Understanding DBS FHR8 Singapore 2021
Are you looking forward to finally have that place you’ve been dreaming of owning for so long? You might have heard about DBS FHR8 Singapore. It is one of the top choices in making your dream and work to make it come through!
There are several mortgage loans offered by banks or mortgage lenders out there. Learn the different plans and search which fits you the best.
Make that dream a reality by understanding how DBS FHR8 works. Read till the end.
DBS Fixed Home Rate
The Fixed Deposit Home rate or FHR means that there is a fixed rate for the loan period. It is the rate provided by the bank for your loan.
You will be paying the same interest rate until the end of the loan period. To better understand FHR, here are the basic terms and definitions.
Basic terms in DBS FHR8 Singapore
Mortgage interest rate
First, we need to understand what a mortgage is. A mortgage is a loan granted by the bank or moneylender. It helps the individual to buy a house.
The rate of interest charged on a mortgage can be either fixed or floating.
Tenure of loan
It is the period you’ll be paying your loan along with interest. It may last up to 18 years, depending on the offered mortgage plan by your provider.
Lock-in period
Depending on the mortgage plan, you will be paying an actual interest rate for your monthly mortgage instalment. It may span for at least 15 days up to 60 days.
It will protect you from rising interest rates while the loan application is being processed.
Maturity date
It is the loan balance, including the interest and end fees due date.
Types of DBS Fixed Home Rate Loans
The current DBS FHR8 Singapore is 0.600%. During the pandemic, the market interest rates have decreased and more so in March.
The first type is a 1-year lock-in period where loaners will be paying the FHR8 plus the bank spread of 1.13% p.a. for 8 months. It varies for 1 year, 2 years,3 years, and 4 years or more plan.
The second type is a no lock-in period plan. For example, FHR8 and the bank spread of 1.20% p.a. are paid for 8 months. It also varies for 1 year, 2 years,3 years, and 4 years or more plan.
The third type is a 3 year lock-in period. The bank spread of 1.80% p.a. is paid for the first three years. Then, for the year 4 and the following years, FHR8 plus the spread paid.
The last type is the 5 year lock-in period. The amount of bank spread to be paid for the year 1-5 is 1.80% p.a. For year 6 and so forth, FHR8 and bank spread of 1.40% p.a. is the amount.
Advantages of DBS FHR8 in Singapore
Fixed income and looking for stability
If stability in your investments is your main concern, then the DBS FHR8 Singapore is a good plan for you. Unlike the other indexes, where rates are based on SIBOR and SOR, FHR is less volatile than others.
It also fits those with fixed incomes. Since in the next 8 months, the loanee would have the same interest rate for them to pay.
Elimination of Uncertainty
Another advantage would be, any changes in the market interest rate would not affect you. So whether your fixed-rate period for the loan is one year, two years or three years, you will still be paying for the same rate.
They also offer a five-year plan for those who are uncertain about the market rate for the next year.
Opportunity on a rising interest rate
It can also be an opportunity for those who want to invest in the market while the rising mortgage rates. In addition, you will be paying less since the rate is fixed.
Disadvantages of FHR8 in Singapore
Noticeable higher interest rates
Compared to other market rates, DBS FHR8 Singapore is distinct higher since there is a fixed rate. You are paying for that premium in exchange for the uncertainty in the market.
The lock-in period limitation
During the lock-in period, there is no partial capital repayment. Usually, there is a clause for the lock-in period in one or two years of fixed interest.
You cannot reduce the capital repayment, and being unable to pay it would be a breach of contract. However, in recent times, there are flexible plans where you can pay for the partial capital.
Loss in falling interest rate
If the market interest is falling, you are at a disadvantage since the fixed-rate bonds you.
For example, the current FHR8 for your plan is 3.0%. Yet the market price dropped to 2.5% or 2.0%. Unfortunately, you won’t be able to take advantage of the lower prices since the agreement secures you.
FHR v.s. SIBOR
You may ask why there are different rates between banks, and you also wonder how the rates are established in the first place.
There are only two bases for Singapore rates.
The first basis is called SIBOR. SIBOR (Singapore Inter-Bank Offered Rate) changes almost all the time.
The Association of Banks in Singapore site shows the current rates. It is government monitored. The information about the rates is available for the public.
The usage of the SIBOR rate includes the SIBOR rate plus a spread, a charge or a fee by the bank. The amount of spread also affects the rate.
The second basis, which is more transparent, is called a board rate set by the bank. A variation of the board rate is a fixed deposit loan.
With the board rates, you are to accept an interest rate set by your bank. There are other variations of board rates.
The most attractive one is the interest rate packed of fixed deposits. Prevalent to people because it is believed to restrict the bank from raising interest. Since promotional deals and offers change all the time, it is wise to consult a specialist.
Besides the bases of the rates, what affects the rate changes?
Mortage supply and demand influences the general estate market. The higher the number of people who wants a home, the higher the rates go. But, the less in demand for these homes, the rate goes down.
Another thing to consider in rates would be the bank quota. Banks set targets on how much they want to loan out. If the interest rate nears their quota, interest rates go up as well.
If the interest rate is far from the quota, the rate is lower. That is why not all banks offer the same rate. 2 or 3 banks may offer the cheapest rates.
Conclusion
You are now familiar with DBS FHR8 Singapore. Here are some reminders before you get that loan to get your dream home.
Make sure you have approval in principle before paying any deposit. For example, the property you have agreed upon times, but the owner wants more payment than agreed.
Check if the loan plans match your living. If it matches your income, it would be a breeze to pay the account. It would be the opposite if it weren’t; better check first than regret later.
In any case, you have trouble acquiring bank loans, why not try a Money lending service provider?
Cash Mart Singapore is a licensed money lender in the country. It is under the regulation of Singapore law. The years they have been in the business speak a lot about how they provide excellent service.
Moreover, the company requires fewer documents than banks. Personal Loan application is faster and more accessible through its official website.
Once you received a pre-approved loan application, you can visit their office. Then, finally, receive the loan cash you need.