Housing Loan Singapore

www.Housingloansingapore.com

Providing online home loan services since 2009

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.

Definition

Home Equity Loan

A home equity loan is a term loan secured against property in which the borrower receives a lump sum in cash.

The property is used as collateral to the bank and the borrower gets access to the cash loan.

This is a very useful method for homeowners to get access to funds when they have unencumbered property and want to get a loan at low interest rates.

The key difference between a home equity loan and a typical home loans is that funds from the latter can only be used to pay a home seller or developer. Funds from the former can be used for any purpose the borrower intends as he gets access to it in the form of cash.

Another difference in the Singapore market is that regular home loans offered by banks can be used for public housing (HDB) transactions, while home equity loans are only available for private property.

Saying that, it does not mean that a private property would be entitled to home equity term loans as every mortgagor (borrower) would still have to be put through the credit screening and assessment process.

When there is an existing loan on a house, borrowers can often consider equity loans via a cash out.

Difference between cash out and home equity loan

Sometimes a cash out refinancing is deemed as a home equity loan. But by definition and practice, they are not the same.

A cash out refi consist of a new home loan with a larger loan quantum than the current one. This new and bigger loan would fully repay (or replace) the existing housing loan, with the remaining balance as free funds for the borrower to use in cash.

Because of the similarity of this balance and an actual home equity loan, the terms used to describe them are often used interchangeably.

But as one can see from reasons explained above, they are not the same.

It should also not be confused with a HELOC.

How it works

When a home equity loan is approved, the funds would either be presented to the borrower via a cheque or disbursed into an account which the lender has opened for the borrower.

The borrower can then either cash in the cheque into his own personal accounts, or access the funds with a credit card, cheque book, or ATM card when a account has been opened specifically for the borrower.

This account can sometimes even be interest-bearing which is bank’s way of encouraging the borrower to keep the money in the account instead of using it.

The equity loan acts like a typical mortgage with amortization properly scheduled for the entire life of the term loan.

Borrowers would make payment just like a typical home loan.

The interest rate charged will depend on whether it is on a fixed rate or a floating rate pegged to an index rate.

They are typically the same types of interest rates of regular housing loans offered by the same lender.

For example, if a lender is offering SIBOR + 1% for their regular housing loans, then this rate should be available for their home equity loans as well.

Closing costs

The costs that a borrower can expect to pay might include:

  • Redemption penalty charged by existing lender
  • Other penalties by existing lender such as legal clawback
  • Legal fees
  • Facility fee
  • Valuation fee
  • Administrative fee
  • Other junk fees

When considering whether to accept a home equity loan, don’t forget to ask for fee waivers or freebies.

If you don’t ask, you’ll not get them. And if you ask, you might just get lucky.

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Related Posts

What We Do For You

We Gather And Provide You Information On The Best Housing Loans In Singapore So That You Can Make A Better Decision Based On What Is Available In The Market

Which bank do you recommend for home loans in Singapore?

We don't recommend banks. We recommend you the best home loan that suits your profile and financial position.

How Does SOR Rates Hit Negative Value?

SOR rates are calculated with a complex financial formula, solved with simple algebra. The results of solving the equation therefore depends on the inputs used. Varying inputs that result from economic impacts and indicators can lead to negative value when the formula is solved. Key input indicators include USD/SGD spot rates and USD/SGD forward rates.

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.

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.
Want to see housing loan interest rate trends for the last 36 months?

Enter your email below so we can send it to you.

It makes absolutely no sense to pay more
than you have to on a home loan.

Find the best mortgage rates here
SEE RATES
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It makes absolutely no sense to pay more than you have to on a home loan.

Find the best mortgage rates here
VIEW TODAY'S RATES
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