Finding the Right Home Loan Interest Rate

By MyVine | October 28, 2011

Searching for the correct home loan interest rate

Singapore is known for its high rate economic stability.  This is why there are many people and investors, alike, who would want to have a property investment in the Lion City.  Many banks and financial institutions are on the market offering different house loan packages and schemes.  Each package has their own system to follow when offering their mortgages.  However, as you are the borrower it is wise to learn what are these loan schemes are and the prevailing home loan interest rate.

There are two kinds of home loan interest rate that are being offered by these lending institutions.  The fixed interest rate and the floating interest rates, both cannot be compared directly because it differs in scheme.  A floating rate is a rate based on the up and down of the prevailing interest rate in the market.  This type of interest is flexible and common on banking institutions.  It can be adjusted on a weekly basis, monthly or even yearly depending on the type of package a borrower decides to acquire.  This type of loan is usually avoided by people who are not risk takers.  This may cost less than the fixed loan rate, which rely on the cost and the maturity of the loan.  Normally, this rate is attached to an external rate, which is set by the bank to limit the largest amount that a rate would go high to protect the interest of the borrower, as well as, the bank itself.  This reference point is the Swap Offered Rate or (SOR) Singapore Interbank Offered Rate (SIBOR).  Since this kind of home loan interest rate is unpredictable, it is a non-lock term loan and last only for a short period.

The other rate is the fixed home loan interest rate. This is the customary type of rate offered by financial institutions.  Fixed rate means that the rate is defined and set regardless of any change in the market interest rate.  This cost higher than the floating rate.  And as a rule, the longer the term of loan the higher the interest charge one would have on his/her loan.  However, there are advantages in choosing a fixed rate.  First, if one applied on a low fixed rate for a long period of term, one does not worry that it would tend to rise as the rates gets high.  Another is, since payment is set you do not need to inform the bank or institution of any adjustments on the payment if there is a sudden change on interest rates.  It place one on a hassle-free monitoring the current rates.  This is most suitable to people who would stay on a long period and is conscious of their financial standing on the future.

However, before deciding on anything one should also have knowledge on other charges and fees that the bank or any institution might add up to the principal loan.  Home loan interest rate is just one reason there are other factors that one should give consideration.  It is the right of any borrower to ask costing particulars and other benefits that one derived on their home mortgage.  Remember, these financial institutions could give a flexible rate and other perks in their packages, and one just have to know how to ask.

Topics: Buying Tips, Financing, Foreclosures, General, Investing, Selling Tips | Comments Off

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