13 Home Loan Terms Explained
Trying to get a home loan in Singapore can be both exciting and tedious for intending home owners. If you have just began your journey to becoming a home owner, you may be confused with home loan jargon used by mortgage brokers, lenders and other professionals in the property industry. Even before going around comparing home loan rates in Singapore, coming to grips with home-loan jargon will be a fantastic asset for you.
Getting acquainted with home loan terminology will not only give you a better understanding of contractual agreements involved in your home-buying business and safeguard against avoidable disputes in the future.
- Singapore Interbank Offered Rate [SIBOR]: This is a index that monitors the interest rates at which banks in Singapore borrows from one another.
- Letter of Offer: This is the contract document offered to you by banks when you take up a loan:
- Loan-To-Value Ratio [LTV]: This is an index that shows a lender what percentage of the property value you can borrow.
- Lock-In Period: This is the period of time where you cannot change the terms of contract or the bank tender.
- HDB Loan Eligibility Letter [HLE]: This is document that stipulates the maximum amount the Housing Development Board [HBD] of Singapore is willing to lend you. This applies only to public housing managed by HDB.
- Swap Offer Rate: This is predicated by the exchange rate between the US Dollar and the Singaporean Dollar.
- Valuation Fee: This is a fee charged by a lender for valuing the worth of a property.
- Floating Rate: This is not a fixed interest rate. It fluctuates with the economy and market condition.
- Loan Tenure: The duration during which the loan is expected to have been fully paid back.
- Fixed Rate: As the name implies, this is an interest rate that remains constant irrespective of economic and market conditions.
- Loan Quantum: This is the amount of money that you borrow. It is often referred to as the principal
- Option-To-Purchase [OTP]: After a buyer has been verified, he or she is issued a contract called the OTP, giving him the exclusive right to purchase the property.
- Board Rate: This represents the index used by banks in determining interest rates.
Still Need to Understand More about Home Loans?
You can be rest assured that there will always be complicated terms used in home loans. While it is true that most Singaporeans hardly have the time to fully monitor the process of getting a home loan, it is good practice to always ask your mortgage broker to clarify any terminology that seems not too clear to you.