Before Taking the Loan

If you're a home loan customer in Singapore, here are the key things you need to look out for before and after taking a loan, to avoid surprises and ensure long-term financial health:

Back

1. Eligibility & Loan Type

Property type: Is it HDB, Executive Condo, or Private Property?
Loan type: Are you eligible for an HDB loan (fixed 2.6%) or must you take a bank loan?
Nationality/income criteria: Some HDB loans are only for Singapore Citizens.

3. Interest Rates

Understand the difference between:
Fixed rate: More stable but usually higher at the start
Floating/variable rate: Cheaper upfront, but risk of rising over time (linked to SORA or bank’s board rate)
Watch out for lock-in periods (e.g., 2-3 years you can’t refinance or face penalties)

5. Stress Test

Banks will assess your income using TDSR (Total Debt Servicing Ratio) – capped at 55% of monthly gross income
For HDB/ECs, MSR (Mortgage Servicing Ratio) also applies – capped at 30% of gross income

2. Loan-to-Value (LTV) Ratio

First housing loan: Up to 75% LTV
Second loan or existing loans: LTV can drop to 45% or even 35%
You must prepare the downpayment:
- Bank loan: 25% downpayment (minimum 5% cash, rest CPF/cash)
- HDB loan: Up to 15% downpayment, all CPF/cash (no cash minimum)

4. Tenure

Maximum tenure: 30 years for HDB, 35 years for private
Longer tenure = lower monthly payment but more total interest
For buyers above 35–40 years, loan tenure affects maximum loan due to age-related restrictions

After Taking the Loan

1. Monthly Commitment

Know your monthly repayment amount
Plan a buffer for potential interest rate hikes (especially if on floating rate)

3. Insurance Protection

Consider Home Protection Scheme (HPS) for HDB loans (CPF-related)
Or take mortgage term insurance to cover the outstanding loan in case of death/TPD

5. Early Repayment or Selling

Some loans have prepayment penalties during the lock-in period
If you sell early, check for clawback clauses on legal subsidies

2. Using CPF

You can use CPF-OA for downpayment and repayments
Be mindful not to drain CPF completely – you may still need cash in emergencies

4. Refinancing or Repricing

After lock-in period, check if you can refinance with other banks for lower rates
Or reprice with your current bank to get better rates without legal fees
Look out for penalties and fees when switching