Paper 2 · Finance
Home Loan Rate Types & Refinancing (fixed, floating, SORA)
Must-know for the exam
- Loan eligibility (LTV, TDSR, MSR) is only half the finance syllabus; the loan products a buyer chooses between are also examinable.
- The HDB concessionary loan rate is pegged at 0.1% above the CPF Ordinary Account rate, so 2.6% while the OA rate is 2.5%.
- The HDB loan offers a higher LTV and CPF use but carries eligibility conditions: income ceiling, citizenship and prior-loan limits.
- A bank loan charges market interest rates, is available for HDB and private property, and has a lower LTV and stricter TDSR assessment than the HDB loan.
- A fixed rate is locked for a period (e.g. 2–3 years) then reverts to floating; it gives certainty but usually starts a little higher.
- A floating rate is a reference rate plus a bank spread; banks also offer board rates (bank-set, less transparent) and fixed-deposit-linked rates.
- SORA (Singapore Overnight Rate Average) has replaced SIBOR and SOR as the main floating benchmark; a package quoting SIBOR is out of date.
- Refinancing moves the loan to another bank for a better package and may incur legal and valuation costs plus a lock-in or prepayment penalty.
- Repricing switches to a new package within the same bank and is usually cheaper and faster than refinancing.
- The lock-in period and prepayment penalty must be checked before any switch; refinancing (new bank) is not the same as repricing (same bank).
Loan eligibility (LTV, TDSR, MSR) is only half the finance syllabus — you also need to know the loan products a buyer chooses between. Figures change, so confirm current rates/limits, but the structure is stable and examinable.
HDB concessionary loan vs bank loan
- HDB concessionary loan — for eligible HDB buyers; the rate is pegged at 0.1% above the CPF Ordinary Account rate (so 2.6% while the OA rate is 2.5%). Its LTV is 75% (cut from 80% on 20 Aug 2024, HDB), the same first-loan cap a bank applies, and it lets you use CPF, but it has eligibility conditions (income ceiling, citizenship, prior-loan limits).
- Bank loan — market interest rates, available for HDB and private property, with the same 75% first-loan LTV cap since 20 Aug 2024 but a stricter TDSR assessment and no OA-pegged rate.
Fixed vs floating rate
- Fixed rate — the rate is locked for a period (e.g. 2–3 years), then reverts to a floating rate. It gives certainty but usually starts a little higher.
- Floating rate — a reference rate + a bank spread. Since the phase-out of SIBOR and SOR, the main benchmark is SORA (Singapore Overnight Rate Average). Banks also offer board rates (bank-set, less transparent) and fixed-deposit-linked rates.
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Practise exam-style questions on Finance — with instant answers and explanations.
Practise Finance questions →Exam-style questions on this topic
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Common questions
- What replaced SIBOR as the home-loan benchmark rate?
- SORA (the Singapore Overnight Rate Average). SIBOR and SOR have been phased out, so floating-rate packages are now pegged to SORA plus a bank spread.
- What's the difference between refinancing and repricing?
- Refinancing means switching your loan to a different bank for a better rate (with possible legal/valuation costs and lock-in penalties); repricing means switching to a new package within your existing bank, which is usually cheaper and quicker.
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Join @resprepsg →Study material aligned to the public CEA syllabus. Not financial or legal advice — verify current figures with the relevant authority (IRAS, HDB, CEA, MAS).