How to find the best home loan package
The best home loan can allow home owners to save money, pay off the home loan faster and reduce rates volatility.
What’s the ‘best’ for one borrower might not be the same for another.
What is the best home loan?
The short answer is there’s no one best home loan for everyone. However if you know what you are looking for, you should be able to find one that will suit your needs for the short (1-3 years) and medium term (5-7 years). Usually, a good home loan will combine low cost with high priority features. Some ideas of what ‘the best’ home loan might be to different people:
The cheapest home loan
Low rates. If a home loan rate is lower, it will save the borrower a significant cost over the long term. However in Singapore, home loan rate tends to be variable after the first few years. As such, payments may increase when the benchmark rate starts to rise. Therefore it’s important to consider refinancing your home loan after 2-3 years.
Low penalty fee. If the penalty fee for partial prepayment or full redemption is lower or waived, it will give borrower the flexibility to pay down his/ her home loan faster and maximise capital gains when he/ she sold off the property.
The quickest home loan
Home Buyer. For a borrower who needs to complete the Sale and Purchase (S&P) within a short duration, sometimes the best loan would simply be the one that gets approved faster. In Singapore, the lowest rate package may not always be the fastest approved loan. Therefore it is important for borrower to apply his/ her home loan with more than one bank.
The subsidised home loan
Legal fee, valuation fee etc. Under MAS guidelines, Banks are no longer allowed to offer legal subsidy to new home loan. For borrower doing a refinance, there is still some possibility in finding packages that offer legal subsidy. However almost all packages that offer legal subsidy will have a clawback period of 3 years. This means if the borrower redeems the loan (due to sale, higher interest rates etc) within the clawback period, he/ she will have to pay back the legal subsidy.
The most familiar bank home loan
Relationship. Sometimes the best home loan is all about relationship. You have been banking with the same bank for the last 30 years. Your first savings account is with this bank, so are your investments. You know how you will be served by the bank you want the relationship to continue. As such, there is no reason to look elsewhere for a home loan. Still, we think it is important for borrower to compare the home loan packages and ensure he/ she is getting a comparative package.