SIBOR or SOR?

SIBOR is generally more stable while SWAP tend to fluctuate more. However 3-month SWAP has recently stayed consistently lower than 3-month SIBOR for an extended period of time. SOR is also very reactive to currency exchange rates.

Which bank offers the best home loan deals?

Interest rates and spreads are not all that matter. Don't ignore the closing costs involved. Different banks can have different customized home loans for you. Don't be surprised if you will save more on a home loan that charges more interest because of the lesser closing costs involved. This is especially so if you know that you will refinance your home loan as soon as the lock in period has expired.

HDB loan or bank housing loan?

Our opinion is to always take a HDB concessionary loan if you are eligible for one. One of HDB's objectives is to to provide affordable housing for the people. While a bank is profit driven.

Home Equity

Home equity refers to the value of a property after deducting any outstanding housing loans against it.

Many homeowners don’t realise that when in order to cash out on home equity, that there must be sufficient equity in the house to begin with.

They get informed that as long as their homes are valuable, that they would be able to get a term loan against the property.

However, that is not the case.

For example, if a house is valued at $800,000 with an outstanding mortgage of $600,000, a homeowner will not be able to get a home equity loan even at 75% LTV. This is because 75% of $800,000 is $600,000 which is the balance on the home loan.

In order to be eligible for a such a loan, the amount after accounting for LTV must be higher than the outstanding balance of $600,000.

Home equity is generally increased via two methods:

  1. Appreciation in property value
  2. Reduction in outstanding loan

This implies that the more time that goes by, the more the equity would grow, raising the chances of a homeowner getting some type of credit facility from the bank with home equity.

This is because the more time passes, the more likely a house will appreciate in value. And the more repayments will have been made towards the mortgage.

Using equity to purchase new property for investment is a dangerous game to play.

So do consider things from every angle before making such a move.

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