There are a number of factors that have an influence on the interest rate you are paying for your home loan. Some are external factors (such as the state of the economy) which are beyond your control, while others (e.g. your credit score) you may have some influence over.
Let’s try to understand some of these factors:
Singapore Interbank Offer Rate (SIBOR)
Singapore fixed rate mortgage loans only have a fixed rate for the initial 1 to 5 years. Thereafter, your mortgage loan will most likely be pegged to the Singapore Interbank Offer Rate (SIBOR) or Swap Offer Rate (SOR) plus a spread. For floating rate loans, the interest rate is pegged to SIBOR or SOR since beginning.
This means that at times of low SIBOR, borrowers will benefit from floating rate mortgage loans. However, when interest rates rise, borrowers will have to pay a higher interest for their mortgage.
Your Credit Profile / Credit Score
Your personal credit profile is important as it can often decide whether you will qualify for a home loan or not, as well as the amount and interest rate the bank is prepared to lend you at.
Banks normally look at two things: your credit worthiness, and your income. To enjoy favourable home loan rates, you need to have both a strong credit profile and a goodincome..
Your Home Loan Terms
The interest rate on your home loan may also depend on the terms of your loan.
Home Loan Period – With short home loan term you would have to pay lower interest overall but it would increase the payment of your interest every month.
Home Loan Insurance – Some banks offer a discount on your interest rate if you apply for a mortgage insurance along with your loan. These insurances (e.g. Mortgage Reducing Term Assurance or MRTA) help cover your outstanding loan amount in the event of death or permanent disability, thus reducing the risk for the banks.
Are You A Profitable Customer
Like all businesses, banks are profit-driven. If you use many products (e.g. current accounts, credit cards, car loans) from the same bank, there are chances that you will receive a much better offer for your home loan from that same bank (as compared to other banks).
Do you want to know which bank offers the best housing loan interest rate? Find out more here!
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