Refinancing: Comparing Home Loans

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Guest Post: By iCompareLoan Editorial Team

2013 marked a year with an astonishing array of property rules and home mortgage regulations.
For many shoppers in the residential property market, they would have found their buying ability curbed. But not wishing to penalise home owners who had bought their properties before the new rules kicked in, the Monetary Authority of Singapore (MAS) have announced last month a relaxation of the rules for owners who are refinancing.

So just what are the mortgage regulations affecting refinancing, and what have been revised? We present here a summary of these.

Table 1: Rules for Refinancing

With Effect From Rules
6 Oct 2012 The maximum tenure of all residential property loans for individual and non-individual borrowers will be capped at 35 years.The sum of the tenure of the re-financing facility and the number of years since the first housing loan granted to the borrower for the purchase of that residence was first disbursed, cannot exceed 35 years.
12 Jan 2013 HDB loans by FIs: A Mortgage Servicing Ratio (MSR), or percentage of total monthly mortgage obligations to gross monthly income, not exceeding 30% will apply.
29 Jun 2013 A Total Debt Servicing Ratio (TDSR), or percentage of total monthly debt obligations to gross monthly income, not exceeding 60%, will apply to all property loans granted by FIs to individuals.A mandatory interest rate of 3.5% (4.5%) p.a. or the prevailing market interest rate, whichever is higher, has to be used in the computation of MSR and TDSR for residential (non-residential) loans.Exemption from TDSR for re-financing is allowed if the borrower only owns the property he is refinancing AND do not have any other outstanding property loan.
28 Aug 2013 HDB loans by FIs: The maximum loan tenure is reduced to 30 years.The sum of the tenure of the re-financing facility and the number of years since the first housing loan granted to the borrower for the purchase of that HDB flat was first disbursed, cannot exceed 30 years.
10 Dec 2013 Executive Condominium (EC) loans by FIs: A MSR cap of 30% for refinancing within the minimum occupation period of 5 years.

Source: MAS

Table 2: Refinancing Rules That Have Been Eased From 10 February 2014


A borrower can be exempted from the TDSR threshold if
  • the residential property is owner-occupied, AND
  • the Option to Purchase (OTP) of the residential property was granted before 29 June 2013

The MSR will not apply to the refinancing of loans for HDB flats and ECs that are

  • owner-occupied, AND
  • were purchased before their respective MSR implementation dates

The maximum loan tenure for refinancing of HDB loans and residential properties is retained as the remaining tenure of the original loan at the point of refinancing, if

  • the residential property is owner-occupied, AND
  • the Option to Purchase (OTP) of the residential property was granted before the respective implementation dates for the loan tenure limits.

For all investments property loans, the TDSR threshold will not hold for refinancing up till 30 June 2017, provided that the followings are met

  • the OTP of the property was granted before 29 June 2013;
  • the borrower commits to a debt reduction plan with the financial institution (FI) at the point of refinancing; and
  • the borrower fulfils the FI’s credit assessment.


With interest rates expected to head north soon coupled with the loosening of refinancing mortgage rules, many owners are looking to refinance, or reprice, now. If you are one of them, read on for some information about the various types of home loans you can refinance/reprice to.

In case you are wondering what is the difference between refinancing and repricing: the former involves changing to a different financial institution whereas the latter means remaining with your current financier but changing to a different loan package.

Fixed Rate Loan

As its name suggests, a fixed rate loan has its interest rate fixed. However, in Singapore, we only have packages with rates that are fixed for the first 3 to 5 years of the loan tenure.

Typically, fixed rate packages have interest rates that are higher than a floating rate loan. After the fixed rate period ends, the interest rates will be converted to variable rates. Specifically, the interest rate will be pegged at a discount below the financing institution’s board rate or floating rate, which is based on SIBOR or SOR. Below is an example of the interest structure for a fixed rate loan:

Bank Y Fixed-rate Loan


Interest Rate (p.a.)

First Year


Second Year


Third Year


Fourth Year Onwards

0.50% below the Board Rate

Currently when interest rates are foreseen to ratchet up, more people are turning to fixed-rate mortgages as these provide certainty in the repayment amounts and a cap against interest-rate spikes.

Floating Rate Loan (aka Variable Rate Loan)

In contrast, a floating rate loan has its interest rates fluctuating during the entire duration of the loan.

Today’s floating (variable) interest rate loans come in three flavours:
a) Interest rates pegged at a discount below the Board Rate
b) Interest rates pegged at a margin (spread) above SIBOR (Singapore Interbank Offered Rate)
c) Interest rates pegged at a margin (spread) above SOR (Swap Offer Rate)

Financial institutions may not offer all three types, with b) being the most common. A loan pegged to SOR is less popular as it entails more uncertainty as SOR is prone to larger fluctuations being a function of exchange rates.

On the other hand, SIBOR is relatively more stable as it is the rate in which banks in Singapore lend to one another.

SIBOR and SOR are also valued for their transparency. Both are reported regularly in the mainstream media, and have various tenures. A 1-month, 3-month or 12-month tenure is more common. The longer the tenure, the higher will be the rate. However the rate remains static during the entire tenure.

Finally there is the Board Rate. This is the determined by the bank and differs across banks. It is usually unclear how the bank arrives at the Board Rate.

The interest-rate structure of a SIBOR-pegged package is shown here. After the first few years of the loan start-date, the spread is usually revised upward.

Bank Y SIBOR Loan


Interest Rate (p.a.)

First Year

0.80% + 3-Month SIBOR

Second Year

0.80% + 3-Month SIBOR

Third Year

1.00% + 3-Month SIBOR

Fourth Year Onwards

1.20% + 3-Month SIBOR

With its relative stability and transparency, a SIBOR-pegged loan is highly popular during a low interest-rate environment – the interest savings a borrower can have with it far exceeds a fixed-rate loan.

Hybrid (Combo SIBOR / SOR) Loan

For borrowers undecided between a SIBOR and SOR, they can consider a package based on the average of both rates. So far, ANZ is the only bank here to offer a combo SIBOR / SOR mortgage.

Interest-rate Cap Loan

Finally for borrowers who are apprehensive of interest-rate hike but want to enjoy savings that comes with a floating rate loan, they can opt for a package with an interest-rate cap, such as the DBS Mortgage Rate Protector or POSB HDB Loan.

These loans typically have higher rates compared to conventional SIBOR-pegged packages but they provide certainty in how high rates can hit.

Bewildered by the multitude of mortgage packages on the market? Turn to the FREE service of an iCompareLoan mortgage expert today!

For advice on a new home loan.

For refinancing advice.

Download this article here.


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Using an Economic Calendar to Trade: How It Works

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Guest Post

An important trading tool for all investors is the daily economic calendar. Irrespective of whether investors choose to utilise fundamental or technical analysis, economic news and market sentiment will still have a marked impact on the performance of their stock portfolio. Major economic or political news can cause stock prices to rise or fall dramatically in mere seconds, and fundamentals that are entirely relevant one moment can be rendered completely obsolete the next due to fresh news. In these cases, it is important to keep abreast of these incidences, and it is the economic calendar that allows investors to do so.

How Investors Can Protect Themselves Against Negative Events

The most impactful events that will influence the stock market are often known about months in advance, and for investors who have access to information such as when and how they will occur, research and analysis can be performed beforehand, and used to shield them from any negative fallout by informing their decision-making.

This is the trick to trading the economic calendar successfully, and veteran investors will always attempt to position themselves securely before the actual consequences of an event. Novice traders, on the other hand, are not proactive, and are forced to react to happenings as they actually occur – a very dangerous game to play.

Economic Calendars and How They’re Used

The most important tool in guarding against unforeseen market volatility is the live economic calendars that stockbrokers such as provide. These usually contain seven columns:

  1. The time that data will be released
  2. The country announcing the data
  3. The event
  4. The potential impact on the markets (3 bars indicates a major event, 1 bar a less significant occurrence)
  5. Actual published data
  6. The consensus of the numbers
  7. Previously published numbers

Investors use this information to try to predict the impact that economic changes will trigger and how these will impact their portfolio. The consensus column contains some of the most influential data in terms of their decision-making, as it specifies average approximations of a large number of analysts.

Once investors reach a conclusion as to how they feel the market will react, they will act on this foresight to enact trades that they feel will be beneficial in the future. If they have gotten it right, it means that when the announcement is made and its consequences begin to be felt, they have already reacted in a manner that benefits their portfolio. This has the added advantage of maintaining market stability, as provided the consensus matches announced figures, little impact is felt.

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The Growth of the Singapore Economy: A Shift in the Forex Market

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Guest Post

There have been several shifts in the forex market recently, with the Australian Dollar (AUD) experiencing rapid and sudden decline. This has been sharply contrasted by the rise of the Singapore Dollar (SGD), which has evolved steadily on the back of concerted commercial growth and a positive outlook in the Economic Development Board’s Industrial Production statement. This is creating a new and interesting dimension for forex traders, who may be able to capitalise at least in the quest for short-term gains.


The SGD and the Singapore Economy: Consistent Growth in 2014

In terms of specific performance figures, Singapore’s industrial production sector expanded by 0.2% in October, with year-on-year growth only just falling slightly short of the analysts’ forecast of 0.6%.  Despite brief periods of fluctuation, the biomedical manufacturing sector in Singapore recorded annual growth of 22.5%, while pharmaceutical segments also rose by a healthy rate of 24.3%. Alongside significant expansion in the technology sector, this has created a strong economic proposition that has driven a significant rise in the value of the SGD.

This can be contrasted sharply with the performance of the AUD, which is often traded as part of a pair with the Singapore Dollar. While it is fair to say the SGD has held a significant advantage over the AUD since the final embers of 2012, however, in recent times the distance between the two has widened with the latter falling to depressing four year lows recently. This at least provides clarity for traders in the forex market, who can capitalise on the falling demand for Australian commodities and the sense of global economic uncertainly to back the often unheralded SGD.

In Summary: The Big Picture for Forex Traders

With this in mind, we are likely to see a growing number of traders back the SGD in the near future, especially with the trend for Singapore economic growth likely to remain prominent during the first financial quarter of 2015 at least. Alongside a declining AUD, this offers a transparent vehicle for short-term gains and relatively secure trades.

Going forward, however, it will be interesting to see whether the Australian economy can recover and gain a position of strength among its Asian trading partners such as China, India and to a lesser extent Japan. Without this, the SGD is likely to remain the Asia-Pacific currency of choice for forex traders who are looking to maximise their income in the current marketplace.

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