What is the best home loan interest rate?

With interest rates expected to hit record highs, many home owners are asking, ‘what is the bet home loan interest rate?’

best home loan interest rate
Image credit: http://alphastockimages.com/

The truth is, the best home loan interest rate is subjective.

A fixed interest rate package is usually higher since you are paying a premium for stability. This is viewed as the best home loan package for someone who is risk-averse but might not be the best for someone who is willing to take a little more risk and enjoy more savings with a floating rate package. So, it is good to read all about the different home loan packages.

What you prospective home buyers and those that want to refinance should do is, compare different packages. And if they do not have the time to do that, then they should seek the services of mortgage specialists. They will clarify your doubts and refer you to the bank that best suits your needs.

Mr Paul Ho, chief officer at iCompareLoan, said: “a lot of home owners and those that want to refinance have many misconceptions about what the best home loan interest rate is. For example, many think that their interest rate is fixed during the lock-in period.”

“This is a common misconception. Your rates are not fixed during the lock-in period unless you specifically take up a Fixed Rate package,” he added.

When it comes to home loans, treat them as if you’re buying a new pair of shoes – you have to shop around to find the best pair that fits you, while also making sure they are at the lowest price possible. With so many banks offering different home loans with variable or fixed interest rates and varying lock-in periods, you might be at a loss.

Best Home Loan Interest Rate for different loan sizes 

The size of the outstanding home loan matters. Banks generally like to finance larger loan sizes. Hence for larger home loan sizes, they tend to offer lower rates and better terms such as legal subsidy, or cash rebate and or valuation subsidy, on a case by case basis. Also it cost the banks more administratively to lend out a small loan then a larger size loan.

For example, a Best Home Loan for up to $300,000 loan may be Sibor + 0.8%, and one that is above $500,000 is Sibor + 0.75% and above $1,000,000 is Sibor + 0.7% or one that is a jumbo home loan of $2,000,000  and above is Sibor + 0.65%. Very similar to buying one orange for $1 and 1 carton of 100 oranges for $60. The larger home loan you need or want to get refinanced, the lower the potential rate.

Illustration of a 2 Years Fixed and 2 Years Locked in Home Loan Package

You tell your girl friend you love her for 2 years and during this 2 years, your love will never change, this is Fixed and Committed Love and locked in for 2 years. She tells you, she loves you back and will not change her love for 2 years.

This is a analogous to a 2 years Fixed rate where the rate will not change and similarly you are locked in and cannot leave the bank within 2 years.

Illustration of a 2 Years Floating Rate and 2 Years Locked in Home Loan Package

You tell your girl friend that your love for her will not change for 2 years. She says, “Noted”. So during this 2 years, you have committed to her for 2 years and locked in for 2 years, you cannot leave. She can still change her love, to love you less or not love you anymore.

This is analogous to a 2 years locked in home loan package where the borrower (mortgagor) cannot leave the bank for 2 years. But the bank can still raise their interest rate whilst you are in the locked in period and there is nothing you can do about it, unless you break the locked in and pay penalty for it.

Do note that best home loans for new launch condominiums that are building-under-construction (BUC), generally referred to as BUC home loans by the banks are again different from that of completed properties. Most BUC home loans do not have locked in period, though some do. So the idea of a Best BUC Home Loan may differ from that of a Best completed property home loan.

Trust the home loan specialist to get you the best home loan interest rate

Mortgage brokers are highly trained former bankers or people with very strong numerical skills with many years in the wealth and financial planning industry.

Mortgage brokers are expert in understanding the MAS regulations and rules and the ins and outs of the home loan packages. The panel of bankers and lenders mortgage brokers recommend are carefully selected and filtered throughout the years. They represent the best of the breed bankers who are both knowledgeable, ethical and know the inner workings of bank loan applications to expedite the bank loan process.

A good mortgage broker will continue to monitor the lender’s performance constantly through customer feedback as well as (from time-to-time, with the agreement of the customer) accompany customers to sit in at the session, where the respective bankers will be graded.

You can consider using mortgage brokers to having a Home Loan Concierge service where mortgage brokers will guide you through the various banks and it’s home loan packages, generate detailed Home Loan Report (TM) analysis to give you the data for an informed decision. This concierge service will then usher you towards a panel of lenders for processing your home loan application smoothly and efficiently.

Finding the best home loan interest rate for you is tough as everyone’s situation is unique – your financial position, type of home, family structure, age, nationality, reason for getting a loan, etc. So what suits your friend may not be suitable for you.

This is where the mortgage broker can help you find the best home loan for you – whether it is for new property or refinancing.

If you are buying property in Singapore, it is important to manage it well as it is a major commitment and investment and will most likely require a home loan from a bank, financial institution or HDB. If not managed well, the loan and the interest rate, can be a financial burden and weigh you down in even in your personal life.

Written by Ravi Chandran

investment home owners

Will private property be affordable to Singaporeans in future? Ex-MP questions

research mortgage options

Low mortgage interest rate environment is fast changing and what can I do about it?