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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.


Citibank Home Saver

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Citibank is one of the most well-known foreign banks operating in Singapore even though the number of branches it has is a very small number compared to the local banks.

Their favorable reputation might be partly due to such a catchy name. And being an American bank, a place that is revered for their marketing abilities, it’s no surprise that most people would think of credibility and dependability when the word Citibank comes up.

As the mass consumer market is dominated by the local banks in Singapore, Citibank mostly serves a clientele of consumers with higher net-worth. After all they are more known in their home nation as an investment bank.

Saying that, they are also fairly active in the Singapore property loan market when it comes to mass market products.

Even though local banks dominate the real estate market in terms of reach and competitive interest rates, Citi can sometimes make bold moves with home loan packages that local banks are unable match.

This could be because of their international strength and exposure.

For example, they are one of the first banks to introduce 1-month SIBOR into mortgage offerings. The same can be said of step down mortgages.

This shows their innovative approach to financial products, and not being afraid to create something new to broaden the options of borrowers.

The Citibank Home Saver is one of those unique products that they have conceptualized.

This is essentially a housing loan with an interest offset feature based on the deposits that a borrower places with them.

The offset mortgage loan works like this.

The funds in the account would offset up to half of the interest on the home loan for the amount equal to the available funds.

For example, if home loan balance is $500,000 with an interest rate of 2%, and there is $100,000 in the interest offset account, then $100,000 of the $500,000 mortgage would be able to enjoy up to 50% offset of the 2%, resulting in a 1% interest charge.

When we take into consideration that the bank often rewards Citi Gold customers with better rates than the general public, the offset feature of the Citibank Home Saver facility can really bring down the eventual interest rate that borrowers pay for their housing loans.

Opinion on HomeSaver

While being able to reduce the published home loan rate of a property loan can sound very attractive, borrowers should take note that the offsets work like interest credits that reduce the interest portion of the monthly payments.

This means that if you are on an amortization schedule with a $3,000 monthly payment, the monthly payment amount remains the same.

The interest savings would reduce the interest portion of the $3,000, with the excess paid towards the loan principal.

So if the interest portion was originally $600 and the offset comes up to $200, then $400 would be the interest due. $200 would then go towards reducing the outstanding loan balance.

The end result is that the borrower would be reducing the principal faster than originally scheduled, leading to an earlier full repayment date than that what the original tenure suggest.

As with such interest offset credit facilities that requires an account owner to deposit funds with the bank, the question that always arise is “Why would a home owner keep funds in the bank instead of using it to partially redeem the home loan?”

The simple answer is leverage and personal preferences.

Some people just prefer to delay debt payments and keep as much cash on hand as possible so as to be prepared for a rainy day.

On top of that, one must be mindful that Citi is a bank that has a strong focus on high networth individuals and corporations. So their client base might have the profile of having a lot of excess funds parked in savings accounts.

This HomeSaver mortgage facility enables these customers to make good use of parked funds and reduce the interest rate of their home loans.

However, it must be said that if an investment opportunity arise, then borrowers should evaluate and decide whether it would be more worthwhile to move these funds to an investment with higher returns, and pay the regular non-offset home loan rate instead.

High networth consumers are after all, by definition, more financially savvy than the average joe.

Who would benefit from Home Saver?

The niche market that would reap the most benefits from this housing loan facility are those who are looking to become, or are already, CitiGold customers.

CitiGold is the wealth management arm of CitiBank in Singapore. They manage relationships with clients who have a specific range of networth, and keeps a bulk of their cash with the bank.

As Citigold customers would already enjoy a privileged interest rate on regular consumer products offered by the bank, being able to use those funds to offset the mortgage interest charges would enable a borrower to take advantage of special rates provided by the bank.

This can actually work both ways.

One could already be enjoying privilege banking services from Citibank and enjoy better home loans rates with the home saver account. Or sign up for home saver and become a CitiGold customer.

Saying that, it is not necessary to combine the two.

A regular home owner can simply obtain a home loan, and deposit funds into the offset account to reduce the interest payable without becoming a CItiGold member.

This can be a useful feature that accumulates home loan savings whenever one receives a windfall such as a big annual bonus.

If fixed deposit rates are 1% and home loan savings can amount to over 1% with the home saver plan, then the latter can look more attractive to homeowners.

More terms and conditions of this loan package can be found here

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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?

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It makes absolutely no sense to pay more
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Find the best mortgage rates here

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

Find the best mortgage rates here
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