5 Things to Know Before Taking a Home Loan in Singapore

Home-buying fees at a glance

 

1. How to reduce the interest you pay on a home loan

Because home loans run for decades, interest makes up a large share of what you repay, especially in the early years. A few strategies can bring that cost down.

Refinance or reprice after your lock-in ends. Once your lock-in period is over, you can reprice (switch to a new package with the same bank) or refinance (move to a different bank). Repricing is usually faster and cheaper, while refinancing may get you a lower rate. Banks often offer legal and valuation subsidies to refinancers, but check for clawback clauses that require you to repay them if you leave within a set period.

Make partial prepayments. Paying down your principal with spare cash or CPF Ordinary Account savings reduces the interest charged on the remaining balance. Check your package for prepayment penalties first, as these usually apply during the lock-in period.

Compare the full rate, not just year one. Many packages advertise a low first-year rate that rises in later years. Compare rates across the first three years and the thereafter rate to see the real cost.

2. Fixed vs floating rates: How SORA affects your home loan

If you choose a floating rate home loan, your rate will be pegged to the Singapore Overnight Rate Average (SORA). SORA has replaced the Singapore Dollar Swap Offer Rate (SOR) and the Singapore Interbank Offered Rate (SIBOR) as the main benchmark for Singapore dollar loans.

Unlike SOR and SIBOR, SORA is based on actual overnight interbank transactions, which makes it more transparent. Banks typically use compounded SORA averaged over one or three months, so changes in the market flow through to your rate gradually rather than overnight. You can track daily SORA movements on the Monetary Authority of Singapore (MAS) website.

1M vs 3M SORA: A 1-month compounded SORA loan updates monthly, so you benefit from rate cuts sooner but also feel increases faster. A 3-month compounded SORA loan updates quarterly, which smooths out short-term movements and makes your instalments easier to plan around.

Fixed vs floating home loans

 

If you value stability, a fixed-rate package with a shorter 1- to 2-year lock-in gives you certainty without tying you down for too long. If you can handle some fluctuation, a floating rate lets you pay closer to market rates. Whichever you pick, review your loan regularly and consider repricing or refinancing once your lock-in ends.

3. Insurance you need to protect your home and loan

Mortgage insurance. If you're buying an HDB flat and using CPF savings to pay your monthly instalments, you must be covered under the Home Protection Scheme (HPS). HPS pays off your outstanding housing loan if you pass away, become terminally ill or suffer total permanent disability, up to age 65 or until the loan is paid off. Premiums are deducted annually from your CPF Ordinary Account. For private property, banks may recommend a mortgage reducing term assurance (MRTA) or term life policy to cover your outstanding loan.

Fire insurance. HDB fire insurance is compulsory if your HDB loan commenced on or after 1 September 1994, and it must be renewed every five years for as long as the loan is outstanding. The scheme is currently administered by Etiqa, with five-year premiums ranging from S$1.11 for a 1-room flat to S$5.43 for a 5-room flat, including GST. If you're on a bank loan, your bank will typically require fire insurance as a loan condition. Note that fire insurance covers only the building structure, not your renovations or belongings.

Home contents insurance. To protect your renovations, furniture and personal belongings, you'll need a separate home insurance policy. Costs vary with the coverage you choose, ranging from around S$50 to S$350 per S$100,000 of coverage.

4. Hidden fees to budget for when buying a home

On top of your downpayment, several one-off costs come up during the purchase. The fees table above summarises them; here's what each involves.

HDB flat application fees. Applying for a new HDB flat costs S$10. For resale HDB flats, it's S$40 for 1- or 2-room flats and S$80 for larger flats.

Stamp duty. Buyer's Stamp Duty (BSD) applies to every property purchase and is calculated on the purchase price or market value, whichever is higher. Additional Buyer's Stamp Duty (ABSD) applies on top of BSD depending on your residency status and how many residential properties you own. Both must be paid within 14 days of signing the purchase agreement or exercising the Option to Purchase.

Residential BSD rates

 

ABSD rates for individuals

 

For a S$1 million property, BSD works out to S$24,600.

Property valuation fees. Your bank or HDB needs a valuation before approving your loan. For HDB flats, you can submit a Request for Value for S$120. For private properties, a bank-approved valuer typically charges S$120 to S$400.

Agent commissions. If you use a property agent to buy a resale HDB flat, the buyer's commission is commonly around 1% of the purchase price, though commissions are negotiable.

Legal fees. A lawyer must handle the conveyancing when you buy a home. HDB's legal fees are tiered as follows, which usually adds up to a few hundred dollars:

• First S$30,000: S$0.90 per S$1,000
• Next S$30,000: S$0.72 per S$1,000
• Remaining amount: S$0.60 per S$1,000

If you hire a private lawyer, expect to pay around S$2,500.

Caveat registration fees. A caveat is a formal notice of your interest in the property, which prevents it from being sold to someone else. The buyer's caveat costs S$64.45, plus S$10 for a title search. If you're taking a home loan, there's another S$64.45 for the mortgagee's caveat.

These costs add up quickly, so set aside cash for them early to avoid a last-minute shortfall.

5. Why a mortgage advisor can save you time and money

With dozens of packages across banks, each with different spreads, lock-ins and clawbacks, comparing home loans on your own can be time-consuming. A mortgage advisor can compare packages across multiple banks, explain the fine print and help you find the loan that best fits your finances, usually at no cost to you.