Quite often, financial experts advise mortgage borrowers to seek the lowest interest rates currently available in the market. However, when looking for your Singapore housing loan, one of the most important aspects to take into account is the type of interest rate that applies to your mortgage package. This is due to the fact that there are several kinds of interest rate structures that apply to home loans in Singapore. Generally, these loans either fall in the fixed or fluctuating interest rate categories. As a home buyer, it is imperative to choose rates that are suitable according to your financial situation.

The Singapore Interbank Offered Rate (SIBOR) and the Swap Offered Rate (SOR) both set the standard house loan interest rates charged by banks and lending institutions in Singapore. Both of these interest rate standards are determined by the Association of Banks in Singapore. They are also affected by market factors that can cause some volatility. Most buyers keep an eye on SIBOR and SOR rates since these two interest rate structures set the benchmarks for their home loan portfolios. Due to the fluctuating nature of SIBOR and SOR rates, home loans attached to these interest rates can be rather risky, especially with an ailing economy.

An alternative type of home loan interest rate is the federal rates for HDB loans which are approved by Singapore’s Home and Development Board. Unlike the previous two rates, interest rates for HDB home loans are not as volatile and they are usually between 0.1% and 1% above Singapore CPF rate. The Housing and Development Board reviews their interest rates from time to time, and therefore it is important to check with the current market figures before deciding to secure a home loan for a HDB property.

Most of the times, lenders charge a fixed interest rate for some time during the life of the loan, and then it reaches a point where the interest charged is subject to SIBOR or SOR rates. It is therefore important to understand the details of interest structures when considering various kinds of home loans. Some buyers prefer fixed rates since they have the least amount of risk. However, fluctuating interest rates also offer a faster way to pay off your home loan, but they carry a significant amount of risk when the rates reach all time highs during economic downturn.

Once you have fully understood the interest rate structure for your preferred mortgage package, you can make amortization plans with the help of a home loan calculator. This tool is freely available on many mortgage broker websites and it will help you to determine the interest rate, principal amount and monthly installments over the period of time which you wish to pay back the loan. Keep in mind that the best home loans are not necessarily those with low interest rates, but a package that is suitable according to your financial situation.