What to know before buying a new property or refinancing your mortgage

Home loan rates are rising, with three-year fixed-rate packages offered by Singapore banks up at least 1.6 percentage points from year-end 1.15% pa last. As interest rates are likely to continue to rise, what can current homeowners and future homebuyers do?

In this column, Mr. Lim Beng Hua, UOB’s Head of Secured Lending answers some of your top questions about rising mortgage rates. The 50-year-old expert has been in the financial sector For more than 20 years. Secured loans are those that are backed by collateral and include mortgages.

Q: I am buying a new property this year. What are the considerations when looking for a home loan?

A: For most of us, buying a home is the biggest financial commitment we will make, so we need to research and plan a property purchase accordingly.

Carefully assess how much you can afford to pay in upfront costs – including cash outlays, stamp duties and legal fees – and your monthly mortgage. Our local interest rates are heavily influenced by the policies of global central banks. Since they have increased, you should consider using a higher rate when calculating your potential monthly payments.

There are digital tools like UOB Home Solution that help you instantly calculate how much home loan you can afford and get an appraisal of the property you’re considering, so you don’t overwork yourself.

Q: Should I choose a fixed rate mortgage or a variable rate mortgage? Which is better in the long run?

A: It really depends on your needs. If you prefer greater certainty on your mortgage payments to manage your cash flow, a fixed rate plan would be more appropriate. Or you can consider a variable rate plan if you are less sensitive to interest rate fluctuations.

We also offer packages where part of the amount is based on a fixed rate, and the rest is indexed on a variable rate like the Singapore Overnight Rate Average (Sora). This gives you the flexibility to make prepayments if interest rates remain high, while the fixed rate portion protects you against further rate increases.

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