Preparing for your upcoming significant property investment and seeking guidance on securing an intelligent bank loan for your property financing? Look no further! We’re here to provide you with our latest comprehensive bank loan guide, equipped with essential terms and invaluable tips to aid you in making well-informed mortgage decisions.
- Fixed vs Floating Interest Rate Every bank loan offers either a fixed or floating interest rate. A fixed interest rate remains constant from the agreement’s initiation to its expiration, ensuring stability during the specified term. Conversely, a floating interest rate is dynamic and is determined by a formula involving an interest rate benchmark and a spread. For instance, a bank loan might have a floating interest rate calculated as 3M SORA (interest rate benchmark) + 0.60% (spread) for the first year.
- Floating Interest Rate: SORA vs Board Rate Floating interest rates primarily use two benchmark types: Singapore Overnight Rate Average (SORA) and board rate. SORA is a fluctuating benchmark based on actual borrowing transactions between banks, providing transparency. On the other hand, the board rate is determined internally by the bank without clear visibility into the calculation process.
- Loan-To-Value: Striking the Right Balance Loan-to-value (LTV) is the ratio used to determine how much of your property’s cost will be financed through a bank loan. A higher LTV means more leverage but also results in a larger loan amount and higher interest payments. The choice of LTV depends on your comfort level with taking on debt to secure your home.
- Principal Repayment vs Interest Repayment Monthly repayments on your bank loan are divided into interest and principal components. A portion goes towards repaying the interest accrued on the outstanding loan, and the remainder is applied to reduce the principal amount owed.
- Loan Tenure: Striking a Balance Choosing the loan tenure is crucial as it impacts the total cost of the property. A longer tenure means lower monthly repayments but higher overall interest paid. Conversely, a shorter tenure reduces interest costs but increases monthly payments.
- Finding the Best Bank Loan Deals Seeking the best bank loan deals in the market can be time-consuming. Utilizing a mortgage consultant streamlines the process, providing access to current home loan packages and potential exclusive interest rate offers that may not be directly available from the bank.
Are you preparing for your next property investment or considering refinancing your existing home loan? Fill out our enquiry form, and our mortgage consultants at SGLOANMART will connect with you to provide expert assistance and help you navigate the mortgage landscape seamlessly.
