Home Loan: Fixed of Floating Rate?

Are you thinking of applying for housing loan from SmartLoan licensed money lender for your dream home? Houses in Singapore are considered to be one the most expensive in the world; whether they are condo unit, flats, or bungalows. The bigger the house, the more expensive it is, the bigger the debt, and the longer you have to pay for it.

Aside from the purchase price, loan cost and your insurance, another important factor to consider when applying for a loan is the licensed money lender’s mortgage terms. A licensed moneylender would usually offer different repayment packages depending on what you need. So here we will help you understand the difference between fixed and floating rate loan. This way you can make a better decision as a home buyer.

What is a Fixed Interest Rate?

Fixed interest rate loan does not fluctuate in a given fixed rate duration of the loan. The period can range from one to five years then becomes a floating rate after the period is over. An excellent example of a fixed interest rate is that of HDB at about 2.6%. A fixed rate allows the home buyer to have an accurate payment plan. You would not have to worry if the variables would make the interest higher than the previous month. However, it is a bit higher than what banks offer, and if others’ floating rate went down, you still pay the same amount.

What is a Licensed Money Lender Floating Interest Rate?

On the contrary, the floating interest rate can change monthly or every three months and so is your mortgage. Many variables are affecting the floating interest rate’s fluctuation. It depends on the Swap Offer Rate (SOR), Singapore Interbank Offered Rate (SIBOR) or the Internal Board Rate (IBR). Among the three, SIBOR and SOR are more predictable than IBR which is controlled by the company’s decision. It is a better option for those who are knowledgeable enough to predict the interest rate changes.

Fixed or Floating Interest Rate?

There’s no definite answer to this question because choosing the type of interest rate depends on your financial needs and capability. If you are not ready and don’t have the resources to take the risk of fluctuating rates, choose the fixed one. This is to avoid applying for a loan to pay another loan.

But if you have spare cash and would have not to worry if interest fluctuates, you can gamble on the floating interest rate. You can make use of SIBOR low-interest rate.   

What interest rate type from a licensed money lender did you choose? Share them with us!