Housing Loan Singapore

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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

Household Income

The household income is the total combined income of home loan borrowers which would be the figure used by the lender during credit assessment and underwriting in general.

Also known as the gross monthly income, the term household income is probably most famous for describing the maximum income of households that cannot exceed the income ceiling to be eligible to purchase BTO flats from HDB.

But it also plays a critical role in applying for mortgages from the banks.

This is because household income is made up of personal income of borrowers. And less you have been living under a rock for the last decade, you’d know that the combined personal income of a couple would be better high than low in order to obtain a high loan quantum.

The final approved loan amount of a housing loan is calculated by:

  • Deducting debt commitments from total income
  • Taking remaining figure within the debt ratio as monthly installment
  • And using that monthly installment amount against the loan tenure
  • Ensuring the loan amount is within the loan-to-value

The above is of course, an overly simplified version of events during the loan approval process. But the gist is there.

Observing the information above, most home buyers should be able to see that there are basically 3 key factors in order to obtain approval for a high loan amount.

  1. Low debt obligations
  2. Long tenure
  3. High income

The LTV is something that a property buyer or homeowner has little control over.

The debt levels of individuals are often more or less certain and cannot be changed.

For example, a car loan would often be a debt of someone who drives to work. Even when the car loan is fully paid, the odds are that the borrower would take on a new loan for a new car… or else the transport allowance provided by their employers go to waste!

However, if you have a debt that would expire or mature within 3 to 6 month or less, then show the paperwork that proves this to the bank. You might just get that debt removed from the debt service ratio altogether.

The loan tenure is pretty much limited by the age of the applicants. This is especially so when they want to get as high a LTV as possible.

Personal income, or household income, is the variable that mortgage borrowers have the most control over.

Alternative source of income to boost household income

Most people think that the only source of household or personal income that can be used for consideration in loan assessment is salary.

That is not correct.

There are other sources of income that can be taken in as justified income. This can be useful when there is a need to boost your personal income, especially when you are self-employed and would have your income discounted during credit assessment.

Before we list down the items that can be accounted for as income, take note that some lenders might accept them and some might not. And they are generally not listed as required documents when you first apply for a housing loan.

Therefore, alternative documentation is required to verify them.

1) Allowances

Some companies provide housing allowance to employees, especially when they are foreigners who have came to Singapore to make a living.

These types of allowances are understandably very relevant to home loans and would be odd to find anyone who don’t see it this was as well.

Sometimes other types of allowances can be accepted by lenders as qualifying income as well.

For example, transport allowance.

2) Tenancy agreement

Rental income can absolutely be a part of qualifying income, especially with investment property.

If a property an investor is buying comes with inherited tenants, then the monthly mortgage payment would be paid for by the rents collected from tenants.

It sounds very logical indeed to accept rental income from tenancy agreements as part of personal income.

But again, whether they are accepted depends from lender to lender.

3) Dividends

Dividend payments, especially from blue chip stocks, are pretty regular and predictable.

They can sometimes be accepted as well.

4) Annuities

Annuities are regular payments received (usually from an insurer).

5) Alimony

Alimony is money that is not exactly classified as an income as one would not have worked for it.

But money coming in legally is as good as a salary when it comes to cash flow.

Providing the court documents of the alimony arrangement could be good enough to have it taken in as household income by the bank.

6) Payments from trusts

Trusts are legal instruments where assets and wealth are managed by a third party (usually a lawyer) to release assets such as money to beneficiaries when milestones are met.

If you are receiver of such trusts, then revealing them might boost your qualifying income.

Finally, remember that applying and getting approvals for home loans is a serious business. Lenders would make it their business to go after those who try to deceive them.

So don’t attempt to do anything illegal such as making false declaration or falsifying documents to increase household income.

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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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