Heard that banks now also offers housing loan and they claimed that the rates are lower than bank loan. So i do some readups on the internet and here i shall highlights some pointers found.
- The HDB loan interest rate is 2.6% and it's almost certain it'll remain at 2.6% (becos it's pegged at 0.1% above the CPF interest rate, which has been 2.5% for quite many years).
But with a bank loan, you'll have to be prepared for fluctuations after the 2nd or 3rd year (unless u refinance the loan).
- Fixed interest rate is better than floating interest rate as it takes away the risk of fluctuating interest. banks always offer teaser rates for first two or three years. but note that their rates can change very fast. and the repayments for the initial period of a loan goes towards servicing the interest components more than the principal sum. so when interest rate goes up, you are going to pay a lot more even if its just 1% higher.
- HBD loan is the best for long term. It is peg 0.1 % above the interest given by CPF board. Bank loan fluctuate with the economy and will be much higher that than the CPF rate when economy is good. However, it does not go down as fast as when the economy goes down. Hence when economy is down, and you are out of job... then you are in big trouble, because you will be paying high
bank interest and with no income then you will need to surrender your dream home.. But make sure you keep some spare $ in your ordinary account so that it can serve the loan if you are out of job.......
- A user agrees that HDB loan should be the better option if given the choice, based on long term consideration.
I went to the UOB website and looked for the housing loan and indeed i saw their rates are in terms of 1st year, 2nd year, etc, see:
http://www.uob.com.sg/personal/loans/property/hdb_home_loan.html
