Crucial Factors To Consider on DBS Home Loans Singapore
The home loan process involves many considerations. It’s essential to keep your budget in mind and know how much you can afford before even going into the process of applying for a loan.
Once you’ve done that, it’s time to start looking at all your options. Home loans come with different terms, rates, and plans. It is crucial to explore the ones that work best for you.
Many people think taking out a home loan is an easy process, but many factors are involved in getting approved for one.
We have put together this quick guide to help you learn about DBS home loans.
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How Affordable is DBS Home Loan
Singapore’s largest bank, DBS, tends to offer some of the best mortgage rates. As a leading lender in Singapore, DBS’s housing loans are a good option for borrowers. Additionally, it provides excellent benefits for borrowers refinancing their mortgages.
DBS is an excellent option for prospective homeowners. That is because of its impressive lending history and consistently low interest rates. Also, most Singaporeans consider DBS to be one of the most affordable lenders.
With its HDB and private home loans, DBS has some of the cheapest rates. Whether for completed or under-construction houses, with or without a lock-in period or fixed or floating rates.
Other lenders offer lower introductory rates. In terms of total costs of home loans, DBS is still among the cheaper option. But compared to DBS, other lenders tend to charge higher interest rates in the later years of the loan tenure.
As an added benefit, it is a good source for refinancing home loans since its rates are competitive. In addition, there is currently a legal fee subsidy of $2,600 to $3,200 available from DBS.
What to consider when using DBS Home Loan Calculator?
The following are the two significant factors when calculating your approvable home loan amount (especially home loan maximum amount):
Younger borrowers usually have a longer maximum loan term. For HDB flats and private properties, maximum loan tenures have been limited to 30 and 35 years.
DBS grants a home loan for up to 55% of the property purchase price but with a loan tenure that exceeds 25 years (or 30 years for private properties).
Customer’s Income Profile
For banks to determine the maximum amount they can lend you, they will factor in your debt-to-income ratio. It is called the Total Debt Servicing Ratio (TDSR). It is limited to 60% of each borrower’s gross monthly income.
The bank calculates your Mortgage Servicing Ratio (MSR) when you buy a Housing and Development Board(HDB) flat. MSRs are capped at 30% of gross monthly income for all borrowers. So, MSR is calculated using the loan amount and the combined gross monthly income.
Several factors determine a home loan’s greatest amount.
- MSR (for HDB only)
- Loan tenure
- Medium-term interest rate
You can also check DBS’s online repayment and refinancing calculators. It can give you a more detailed look at your monthly repayments with DBS.
What Should I Know About DBS Home Loan Rates?
If you’re looking for a new home or refinancing solutions, DBS can help you! You can choose from the following loan packages:
Floating Rate Loan Package
Loan tenures under this package have features that you’ll probably enjoy! Such programs are valid if you take at least S$100,000 of the loan amount.
Features of Floating Rate Loan Packages
- The loan interest rate is capped at 1.40% in the first two years. That is to protect against interest rate hikes.
- The interest rate in this loan is capped at 2% per annum. That is in effect for five years and is given to protect against rate hikes.
- Waiver of commitment fee(s) and prepayment fee(s).
It gives you the flexibility to sell your property without worrying about commitment fees. Also, you get the flexibility to partial prepayment with less worry of costing you any prepayment fees.
No Lock-In Package
- Interest will base on the FHR6 rate (currently at 0.200% p.a.). Thus, in the first three years, the loan rate will be FHR6, plus 1.60% per anum. The same to the succeeding years.
3M SORA Package (Two-year Lock-in)
Unlike the first three packages, the least loan you can take in this loan is S$300,000.
3M SORA stands for 3-month compounded Singapore Overnight Rate Average. Monetary Authority of Singapore, or simply MAS, administers such rates. Such rates refer to the volume-weighted average rate compounded within three months.
Your first two years will have an interest rate of 3M SORA with a flat rate of 0.80% per annum. From the third year onwards, the rate will be 3M SORA plus 1% per annum.
Fixed-Rate Loan Package
Enjoy several features when you take a Fixed-Rate Loan Package. Features include a free conversion and waiver of fees, depending on what loan tenure you take.
Features of Fixed-Rate Loan Packages:
Two-Year Fixed Rate
- One free conversion after 24 months from the first disbursement’s date. The advantage of this feature is that you can reprice your home loan at no cost.
- One (1) free conversion after 36 months from the first disbursement date.
Five-Year Fixed-Flexi Rate
- One free conversion after 30 months from the first disbursement.
- Waiver of commitment and prepayment fees.
You can sell your property without worrying about being charged with commitment fees. At the same time, the latter gives you the flexibility to prepay your home loan without any prepayment charges.
Five-Year Fixed Rate (Exclusive for HDB Homeowners)
- One free conversion after 60 months from its first disbursement.
The only qualified applicants to take this loan package are HDB homeowners. The least loan amount they can take is S$200,000.
Important Note: Terms and conditions apply to all these packages. So, you need to understand it fully before signing a contract.
Floating Rate vs Fixed Rate vs Bridging Loan
The interest rate on loans can either be fixed or variable. The interest rate remains the same throughout the loan tenure for the fixed-rate package. In contrast, the Floating interest rates fluctuate over the loan’s term. Rates fluctuate based on the overall market, an underlying index, or the prime rate.
A bridge loan is a short-term loan with a relatively high-interest rate. It is usually secured by some form of collateral, such as real estate or inventory.
DBS Fixed-Rate Loan Package
One of the main advantages of a fixed-rate loan is the elimination of risk. In addition, you can determine the value of the future interest payments after the loan agreement is signed.
A fixed interest rate can also be helpful to the borrower if the market rates rise above the fixed rate. It can save the borrower large amounts of money.
In some cases, a fixed rate can be helpful to the lender. For example, if the market rates fall below the given fixed rate, it provides the lender with significant gains.
DBS Floating Rate Loan Package
The main benefit of floating interest rates is that they move with the market rates. But it could either be an advantage and a disadvantage.
Increasing market interest rates can increase loan costs for borrowers. It raises the lenders’ interest income. A drop in market rates can also make loans more affordable. The interest rates get lower for the borrower, thus lowering the lender’s income.
DBS Bridging Loans
A bridge loan is a short-term loan that bridges a gap between two sales. Often, the sale of one property leads to the purchase of another one.
With bridge loans, you can buy your new property right away. You don’t have to wait to get a home loan. As a downside, bridge loans have higher interest rates than other loans.
DBS Home Loan Repricing vs DBS Home Loan Refinancing
Refinancing is the process of closing your current home loan and securing a new loan from another bank.
A reprice when you switch from one home loan to another from the same lender.
Frequently, people confuse refinancing and repricing. Both options involve switching out your loan at a lower interest rate. Both have their advantages and disadvantages.
If you refinance, you’ll need to switch banks. The process is time-consuming. You’ll have to pay the necessary legal and valuation fees to switch banks.
The cost of repricing is lower. Besides a fixed conversion fee, there are no extra charges.
Think about which option is best for you to save money over time.
Documents Needed for a DBS Home Loan
With DBS, you can apply for a home loan or refinance in as little as 10 minutes. To make the application process faster, you can prepare the following documents in advance.
- NRIC for Singaporeans and PR
- Passport for foreigners
- HDB Flat & Financial Information
- Option to Purchase or Sales and Purchase Agreement
- Value confirmed by HDB(HDB resale)
- Valuation report for Private Property and EC
- Your latest Notice of Assessment or 12 months CPF Contribution History
- Payslips for the last three months
- Account statements for salary crediting for the past three months
- Latest credit facilities statements like existing loans and credit card
You may also need other documents depending on the type of loan you’re applying for.
DBS Home Loans are all designed to help homebuyers make their dream home a reality. Not only competitive rates, but DBS provided options that will meet different profiles of homebuyers in the country.
Before deciding which home loan you will take, be sure to weigh your decisions basing on your income profile.
Other than home loans, maybe you’re looking for instant cash loan services to help you with your home improvements?
You can look for a trusted moneylender in the official list of Registry of Moneylenders Singapore.