How Housing Loan is Calculated in Singapore

Houses are big-ticket items worldwide, especially in Singapore. They’re often the biggest purchase anyone makes. Usually, it takes 10 to 30 years to pay off your home loan. Because of this, understanding how housing loans work in Singapore is key. Lenders use various criteria to approve mortgage applications. This includes the property value, your income stability, investments, and your credit history. Knowing how interest on your mortgage loan is calculated will help you make smart choices before and after you apply.

Key Takeaways

  • Understand how housing loan interest is calculated in Singapore
  • Learn about the different factors lenders consider, including property value, income stability, and credit history
  • Discover the importance of making informed decisions before and after applying for a mortgage loan
  • Explore the various housing loan requirements and financing options available in Singapore
  • Utilize a housing loan calculator to estimate your potential loan amount and tenure

Types of Home Loans Available in Singapore

In Singapore, banks mainly offer two types of housing loans: fixed-rate and floating or variable-rate. It’s important to understand what each housing loan type in singapore offers. This understanding helps you choose wisely, meeting your financial needs and comfort with risk.

Fixed-Rate Loans

A fixed rate loans singapore keep the interest the same for several years. This gives you a stable amount to pay every month. It’s great for people who prefer knowing exactly how much they need to pay, even if the market rates drop.

Floating or Variable-Rate Loans

Variable rate loans singapore have interest rates that can go up or down over time. These changes are linked to a certain reference rate, like the CPF Ordinary Account, SIBOR, or SOR. So, when these reference rates change, so does the interest you pay on your home loans singapore.

How Interest on Housing Loans is Calculated

Housing loan interest in Singapore uses the home loan amortization model. This model spreads the loan amount and interest across months. Your housing loan payments are divided into parts. Each part decreases the interest but raises the principal payment over time.

Loan Amortization Model

The how mortgage interest is calculated singapore rule is simple. They divide the total loan amount and interest into monthly payments. With time, more of your payment will cut the principal. Less will be for the interest. This system reduces what you owe each month systematically.

Breakdown of Monthly Payments

Every month, your home loan amortization model singapore payment has two parts: interest and principal. At first, most of your payment covers the interest. But as time goes on, more of what you pay reduces the loan itself. The interest part gets smaller.

how housing loan is calculated sg

Banks in Singapore look at several factors to decide your mortgage rate. One key factor is your credit score. It shows them how well you’ve managed your financial commitments. This includes things like paying off credit cards, loans, and if you’ve paid on time or not. The banks use this to decide if they can trust you with the amount you want to borrow.

Credit Score

Your credit score really matters to lenders in Singapore. If it’s high, it shows them you’re more likely to pay your mortgage on time. This makes you a less risky borrower and could lead to lower mortgage rates for you.

Loan Tenure

How long you take to pay back your mortgage also affects your rate. Banks usually give better rates to those who can pay back quicker. This is because the shorter period means less risk for the bank.

Asset Worthiness and Loan Amount

Firstly, banks check the value of the home you want to buy. Then, they consider how much you want to borrow. You might get a higher rate if you’re asking for a lot over the home’s value. Smaller loans often have higher rates because they bring the bank less profit.

Interest Rate Types and Lenders

Home loans in Singapore offer two main choices: fixed rate and floating rate mortgages. Unlike fixed-rate loans that stay the same, floating-rate loans can change. They are often connected to a measure like the Singapore Interbank Offered Rate or Singapore Swap Offer Rate.

In Singapore, you can get home loans from banks or private lenders. Banks have more loan options but are strict about certain financial details. This includes how much of your income goes towards debt. They also look at inflation, economic growth, and the housing market.

On the flip side, private lenders might be easier to work with. However, their loans could have higher rates because they take more risk.

Loan TypeInterest RateKey Considerations
Fixed-Rate MortgageRemains unchanged for the loan tenureProvides stability but may be higher than floating rates initially
Floating-Rate MortgageFluctuates based on benchmark ratesRates may increase or decrease over time, impacting monthly payments

Choosing between fixed vs. floating mortgage rates in Singapore depends on your finances and comfort with risk. Talking to experts in the field can guide you to the best choice for your situation.

Managing Your Mortgage Loan and Interest Rates

Before going to your bank for a mortgage, think about managing it later too. Making lump sum pre-payments can lower monthly payments. It also cuts the interest you pay over time.

Lump Sum Prepayments

After your lock-in period ends, think about moving your home loan to a better deal. That could mean getting a new loan with someone else. Or, you might find a better deal with your current bank. On the other hand, if you think you might struggle to pay, it’s good to talk to your bank or HDB. They might be able to help by changing how you repay the loan.

Refinancing or Repricing

If your loan’s lock-in period has passed, looking for better rates is a wise move. You can do this with a new lender or with your current bank.

Restructuring Loan Repayment

Worried you can’t manage your mortgage anymore? Seeking advice from your bank or HDB is a smart step. They can help by offering different ways to pay back what you owe.


The housing loan interest in Singapore is calculated with an amortization model. This model helps set a payment schedule over the loan term. It’s key to get this calculation right when choosing a mortgage. But, it can be tricky, so advice from a financial expert is valuable. Credit Thirty3 is a great place to get that help.

Credit Thirty3 has a lot of experience in finance. They guide people to smart choices in the market. You can get home loan advice in Singapore from their experts. They will steer you through the details of mortgage rates and trends. With their help, you can make decisions that fit your financial plans and future goals.

Thinking of buying a home for the first time or refinancing? Credit Thirty3 is here to assist. They know all about the mortgage interest rate trends in Singapore. With their advice, you can choose the best financing for your next home.


How is the housing loan interest calculated in Singapore?

In Singapore, housing loan interest is figured out with a reducing balance model. This model covers the loan and interest over the loan period in fixed monthly payments.

What are the main types of home loans offered by banks in Singapore?

The banks in Singapore offer two key types of home loans. First, there are Fixed-Rate Loans. These have a set rate that doesn’t change for the first years. Next, there are Floating or Variable-Rate Loans. Their interest rate changes and typically follows a specific reference rate.

This reference rate can be the CPF Ordinary Account or SIBOR. It can also be a rate set by the bank.

What factors do banks consider when determining mortgage rates in Singapore?

Several elements affect mortgage rates in Singapore. Banks look at your credit score, the loan’s time, and the home’s value. They also consider your Total Debt Servicing Ratio (TDSR).

Inflation, economic growth, and market conditions for public and private housing also play a role.

How can I manage my mortgage loan and interest rates in Singapore?

There are several ways to handle your mortgage in Singapore. You can make extra payments to reduce your loan faster. This lowers your interest fees.

Another option is to refinance with a new lender for better rates. You can also renegotiate how you pay if you’re having trouble keeping up.