We Read Today 25 October 2016
Baby Remarkably Survives Being Born With Heart Beating Outside Her Chest
Investing Blog
This Or That? Technical Report 25 October 2016
Opinion Blog
What Triggers Collapse?
The Beer Goggles Stock Market
Precious Metals Blog
Inflation Surging As Platinum Signals Stock Market Decline
Live Markets
26Oct2016 Pre-Market Commentary: US Stock Markets Opened Lower As Apple Takes Center Stage Falling 3%, Market Indicators Remain In No Mans Land, Many Investors Sitting On Hands Awaiting Possible Fed Rate Change On Friday
Amazon Books & More

.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Middle East / Africa
USA Government

Crowdfunding ....



Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved