A Guide to Applying for Home Loans in Singapore

home loan

A home feels even sweeter when your ownership of it is guaranteed. It’s for that reason that many more Singaporeans are considering taking out home loans instead of renting property indefinitely. Taking out a home loan means making a down payment on a property and then repaying the amount to the creditor with interest. The repayment takes place over a period of time that’s agreed upon by the creditor and the borrower, and the property is secured as collateral. In the event that the borrower can no longer pay off the loan, the creditor will recoup its loss by selling the home.

home loan in singapore
Photo credit: Shermin Ng | https://unsplash.com/photos/1PH2uwpYt1w

Applying for a housing loan may seem like a daunting task. After all, the prospect of being indebted for so long may be scary to some people. However, after reading this quick guide, you may find it easier to go through the process and take out your own home loan. Here’s everything you need to know about the benefits of getting a home loan, what types of loans you can take out, whether you have housing loan eligibility or not, and more.

Why Should You Consider Getting a Home Loan?

If your home loan application gets approved, you’ll be on the receiving end of several benefits. First, you will have a roof guaranteed over your head. It will save you both the expense and the grief of paying rent, as renting a home isn’t as secure an arrangement as owning one. This will matter more and more to you as your family grows bigger. It will also be of great relief as you get older and your health and financial security aren’t as set in stone as before.

Second, a home loan provides a convenient arrangement of paying off your home in small increments. By far, this is better than saving for years—even decades—just to be a homeowner.

Third, being part of a housing loan program with Singapore’s own Housing and Development Board (HDB) has its own advantages. You’ll be in line to take up residence in one of Singapore’s safe, thoughtfully designed, and environmentally friendly residential enclaves.

You’ll feel right at home, so to speak, when you find the right loan program. Don’t hesitate to begin that search now.

How Do You Become Eligible for a Singapore Home Loan?

Your eligibility for a housing loan in Singapore will ultimately depend on which program you choose and who you’re borrowing money from. Some of the most common criteria for eligibility include the following:

● You must have residency status in Singapore.
● You must be of the minimum or maximum age required by the creditor’s housing loan program.
● You must meet the minimum income requirement or demonstrate your ability to pay the monthly instalments (for example, if you are self-employed).
● You must be able to meet the loan quantum, or the principal amount of money you can borrow for your home loan.
● You must agree to abide by the property loan rules prescribed by the Monetary Authority of Singapore, as well as by the internal rules set by your creditor.

If you meet all of these criteria, then you are most likely ready to begin the application process!

Should You Get a Fixed-Rate or Variable Rate Home Loan?

When you apply for a home loan, you’ll have a choice between a fixed-rate loan and a variable-rate home loan. The latter is sometimes referred to as an adjustable-rate mortgage (ARM).

As the term implies, a fixed-rate home loan requires you to pay a fixed rate on interest for the first few years of your loan. It may seem expensive at first, but getting a fixed-rate home loan means that your interest will stay the same even when market rates fluctuate. On the other hand, variable-rate loans are tied to certain reference rates, for example your Central Provident Fund (CPF) contributions. Whenever the reference rate changes, the interest you pay changes as well. It may be the cheaper arrangement in the beginning, but you’ll constantly have to recalibrate the amount when you’re paying interest.

Is a fixed-rate home loan a better option for you, or should you get a variable-rate home loan? It really depends on your situation and how much money you’re willing to set aside monthly for your amortization. If you have any more questions about fixed-rate and variable-rate loans, ask your creditor for more details.

How Do You Start Applying for a Home Loan in Singapore?

If you’re now interested in the process of applying for a home loan, you can expect the process to look something like this.

● You will need to find out if you’re eligible according to your creditor’s standards.
● You must ask for a property loan fact sheet from your creditor. This is a document which details the loan terms, interest rate, lock-in period, repayment schedule, and penalties.
● Determine what additional criteria you need to meet for the program, for example, if you’ll be paying your housing loan off with your CPF contributions.
● If you’re applying for a home loan with the HDB, write an HDB Loan Eligibility (HLE) letter. You’ll have to answer a questionnaire pertaining to your eligibility and prepare some supporting documents.
● Read the fine print on any home loan application so that your expectations are fully aligned with the creditor’s.

It will be a happy day for you indeed if you get approved for a loan. When your application does get approved, make sure to follow through on your plans for paying it off.

Is Refinancing Your Current Home Loan an Option?

Yes, it may also be an option to refinance or switch out of your existing home loan program for a new one. You may be able to find a creditor who offers more favourable interest rates and ultimately save more money on your housing loan package.

Check with both your current creditor and your prospective creditor if such an arrangement is possible. If you aren’t within the lock-in period of the loan and don’t have to pay a steep termination fee, this may be a practical choice on your part.

Some Last Tips on Taking Out a Home Loan in Singapore

Before you know it, you may be closer to becoming a proud homeowner in Singapore thanks to your housing loan. Once your application has been approved, don’t forget the following:

  • Have the down payment ready with you.
  • Make copies of all documents pertaining to the loan. Keep a schedule and stay on top of all the terms.
  • Be conscientious about your monthly payments so that you can avoid penalties and build a good credit history.

Here’s to a prosperous, secure, and happy residential life in Singapore, all of which will be possible if you honour your home loan!