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.

Negative Amortization

Negative amortization for a housing loan occurs when your outstanding housing loan balance increases instead of decreases.

There are a few instances that this can happen.

For example, when a borrower is on a floating rate mortgage, interest rates might change every month resulting in a volatile monthly interest charge.

However, if the monthly installments are fixed to a certain amount, should interest rates rise exceedingly high, the monthly installment amount might not be enough to fully cover the interest incurred.

When this occurs, the interest balance is accrued interest and added to the principal loan balance.

Thus, instead of a basic amortization table where we observe the loan principal decreasing over time, negative amortization will show a loan principal increasing over time.

How this situation is remedied depends on the terms of the contract.

A borrower might be asked to:

  • Pay off the accrued interest
  • Pay an additional installment at the end of of the loan tenure
  • Recast the mortgage to work out a new installment amount that take the accrued interest into account
  • etc

When it is unclear why negative amortization has occurred in your loan account, it is best to clarify the details with the lender as soon as possible before the problem gets out of hand.

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