Fixed-rate mortgages lock your repayment for 2–3 years at a small premium; SORA-pegged floating rates track the MAS-administered Singapore Overnight Rate Average and move with the market. Match your package to your holding period, refinance or reprice once the lock-in expires, and always stress-test repayments under the MAS TDSR 55% framework. HDB buyers have a third path: the HDB concessionary loan at 2.6% p.a., payable with CPF.
Choosing the wrong mortgage package costs real money. On a S$1 million loan over 25 years, a 0.5 percentage-point difference in your effective interest rate translates to roughly S$300 more or less every single month — that is S$90,000 over a typical 25-year tenure. Singapore borrowers face a genuine three-way decision: a fixed-rate package that buys predictability, a SORA-pegged floating package that rewards you when rates fall, or — for HDB flat buyers — a government concessionary loan. Each has a distinct risk profile, and the right answer depends on your rate outlook, your risk tolerance, and how long you plan to hold the property before selling or refinancing.
This guide explains how each package type works, how Singapore’s floating-rate benchmark changed permanently when SIBOR was retired (as of 2026-06, SIBOR ceased in December 2024 per MAS guidance), what to watch for in your loan letter of offer, and a step-by-step framework for making the call. Numerical examples use indicative 2026 figures — always get a formal Letter of Offer before committing.
How Singapore mortgage packages are structured
All bank home loans in Singapore fall into one of three categories. Fixed-rate packages lock the interest rate for an initial period — typically two or three years. During that window your monthly repayment is exactly the same regardless of what happens in global money markets. After the fixed window expires the loan automatically rolls onto the bank’s prevailing floating rate, which is almost always SORA-based. You can then reprice (switch to a new package with the same bank for a small administrative fee, usually S$800–S$1,500) or refinance (move to another bank entirely).
SORA-pegged floating packages quote the rate as a spread over compounded SORA, most commonly three-month compounded SORA. Banks calculate the three-month rate by compounding daily SORA overnight observations over the preceding 90 days. MAS publishes SORA daily on its Key Interest Rates page. Your monthly repayment moves whenever the SORA component shifts — sometimes mid-loan-year if your repricing date falls in a rising-rate environment.
Why SIBOR disappeared. For decades Singapore floating mortgages referenced SIBOR (Singapore Interbank Offered Rate), a survey-based rate that proved vulnerable to manipulation globally. Following the international transition away from IBOR benchmarks, MAS guided the market to replace SIBOR with SORA. Banks stopped offering new SIBOR-linked mortgages in 2022, and all outstanding SIBOR loans were converted to SORA or fixed packages before SIBOR was formally discontinued in December 2024. Borrowers on old SIBOR loans who did not act proactively were automatically transitioned by their banks. If you are still holding a “SIBOR + spread” loan, contact your bank immediately — it no longer exists as a benchmark.
Board-rate packages: the type to avoid. A fourth category — the bank’s “board rate” or “internal rate” — once dominated the market. The bank sets this rate at its own discretion with no external anchor, meaning it can move it at any time for any reason. These packages offer no transparency and no predictability. While some banks still offer them as default fallback rates after a lock-in expires, you should never deliberately choose one as your primary package. Always negotiate a SORA-pegged or fixed package from the outset.
The HDB concessionary loan: a fixed-ish alternative
If you are buying an HDB flat you have access to an option no private condo buyer has: the HDB Housing Loan. The rate is set at 0.1 percentage point above the prevailing CPF Ordinary Account interest rate, which has been 2.5% since 1999 — making the HDB loan rate 2.6% p.a. consistently for over two decades. This rate can only change if MAS or CPF Board changes the CPF-OA floor, which happens very rarely. In practice it functions as a stable long-run rate. The loan can be fully serviced with CPF OA savings, and there is no lock-in period or early redemption penalty. The trade-off is a lower Loan-to-Value ceiling (up to 80% of the flat’s value versus up to 75% for bank loans) and eligibility restrictions (income ceilings, must not own private property, etc.).
Choosing the right mortgage structure is one of the most consequential financial decisions a Singapore property buyer makes. Pick the wrong package and you could pay thousands of dollars more in interest over a standard two-to-three-year lock-in cycle — or face stiff penalties if you need to sell or refinance before the clawback period expires. With 3-month MAS SORASORA hovering between 2.8% and 3.2% in early 2026 and banks competing aggressively on fixed-rate offers, the landscape has shifted meaningfully from the near-zero rate era of 2020–2021.
This guide explains every meaningful choice in Singapore mortgage structuring: fixed versus floating, bank loan versus HDB loan, how SORA is calculated and why it replaced SIBOR, lock-in and clawback mechanics, and a worked comparison of a S$1 million loan across two packages over five years. It closes with a strategy section matched to different buyer profiles and a checklist of triggers for refinancing.
Overview: The Singapore Mortgage Landscape in 2026
Singapore borrowers have three primary loan sources: licensed banks (including local banks DBS, OCBC, UOB and the major international lenders), the HDB Concessionary Loan (HDB flats only), and licensed moneylenders (not covered here). For private property, the choice is always a bank loan. For HDB flats, eligible buyers can choose between an HDB loan and a bank loan — a decision with long-term implications explored in depth below.
Bank mortgage packages cluster into three structures:
- Fixed-rate packages — the interest rate is contractually locked for a defined period (typically 2–3 years), after which it reverts to the bank’s floating rate.
- SORA-pegged floating packages — rate is calculated as the published 1-month or 3-month compounded SORA plus a spread set by the bank (typically 0.5%–1.0% above SORA).
- Board-rate (internal rate) packages — rate is a spread above the bank’s own internal mortgage board rate, which the bank can adjust at discretion. These are the least transparent and generally the package borrowers end up on after a lock-in period expires without refinancing.
Since SORA fully replaced SIBOR and SOR as the benchmark for Singapore retail mortgages from October 2024, new floating-rate packages are exclusively SORA-pegged. Existing SIBOR loans were migrated to SORA-equivalent packages by all major banks.
Fixed vs Floating: Side-by-Side Comparison
| Feature | Fixed Rate | SORA-Pegged Floating | Board Rate |
|---|---|---|---|
| Typical 2026 rate | 2.5%–3.5% p.a. (2–3 yr lock-in) | SORA + 0.5%–1.0% ≈ 3.3%–4.2% today | Bank board rate + 0%–0.3% |
| Rate certainty | Full certainty during lock-in period | Moves monthly/quarterly with SORA | Bank can change at any time |
| Typical lock-in period | 2–3 years | 1–2 years (some packages) | None after initial promo period |
| Clawback fee if exiting in lock-in | Typically 1.5% of outstanding loan | Typically 1.5% of outstanding loan | Usually none |
| Transparency | High — rate stated in contract | High — SORA published daily by MAS | Low — bank’s discretion |
| Best for | Buyers who want budgetary certainty | Buyers who can absorb rate movement | Rarely the best choice — avoid |
| Refinancing flexibility | Restricted until lock-in expires | More flexible (shorter or no lock-in) | Usually fully flexible |
| Legal subsidy on refinancing | Many banks offer S$1,800–S$2,500 subsidy | Many banks offer S$1,800–S$2,500 subsidy | N/A |
The core trade-off is simple: fixed rate gives certainty at a potential premium; SORA floating passes the risk of rate movement to you in exchange for a spread that may be lower than the fixed rate when SORA is falling. With 3M SORA at approximately 2.8%–3.2% in early 2026, a SORA + 0.75% package prices at roughly 3.55%–3.95% — currently higher than most 2–3 year fixed offers of 2.5%–3.0%. This rate inversion makes fixed-rate packages unusually attractive in early 2026 for buyers who expect SORA to remain elevated or move higher.
How SORA Works: The Benchmark Explained
SORA — the Singapore Overnight Rate Average — is calculated and published daily by the Monetary Authority of Singapore (MAS). It represents the volume-weighted average rate of overnight interbank SGD cash transactions in Singapore’s unsecured overnight interbank market. Because it is based on actual executed transactions rather than bank submissions, it is considered more robust and harder to manipulate than SIBOR.
Mortgages are typically pegged to the 1-month compounded SORA (1M SORA) or 3-month compounded SORA (3M SORA). These are calculated by compounding the daily SORA observations over the relevant preceding calendar period:
- 1M SORA: compounded daily SORA over the last calendar month. More responsive to rate changes — monthly instalment adjusts faster.
- 3M SORA: compounded daily SORA over the last three calendar months. Smoother, with a quarterly lag. More common in mortgage packages; easier to budget.
Your monthly instalment on a SORA-pegged loan is recalculated each time the compounded SORA figure is reset (monthly for 1M SORA, quarterly for 3M SORA). The published SORA rate plus the bank’s spread gives your all-in mortgage rate for that period. Spreads are contractually fixed for the life of the package (or for the promotional period), so the only variable is the SORA benchmark itself.
The practical implication: SORA-pegged borrowers benefit automatically when MAS monetary policy eases, without needing to refinance. Conversely, when SORA rises — as it did sharply in 2022–2023 — instalments increase in near-real time. Borrowers who cannot absorb payment volatility should prefer fixed-rate packages.
Bank Loan vs HDB Concessionary Loan
This choice applies only to buyers of HDB resale flats and new BTO flats (subject to eligibility). Private property buyers have no access to the HDB loan. Eligibility for the HDB loan requires at least one Singaporean Citizen borrower, income not exceeding S$14,000/month (S$21,000 for extended/multi-generational families), no private property ownership, and no prior HDB loan default.
| Feature | HDB Concessionary Loan | Bank Loan (for HDB) |
|---|---|---|
| 2026 interest rate | 2.6% p.a. (pegged at CPF OA rate + 0.1%) | Fixed ~2.5%–3.0% or SORA + spread |
| LTV limit | Up to 80% of flat value | Up to 75% of flat value |
| Minimum cash downpayment | None (full downpayment can be CPF OA) | 5% cash (first property) |
| Maximum tenure | 25 years (or age 65, whichever is shorter) | 25 years (HDB flat, bank loan) |
| Lock-in period | None — can repay or refinance any time | Typically 2–3 years with clawback |
| Rate stability | Very stable — only changes when CPF OA rate changes | Fixed is stable; SORA floats |
| Prepayment penalty | None | Clawback during lock-in (typically 1.5%) |
| Refinancing to bank | Allowed; cannot return to HDB loan once switched | Can refinance between banks freely after lock-in |
| CPF usage for downpayment | Full downpayment can be from CPF OA | Up to 20% of purchase price from CPF OA |
The HDB loan’s 2.6% rate — set at CPF OA rate (2.5%) + 0.1% — has been unchanged since 1999. With bank fixed rates currently available at 2.5%–3.0%, the cost differential in early 2026 is modest. The HDB loan’s primary advantages are no lock-in, no cash downpayment, and a higher 80% LTV ceiling. For buyers with limited cash savings or those who may need to sell within a few years, these features often outweigh any small interest-rate saving from a bank package.
Lock-In Periods and Clawback Clauses
The lock-in period is the contractual window during which you may not fully redeem the loan, refinance to another bank, or make partial prepayments above a specified threshold, without triggering a clawback fee. The standard lock-in duration in Singapore is 2–3 years.
The clawback fee (sometimes called a prepayment penalty or redemption fee) is typically calculated as a percentage of the outstanding loan balance at the time of redemption. The standard rate across most major Singapore lenders is 1.5% of the outstanding loan. Some banks charge a flat amount (e.g., S$5,000) or apply a tiered structure, but 1.5% of outstanding principal is the market norm.
Example: You took a S$900,000 loan in January 2024 on a 3-year fixed package. By January 2026 (two years in), the outstanding balance has reduced to approximately S$860,000 (depending on rate and tenure). If you attempt to refinance in January 2026 — one year before the lock-in expires — the clawback fee is:
S$860,000 × 1.5% = S$12,900
This fee, combined with legal and valuation costs for the new loan (roughly S$2,500–S$5,000 unless subsidised), means a mid-lock-in switch is rarely worthwhile unless the new rate is meaningfully lower. Most refinancing advisers recommend switching only after the lock-in expires or if the savings over the remaining lock-in period exceed the total exit costs.
Other clauses to check in a mortgage term sheet:
- Partial prepayment threshold: Many packages allow partial repayments of up to 5%–10% of the original loan per year during the lock-in without triggering a fee. Useful for lump-sum capital reduction.
- Conversion fee: Some banks charge a conversion fee (typically S$500–S$1,000) to switch between packages within the same bank during or after lock-in. Cheaper than full refinancing but still a cost.
- Cancellation fee: If you cancel a fully approved in-principle loan before drawdown, some banks impose a fee of 0.5%–1.0% of the approved amount. Check this before exercising an OTP if you are not yet fully committed.
- Legal subsidy on refinancing: Many banks offer to cover conveyancing fees (typically S$1,800–S$2,500) for borrowers refinancing into their books. This subsidy usually comes with a clawback condition of its own — if you leave within 1–3 years, you repay the subsidy. Factor this into refinancing cost calculations.
Worked Example: S$1 Million Loan — Fixed 3.0% vs SORA + 0.75% Over 5 Years
To make the fixed versus floating choice tangible, consider a S$1,000,000 bank loan on a private condominium, taken over a 25-year tenure. We compare two packages available in early 2026:
- Package A (Fixed): 3.0% p.a. fixed for 3 years, then reverts to bank board rate (assumed 4.0% for this model)
- Package B (SORA Floating): 3M SORA + 0.75% spread, with a 2-year lock-in. 3M SORA assumed at 3.0% in Year 1, easing to 2.5% in Year 2, 2.0% in Year 3, and stabilising at 2.0% in Years 4–5.
| Year | Package A Rate | Package A Monthly | Package B Rate | Package B Monthly |
|---|---|---|---|---|
| Year 1 | 3.00% | S$4,742 | 3.75% (3.0 + 0.75) | S$5,122 |
| Year 2 | 3.00% | S$4,742 | 3.25% (2.5 + 0.75) | S$4,863 |
| Year 3 | 3.00% | S$4,742 | 2.75% (2.0 + 0.75) | S$4,613 |
| Year 4 | 4.00% (board rate) | S$5,370 | 2.75% (2.0 + 0.75) | S$4,613 |
| Year 5 | 4.00% (board rate) | S$5,370 | 2.75% (2.0 + 0.75) | S$4,613 |
5-year total interest paid (approximate):
- Package A: ~S$143,200 over 5 years (including the higher board rate in Years 4–5)
- Package B: ~S$136,500 over 5 years (if SORA eases as modelled)
The critical refinancing discipline: Package A borrowers who fail to refinance at Year 3 and remain on the 4.0% board rate pay an additional ~S$15,000 in interest over Years 4–5 compared with Package B at 2.75%. Never drift onto a board rate — set a calendar reminder 3 months before your lock-in expires and begin comparing packages then. See our Refinancing Guide for a step-by-step process.
Choosing Your Strategy: Matching Package to Buyer Profile
Profile 1 — First-Time Buyer, Tight Monthly Budget
Recommended: Fixed rate, 2–3 year lock-in. Predictable instalments make budgeting and TDSR management simpler. With fixed rates at 2.5%–3.0% in early 2026, this is historically reasonable. Set a refinancing review for 3 months before lock-in expiry.
Profile 2 — Investor Expecting to Sell in 2–3 Years
Recommended: Match lock-in to expected holding period, or use a no-lock-in package if available. A 3-year fixed package that expires just as you plan to sell avoids clawback fees. If exit timing is uncertain, explore SORA packages with shorter (1-year) or no lock-in periods at a modestly higher spread. See TDSR guide for investment property TDSR rules.
Profile 3 — HDB Upgrader with Strong Cash Reserves
Recommended: Compare SORA floating carefully. If the rate cycle is expected to turn down, taking a SORA + 0.6%–0.8% package means your rate automatically declines without refinancing. Strong cash reserves absorb any near-term rate volatility. If SORA remains elevated beyond expectations, refinance to fixed when the lock-in expires.
Profile 4 — Long-Horizon Owner-Occupier (10+ Years)
Recommended: Consider SORA floating after the initial fixed period. For very long-term holds, locking into a fixed rate for the first 2–3 years provides early certainty, then switching to SORA-pegged after expiry captures rate normalisation over a long cycle. Refinance every 2–3 years to stay on competitive spreads; use legal subsidy packages to minimise switching costs.
Profile 5 — HDB Flat Buyer Near BTO Completion
Recommended: Retain HDB loan if any uncertainty exists. The HDB loan’s flexibility (no lock-in, no cash minimum, 80% LTV) is most valuable when your financial situation is still stabilising in the first 1–3 years after TOP. If your income is stable and a bank loan is materially cheaper, switching after 2–3 years in the HDB loan is a reasonable step-down approach — but remember it is irreversible.
When to Refinance: Key Triggers and Checklist
Refinancing is the discipline of switching your mortgage to a better package — either with your existing bank (repricing) or a new bank (refinancing). In Singapore, refinancing is extremely common: most financially active borrowers review their mortgage every 2–3 years. The primary value drivers are:
- Lock-in expiry: The single most reliable trigger. Begin comparing 3 months before the lock-in expiry date.
- Rate environment shift: If SORA has moved more than 0.5% since your last review, the economics of switching may have changed materially.
- Significant capital reduction: If your outstanding loan has fallen below a threshold where the clawback fee is small relative to the interest saving, early exit may be viable.
- Life event: Decoupling, adding a co-borrower, or removing a co-borrower all typically require a new loan application and are natural moments to review the package.
- You have drifted onto a board rate: If you missed your lock-in expiry and are paying the bank’s board rate, refinancing is almost always worthwhile immediately.
Refinancing cost checklist (new bank):
- Conveyancing (legal) fees: S$2,000–S$4,000 (often subsidised by incoming bank)
- Valuation fee: S$300–S$800 (some banks waive)
- Clawback fee from existing bank: typically 1.5% of outstanding loan if still in lock-in (avoid if possible)
- Fire insurance setup on new policy: S$200–S$500
- CPF housing withdrawal re-charge: minor administrative fee (~S$30–S$50)
For a complete walkthrough of the refinancing process, including how to compare term sheets from multiple banks, see our Singapore Condo Refinancing Guide.
Frequently Asked Questions
What is 3M SORA and how does it affect my monthly mortgage payment?
3-month compounded SORA (3M SORA) is the compounded average of daily SORA observations over the preceding three calendar months, published by MAS. Your mortgage rate equals 3M SORA plus your bank’s contractual spread (e.g., SORA + 0.75%). When 3M SORA rises, your mortgage rate rises by the same amount, and your next month’s instalment recalculates accordingly. In early 2026, 3M SORA is approximately 2.8%–3.2%, meaning a SORA + 0.75% package costs roughly 3.55%–3.95% all-in. Track the current 3M SORA at MAS’s SORA page or via our SORA Rate Tracker.
Are fixed-rate mortgages truly fixed for the entire loan tenure?
No. “Fixed rate” in Singapore mortgage terminology refers to a fixed promotional period — typically 2–3 years — after which the loan reverts to the bank’s floating board rate. The board rate is set at the bank’s discretion and is generally higher than the promotional rate. Borrowers who want to maintain a predictable rate must actively refinance every 2–3 years when their fixed period expires, or reprice within the same bank. A truly fixed-for-life mortgage does not exist in Singapore’s retail market.
What is the clawback fee and when does it apply?
The clawback fee (or prepayment penalty) applies when you fully redeem your mortgage — by selling the property, refinancing to another bank, or making a full lump-sum repayment — before the lock-in period expires. The standard rate in Singapore is 1.5% of the outstanding loan balance at the time of redemption. It is distinct from the loan’s interest rate and is paid to the existing bank as a contractual penalty. The clawback does not apply to partial repayments within the allowed annual threshold (typically 5%–10% of the original loan), and it disappears entirely once the lock-in period ends.
Can I switch from a bank loan back to the HDB loan?
No. Once you refinance from the HDB Concessionary Loan to a bank loan, you cannot revert to the HDB loan. The HDB loan is a one-way door: you may leave it, but you cannot return. This is an important asymmetry to consider before switching. If you took a bank loan for your HDB flat from the outset (i.e., you never had the HDB loan), this rule does not apply.
What is an MSR limit and how does it interact with my mortgage choice?
The Mortgage Servicing Ratio (MSR) applies specifically to HDB flats and Executive Condominiums (ECs within the first 10 years). It caps monthly mortgage repayments at 30% of gross monthly income. The Total Debt Servicing Ratio (TDSR) of 55% applies to all property loans. On a higher-rate package, the monthly instalment rises — potentially breaching MSR even if TDSR remains satisfied. When evaluating SORA-pegged packages for an HDB flat, banks stress-test the payment at SORA + spread assuming SORA is at least 4.0% (the MAS stress-test floor), which may reduce your maximum loan quantum. See TDSR & MSR guide for the full methodology.
Is the legal subsidy from the incoming bank “free”?
Not exactly. Legal subsidies offered by banks to cover conveyancing fees on refinancing (typically S$1,800–S$2,500) come with their own clawback condition: if you leave the new bank within 1–3 years (the subsidy clawback period), you must repay the subsidy in full. This effectively extends your switching cost horizon. When comparing refinancing offers, factor in the total cost including any subsidy clawback risk, not just the headline interest rate.
What is the stress-test rate banks use for mortgage approval in 2026?
MAS guidelines require banks to stress-test all new residential property loans at the higher of the actual loan rate + 2%, or a floor rate of 4.0% p.a. This means even if your SORA package currently prices at 3.75%, the bank calculates your TDSR and MSR (for HDB/EC) using a notional rate of at least 4.0% — or 5.75% (3.75% + 2%) if the package rate is above 2.0%. In early 2026 with SORA-pegged packages at 3.5%–4.0%, the stressed rate floor is typically 5.5%–6.0%. This stress test is what banks use when calculating your maximum loan quantum at loan application; your actual monthly payment is based on the real contracted rate.
Fixed vs floating: what the numbers look like (as of 2026-06)
The following worked example uses a S$1 million loan at 25 years. These are illustrative rates based on market conditions as of 2026-06; actual quotes vary by bank, loan size, and creditworthiness. Always obtain Loan-in-Principle letters from at least two banks before deciding.
| Package type | Indicative rate | Monthly repayment | Year 1 total interest |
|---|---|---|---|
| 2-year fixed | ~3.00% p.a. | ~S$4,742 | ~S$29,700 |
| 3M SORA + 0.85% spread | ~3.0–3.4% p.a. (variable) | ~S$4,742–S$4,960 | ~S$29,700–S$32,000 |
| HDB concessionary | 2.60% p.a. (fixed) | ~S$4,535 | ~S$25,700 |
The key insight: on a S$1M loan the fixed and SORA-floating packages are often priced within S$200–S$300 per month of each other when SORA is in a moderate range. That premium for certainty is modest. The gap widens dramatically if SORA spikes — during 2022–2023 when global central banks hiked aggressively, 3-month compounded SORA rose from near zero to above 3.6%, pushing effective bank loan rates to 4%+. Borrowers locked into two-year fixed packages at 1.3–1.6% during that cycle avoided those spikes entirely. Conversely, after rates fell in 2024–2025, SORA-floating borrowers benefited first.
The TDSR constraint applies to all loan types. Under MAS TDSR rules, total monthly debt repayments (including car loans, student loans, credit card minimums) cannot exceed 55% of gross monthly income. Banks must also stress-test your repayments at a 4% floor rate regardless of the actual loan rate — so even if your offer is at 3%, the bank checks whether you can service repayments if rates reach 4%. This stress floor protects borrowers from future rate rises.
Lock-in periods and legal fee clawback. Nearly all bank packages carry a lock-in period matching the fixed or promotional period — two or three years. If you sell the property or fully redeem the loan within that window, the bank charges an early redemption penalty, typically 1.5% of the outstanding loan amount. Additionally, if the bank subsidised your legal fees or valuation fees as a loan sweetener (a common incentive worth S$2,000–S$4,000), there is usually a clawback clause: if you exit within the lock-in period the subsidised amount is recovered. Read these clauses carefully in the Letter of Offer before signing. After the lock-in period expires you are free to reprice or refinance at will with no penalty.
Use our mortgage repayment calculator to model different rate scenarios on your own loan amount and tenure, and our refinancing calculator to estimate whether switching banks after your lock-in will generate net savings after legal and administrative costs.
For a full cost breakdown including stamp duties and buyer’s cash outlay, see the total cost of purchase calculator and the guide on complete condo purchase cost breakdown.
Step by step
- Determine your eligibility baseline. Before approaching any bank, calculate your TDSR headroom: add up all existing monthly debt commitments and divide by gross monthly income. If the figure is already above 35%, a large mortgage will be difficult to secure. Use the affordability calculator to find a realistic loan quantum before applying.
- Decide on HDB loan or bank loan (HDB buyers only). If you are buying an HDB flat, compare the HDB concessionary loan (2.6% p.a., no lock-in, CPF-eligible) against the best bank fixed package available. For most buyers who value certainty and plan to hold long-term, the HDB loan’s lower rate and zero early-redemption penalty make it the lower-risk choice. Bank loans offer higher LTV flexibility and lower rates in certain market conditions but require active monitoring.
- Shortlist packages from at least two banks. Request Loan-in-Principle (LIP) letters from at least two institutions. Compare the effective interest rate (EIR) — not just the headline rate — which amortises any cashback or fee subsidies over the loan life. Focus on the total interest cost over the lock-in period, not just the first-year rate.
- Choose fixed if you value certainty or expect rates to rise. A fixed-rate package makes sense if: you are budgeting tightly and cannot absorb payment volatility; you believe rate cuts are unlikely in the next two to three years; or your loan tenure is short (under 15 years) and the premium for fixing is less than 0.3 percentage points over the best SORA package. The certainty benefit is highest in the first years of a loan, when the outstanding principal — and therefore the interest quantum — is largest.
- Choose SORA-floating if you expect rates to fall or plan to exit within two years. If consensus forecasts point to further SORA declines, or if you plan to sell the property before the lock-in expires anyway (making an early-redemption penalty unavoidable under fixed, but not under a no-lock-in floating package), SORA-pegged rates capture rate cuts automatically. Confirm whether the floating package has a lock-in period — some do not, giving you exit flexibility at no penalty.
- Understand every fee and clawback in the Letter of Offer. Before signing, identify: (a) the exact lock-in period and early redemption penalty percentage; (b) any legal fee or valuation subsidy and the clawback clause; (c) the post-lock-in fallback rate (should be SORA + spread, not an opaque board rate); (d) repricing fees if you switch packages within the same bank after lock-in. Negotiate the post-lock-in spread down if you can — this is often more negotiable than the promotional rate.
- Diary your lock-in expiry date and review three months before. Set a calendar reminder six months before your lock-in ends. Three months before expiry, get fresh quotes from two or three competitors and a repricing quote from your current bank. Run the numbers through the refinancing calculator: if the interest savings over 24 months exceed the all-in legal and valuation costs (typically S$3,000–S$5,000 for a full refinance), switching is worth it. Repricing is cheaper (S$800–S$1,500) but usually yields a smaller spread reduction.
- Stress-test at 4% before committing. Compute your monthly repayment at a 4% rate on your chosen loan quantum and tenure. If that figure pushes your TDSR above 50% or strains your monthly cash flow, the loan quantum is too high. Reduce it, extend the tenure, or increase your down payment.
Frequently asked questions
What happened to SIBOR and why does it matter for my mortgage?
SIBOR (Singapore Interbank Offered Rate) was the primary floating-rate benchmark for Singapore home loans for decades. Following a global shift away from survey-based interbank rates after manipulation scandals, MAS guided the market to transition to SORA (Singapore Overnight Rate Average) — an overnight rate based on actual transactions, which is more robust and harder to manipulate. Banks stopped offering new SIBOR mortgages in 2022, and SIBOR was formally discontinued in December 2024. As of 2026-06, no active home loans reference SIBOR. If your loan documentation still mentions SIBOR, your bank should have already contacted you to confirm conversion to a SORA-based or fixed package. If in doubt, call your bank and ask for a written confirmation of your current reference rate.
Can I switch from a fixed rate to a SORA-floating package mid-tenure?
Switching before your lock-in period expires triggers the early redemption penalty (typically 1.5% of the outstanding loan amount) and any legal fee clawback. On a S$900,000 outstanding balance that is S$13,500 in penalties alone — a significant cost. After the lock-in expires you can reprice (change packages within the same bank for S$800–S$1,500) or refinance to a new bank at full legal costs (S$3,000–S$5,000) with no penalty. In practice, most borrowers wait for lock-in expiry and then switch if the SORA-floating spread on offer is materially lower. Model the break-even payback period using the refinancing calculator before committing.
How does the TDSR 55% rule affect how much I can borrow?
Under MAS TDSR rules, your total monthly debt repayments — mortgage, car loan, personal loan minimums, credit card minimum payments — cannot exceed 55% of your gross monthly income. Banks must also apply a stress rate of 4% when computing TDSR even if your actual loan rate is lower. So if you earn S$10,000 a month, your total debt service cannot exceed S$5,500, and the bank tests your mortgage repayment at 4% (not your contracted rate) to arrive at this figure. Clearing car loans or personal loans before applying for a home loan meaningfully increases your eligible loan quantum. HDB buyers are additionally subject to the Mortgage Servicing Ratio (MSR) of 30% for HDB loan repayments as a share of gross income.
What is the typical legal fee clawback and how do I avoid it?
Banks routinely subsidise legal fees (S$2,000–S$3,500) and valuation costs (S$500–S$800) as incentives to take their mortgage. Almost always, the Letter of Offer includes a clawback clause: if you refinance or fully redeem within the lock-in period (usually two or three years), the subsidised amounts are charged back to you at exit. The simplest way to avoid the clawback is to wait until the lock-in expires before refinancing. If you must exit early — for example because you are selling the property — factor the clawback into your net sale proceeds calculation. Some borrowers also choose packages that do not offer fee subsidies in exchange for a slightly lower spread, avoiding the clawback mechanism entirely.
Is the HDB concessionary loan always better than a bank loan for HDB flat buyers?
Not always, but it is often the lower-risk choice. The HDB loan at 2.6% p.a. has been consistently below typical bank fixed rates during high-rate environments (2022–2023 bank rates exceeded 3.5–4%), but above bank SORA-floating rates during low-rate environments (2020–2021 bank rates were sub-1.5%). The structural advantages of the HDB loan are its stability, full CPF-payability, zero lock-in period, and no early redemption penalty. The main reasons to choose a bank loan instead are: you have excellent creditworthiness and can secure a very low SORA spread; you plan to refinance aggressively; or you need the higher 75% LTV that bank loans offer versus 80% for HDB loans (note: HDB loans actually offer a higher LTV of 80% vs 75% for bank loans, which means less cash outlay upfront). Review the latest criteria on the HDB housing loan page and consult CPF usage rules before deciding.