Homeowners who are worried that the interest rates for their home loans are rising, are moving towards fixed rate mortgages, reported several banks. The still upbeat market for non-landed properties, the feel-good-factor created by the several high profile sales and news on Fed interest rates may have pushed homeowners to this decision.
Even though the cost for the current floating rate loans are still lower, homeowners seem to prefer the security fixed rate mortgages provide for the near future. For every 10 basis points increase on a $100,000 loan over 25 years, the monthly installment goes up by $4.80. This means that for a $1 million loan, the buyer would have to pay an extra S$120 every month.
Since the beginning of this year, banks have raised interest rates for both fixed and floating home loan packages by 10 – 30 basis points (bps). Some banks have already upped their mortgage rate to 2.6 per cent, to keep pace with the increasing interest rates.
The 3-month SIBOR has hovered at 1.9 per cent since Dec 2018. Any further increase announced by the Fed will drive the interest rates for home loans even higher.
Homeowners who are worried about the other types of home loans with interest rates that are exceptionally volatile, might opt for good fixed rate mortgages. Fixed rate mortgages may give homeowners thousands of dollars (perhaps even a five-figure sum or more) each year. Homeowners could potentially also enjoy a two-three times difference in their total interest repayment if they opted for fixed rate mortgages.
Some homeowners may however miss out on such potential savings because they are overwhelmed by the banking process. Others might be put off by technical jargon like SIBOR, FHR, Board Rates. Such homeowners may hesitate to explore fixed rate mortgages and wish for someone to just hand them the cheapest home loan package across 16 banks.
Some reasons why homeowners may hesitate
- Unsure of the loan amounts they are eligible for and how to calculate them.
- Unsure as to when or why they should refinance.
- Unsure about how the new banking regulations is affecting them.
- Unsure of the loan tenure they should go for.
- Unsure about the amount of CPF they should use for the purchase of their homes.
And there is good reason why homeowners are unsure and unfamiliar on how to get the best deal interest rates for their home loans. Most don’t buy homes as often as you buy other necessities (like food and clothes). But actually, there is no reason why you should contribute to the banks’ profits when you can keep the difference in interest rates.
All such homeowners need to do is, look for a mortgage specialist. The mortgage specialists will give them the advice that they need at zero cost to the homeowners. In case you are wondering why the service by the mortgage broker is free to the borrower – it is because the lenders will pay the mortgage broker a distribution fee upon successful disbursement of loan.
The services of a mortgage broker are free to the borrower because the bank pays a referral fee upon successful loan disbursement.
Mortgage brokers offer unbiased recommendations since they are not tied to any one bank.
Well-informed and professional
Mortgage brokers are well-informed of all the loan packages, the different interest rates in the market and their accompanying features, compared to most borrowers, because it is their job.
Besides matching you with the right loan with the best interest rates, they can warn you about caveats and conditions of the loan contract, which you may not be aware of if you are a lay person .
In addition, loan contracts have financial jargon that first-time borrower may be baffled with. A mortgage broker will be able to explain these to you in plain English.
Most will even assist you with the paperwork in the application process.
In short they take most of the hassle out of the loan process – from search to application.
The home buying process – from application, liaising with lawyers, compiling the documentation, and finally disbursement – can be a tedious, time consuming process. Good mortgage brokers understand the range of products which are available in the market, but great mortgage brokers use this knowledge to guide you through this process and teach you how to buy so that you don’t stress yourself out.
While many prospective home buyers shop for a mortgage, a professional and conscientious mortgage broker can make all the difference, with their wealth of knowledge and experience in the property market.
However, with several mortgage brokers to choose from in the market, it can be difficult to gauge whether your mortgage broker is offering you top quality service. But after reading this article, if you are persuaded into trying out a mortgage broker, you can try the more friendly and helpful ones. Some brokers use home loan reports, generated from Singapore’s most advanced loan analysis system (exclusive to iCompareLoan), to help you find a package with the best fit. If you need advice on a new home loan you should speak to a mortgage broker. They can also offer you refinancing advice.
Good mortgage brokers distinguish themselves from the competition. And the best thing about engaging a great mortgage broker is – the services of the mortgage brokers are usually free. That is, unless you have a complex situation or if you are only borrowing a small amount.