Capital and interest housing loans |
Part of each monthly payment you make goes towards repaying the capital amount you owe and part goes towards paying interest charged on the loan. At the end of the loan tenure, the entire debt will be repaid. In the early years, payments consist largely of interest; as time goes on the capital repayment proportion increases.
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Cashback housing loans |
The lender refunds a percentage of the housing loan – the cashback – and you are usually tied by way of an early redemption penalty for a set number of years.
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Combo housing loans |
A combo or hybrid housing loan can be sub-divided into different parts. Each part can be treated as a separate housing loan so you can choose a package for each division. In other words, your loan, if you were to sub-divide it into two parts, can consist of a floating rate component and a fixed rate component.
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Claw-back period |
If you are to fully redeem your mortgage within the claw-back period, the lender will reclaim the cost of “freebies” they gave to you when you sign with them. These would usually be the legal subsidy and may include valuation fees and fire insurance premiums.
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Fixed rate housing loans |
Packages offering a fixed interest rate for a set period, during which there will almost certainly be early repayment charges. You are protected from interest rate increases and allows for easy monthly budgeting. However, if rates were to fall during the fixed interest period, you would be left paying a relatively high rate.
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Floating rate or variable rate housing loans |
The interest rate can rise or fall throughout the tenure of the loan. Lenders usually give at least one month’s notice when adjustments are made to the interest rate. Most lenders allow partial prepayments for this type of loan, making this a good package if you intend to repay a significant portion of your housing loan in the initial few years.
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Interest calculation |
The frequency with which lenders calculate the outstanding balance on mortgages – annually, monthly or daily – is an important consideration for capital and interest housing loans.
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Interest-offset accounts |
Some deals come with an account whereby cash deposited into this account will offset the interest that you pay on your housing loan quantum. For every dollar that you deposit into the account, the interest may be offset fully or by a fraction. For example, your deal may offer you an account that offsets 2/3 of your interest rate for cash that you deposit into it. When you deposit S$100,000 into the account, assuming your interest rate is 3% and loan quantum is S$500,000 at the time of deposit, you will be paying interest of 3% for S$400,000 and 2% (2/3 of 3%) for S$100,000. This type of account is useful when you have access to substantial liquid funds but have no intention of using the funds to reduce your loan quantum.
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Interest-only housing loans |
Monthly payments consist entirely of the interest due on your loan so that the balance you owe is not reduced during the term.
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Loan quantum |
The loan quantum or principal is the amount of money that you borrow.
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Loan tenure |
The period of time that you will take to fully repay your loan.
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Loan to value (LTV) |
A percentage figure indicating the size of the housing loan on a property in relation to its value. Thus, a house worth S$500,000 with a mortgage of S$250,000 would have a loan to value of 50%. Most banks and financial institutions have better housing loan deals for LTV 80% and below. The maximum LTV that lenders can legally go to in Singapore is 90%.
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Lock-in period |
The number of years that you are tied to your lender. If you fully redeem your loan within this period, there will be a full redemption penalty that is equal to a percentage of your loan quantum. Lenders may also charge a penalty for making partial payments within this period.
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Payment holiday housing loans |
A relatively new type of mortgage in the Singapore market. You pay the year’s interest in the first month of your loan tenure. For the rest of the year, you can choose to either make a monthly payment towards the principal or take a break from mortgage payments for the rest of the year.
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Prepayment |
Payments that you make in addition to the monthly instalments.
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Refinancing |
Switching from one housing loan package to another, usually better, deal.
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Repricing |
Switching from one housing loan package to another deal with the same lender.
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Sibor |
Singapore Interbank Offered Rate is the rate that banks and financial institutions borrow from each other. Local housing loan interest rates track movements in the Sibor.
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