Housing loan is one of the main products offered by banks, with housing loan in place with its customers; banks can then have the break of building a cluster of products around it. This will in turn develop the retention tie with the customers. Other than housing loan, other types of home loan financing that banks offers include bridging loan and renovation loan. These loans are commonly presented to the lenders in a package, provided the lenders are eligible for the loans.
A Housing is a credit facility provided to customers for the purchase of a residential property for their occupation or for investment, secured on the property that that the customer is buying.
The banks’ housing loan packages in Singapore can be broadly defined into two categories, fixed rates and floating (variable) rates. Banks start charging interest from the date the loan is first disbursed. Fixed rates packages in Singapore are normally offered for up to 3 years, However, some banks may extend up to 5 years fixed rates or even 10 years. After the agreed fixed-rate term is up, the interest rate will become variable where the interest rate will be a floating rate.
Floating rates in Singapore can be classified into published rates or board rates. Published rates are rates that are published daily, such as the Singapore Interbank Offered Rate (SIBOR) or Singapore Swap Offer Rate (SOR). Board rates on the other hand are determined by the bank. Most banks peg their board rates to certain financial benchmarks such as SIBOR. Where the home loan interest rate will move correspondingly with the reference rate, this will lead to a rise or fall in the monthly installment payment depending on the movement of the reference rate.
A home loan is usually repaid in monthly installments. Each monthly installment consists of a principal repayment and interest payment. The amount of the monthly installment depends on the loan amount, the term of the...