Need advice on choosing SOR or Sibor package

[evergreen]

This is my first time taking mortgage. Please share your view on which package I should to select. Thanks!

Property: Freehold, uncompleted, TOP 2015, purchased for own stay
80% loan.

I've read that Sibor is more stable than SOR. I believe there's always a price to pay for stability, i.e. higher rates. SOR has been lower than Sibor for the past year. The US has indicated that they will keep interest rates low at least for the next 12 months. Singapore dollar looks to remain strong and has appreciated against USD. I expect SOR to remain low. MAS has announced an increase in bank reserve ratio so I expect Sibor rates to go up. But ultimately they are both linked, with Sibor adjusting to be higher than SOR when we look at periods of time (say, 5 years or 10 years) though SOR may be higher than Sibor at a fixed point in time (i.e. on a particular date). Assuming the Sibor rate of 0.4375% and SOR 0.202%, in year 1, I will pay the same interest amount on package A and B, I will pay less interest amount on package A in the 2nd and 3rd year. Package A gives full legal subsidy.

I have the ability to pay half my loan amount in cash at the moment. But the current interest rates are very low so I would rather keep the cash in investments (gold and SG blue chip stocks) which yields alot more than the current 1% mortgage interest.

Should interest rates become significantly higher like 4-5%, I might pay down the loan. I have the intention of refinancing after 3 or 4 years if I can get better rates at that time.

I can accept instability for possible gains/savings. I don't mind doing extra work/homework for a proportionate amount of savings. I am inclined to choose package A below. Bank A approved my loan 1 day after application but I have not signed offer letter.


A) 3M SOR No Lock Package:
Year 1 to 4: 3M SOR + 0.75%
Thereafter: 3M SOR + 1%
The SOR rate today is: 0.202%

- No Partial Prepayment Penalty
- No Redemption Penalty
- Cancellation Fee : 0.75% on undrawn amount
- Legal subsidy : Full legal subsidy (to be refunded if loan is redeemed within 3 years from 1st loan disbursement date)

B) 3M Sibor No Lock Package
Yr 1: 3 mths sibor + 0.55%
Yr 2: 3 mths sibor + 0.60%
Yr 3: 3 mths sibor + 0.65%
Yr 4: 3 mths sibor + 1.25%
Thereafter: 3 mths sibor + 1.25%
The Sibor rate today is = 0.4375%

- Partial Prepayment penalty: Partial Repayment Up to 50% no prepaymt penalty, the balance will be 1.5% of Prepaid Amt
- Full redemption penalty: 1.5% of Outstanding Loan amount
- Cancellation fee: 1.5% on loan amount
- Legal subsidy: 0.5% (to be refunded if loan is redeemed within 3 years from 1st loan disbursement date)

[amk]

Package A. No brainer to me. Ur pty TOP only 2015, all the low rates in the 1 st 4 yrs irrelevant. U should look at flexibility instead. No partial and full redemption penalty and 0.75 cancellation fee is much better than the other one.

[newbie11]

What's the quantum

[DC33_2008]

Package fm which bank?

This is my first time taking mortgage. Please share your view on which package I should to select. Thanks!

Property: Freehold, uncompleted, TOP 2015, purchased for own stay
80% loan.

I've read that Sibor is more stable than SOR. I believe there's always a price to pay for stability, i.e. higher rates. SOR has been lower than Sibor for the past year. The US has indicated that they will keep interest rates low at least for the next 12 months. Singapore dollar looks to remain strong and has appreciated against USD. I expect SOR to remain low. MAS has announced an increase in bank reserve ratio so I expect Sibor rates to go up. But ultimately they are both linked, with Sibor adjusting to be higher than SOR when we look at periods of time (say, 5 years or 10 years) though SOR may be higher than Sibor at a fixed point in time (i.e. on a particular date). Assuming the Sibor rate of 0.4375% and SOR 0.202%, in year 1, I will pay the same interest amount on package A and B, I will pay less interest amount on package A in the 2nd and 3rd year. Package A gives full legal subsidy.

I have the ability to pay half my loan amount in cash at the moment. But the current interest rates are very low so I would rather keep the cash in investments (gold and SG blue chip stocks) which yields alot more than the current 1% mortgage interest.

Should interest rates become significantly higher like 4-5%, I might pay down the loan. I have the intention of refinancing after 3 or 4 years if I can get better rates at that time.

I can accept instability for possible gains/savings. I don't mind doing extra work/homework for a proportionate amount of savings. I am inclined to choose package A below. Bank A approved my loan 1 day after application but I have not signed offer letter.


A) 3M SOR No Lock Package:
Year 1 to 4: 3M SOR + 0.75%
Thereafter: 3M SOR + 1%
The SOR rate today is: 0.202%

- No Partial Prepayment Penalty
- No Redemption Penalty
- Cancellation Fee : 0.75% on undrawn amount
- Legal subsidy : Full legal subsidy (to be refunded if loan is redeemed within 3 years from 1st loan disbursement date)

B) 3M Sibor No Lock Package
Yr 1: 3 mths sibor + 0.55%
Yr 2: 3 mths sibor + 0.60%
Yr 3: 3 mths sibor + 0.65%
Yr 4: 3 mths sibor + 1.25%
Thereafter: 3 mths sibor + 1.25%
The Sibor rate today is = 0.4375%

- Partial Prepayment penalty: Partial Repayment Up to 50% no prepaymt penalty, the balance will be 1.5% of Prepaid Amt
- Full redemption penalty: 1.5% of Outstanding Loan amount
- Cancellation fee: 1.5% on loan amount
- Legal subsidy: 0.5% (to be refunded if loan is redeemed within 3 years from 1st loan disbursement date)

[flagship74]

This is my first time taking mortgage. Please share your view on which package I should to select. Thanks!

Property: Freehold, uncompleted, TOP 2015, purchased for own stay
80% loan.

I've read that Sibor is more stable than SOR. I believe there's always a price to pay for stability, i.e. higher rates. SOR has been lower than Sibor for the past year. The US has indicated that they will keep interest rates low at least for the next 12 months. Singapore dollar looks to remain strong and has appreciated against USD. I expect SOR to remain low. MAS has announced an increase in bank reserve ratio so I expect Sibor rates to go up. But ultimately they are both linked, with Sibor adjusting to be higher than SOR when we look at periods of time (say, 5 years or 10 years) though SOR may be higher than Sibor at a fixed point in time (i.e. on a particular date). Assuming the Sibor rate of 0.4375% and SOR 0.202%, in year 1, I will pay the same interest amount on package A and B, I will pay less interest amount on package A in the 2nd and 3rd year. Package A gives full legal subsidy.

I have the ability to pay half my loan amount in cash at the moment. But the current interest rates are very low so I would rather keep the cash in investments (gold and SG blue chip stocks) which yields alot more than the current 1% mortgage interest.

Should interest rates become significantly higher like 4-5%, I might pay down the loan. I have the intention of refinancing after 3 or 4 years if I can get better rates at that time.

I can accept instability for possible gains/savings. I don't mind doing extra work/homework for a proportionate amount of savings. I am inclined to choose package A below. Bank A approved my loan 1 day after application but I have not signed offer letter.


A) 3M SOR No Lock Package:
Year 1 to 4: 3M SOR + 0.75%
Thereafter: 3M SOR + 1%
The SOR rate today is: 0.202%

- No Partial Prepayment Penalty
- No Redemption Penalty
- Cancellation Fee : 0.75% on undrawn amount
- Legal subsidy : Full legal subsidy (to be refunded if loan is redeemed within 3 years from 1st loan disbursement date)

B) 3M Sibor No Lock Package
Yr 1: 3 mths sibor + 0.55%
Yr 2: 3 mths sibor + 0.60%
Yr 3: 3 mths sibor + 0.65%
Yr 4: 3 mths sibor + 1.25%
Thereafter: 3 mths sibor + 1.25%
The Sibor rate today is = 0.4375%

- Partial Prepayment penalty: Partial Repayment Up to 50% no prepaymt penalty, the balance will be 1.5% of Prepaid Amt
- Full redemption penalty: 1.5% of Outstanding Loan amount
- Cancellation fee: 1.5% on loan amount
- Legal subsidy: 0.5% (to be refunded if loan is redeemed within 3 years from 1st loan disbursement date)

Pkg A is nice.

[DC33_2008]

You may want to check with ANZ if they still have 0.75%+3month SOR throughout with no lock-in.

[evergreen]

Package A. No brainer to me. Ur pty TOP only 2015, all the low rates in the 1 st 4 yrs irrelevant. U should look at flexibility instead. No partial and full redemption penalty and 0.75 cancellation fee is much better than the other one.

Pkg A is nice.

Thanks for your advice. I was wondering whether I missed out something important.

What's the quantum

<500K

You may want to check with ANZ if they still have 0.75%+3month SOR throughout with no lock-in.

Foreign banks like ANZ don't want to finance my "shoebox"

Package fm which bank?

You also looking to finance?

[dnomyarw]

the SOR will rise faster when USD appreciates against SGD...
also foreign banks tend to raise loan rates faster when interest rates rise, as compared to local banks...

[rattydrama]

package A is nice. Heard citi offering 1m or 3m SIBOR +075% throughout with 2 yr lock in.

[masterkey]

If you like to use SOR, Citi also has a package for 3mSOR+0.75% throughout entire term, not sure but probably with 2 years lock in. The spread may be reduced depending on your loan quantum.

[yowetan]

This is my first time taking mortgage. Please share your view on which package I should to select. Thanks!

Property: Freehold, uncompleted, TOP 2015, purchased for own stay
80% loan.

A) 3M SOR No Lock Package:
Year 1 to 4: 3M SOR + 0.75%
Thereafter: 3M SOR + 1%
The SOR rate today is: 0.202%

- No Partial Prepayment Penalty
- No Redemption Penalty
- Cancellation Fee : 0.75% on undrawn amount
- Legal subsidy : Full legal subsidy (to be refunded if loan is redeemed within 3 years from 1st loan disbursement date)

B) 3M Sibor No Lock Package
Yr 1: 3 mths sibor + 0.55%
Yr 2: 3 mths sibor + 0.60%
Yr 3: 3 mths sibor + 0.65%
Yr 4: 3 mths sibor + 1.25%
Thereafter: 3 mths sibor + 1.25%
The Sibor rate today is = 0.4375%

- Partial Prepayment penalty: Partial Repayment Up to 50% no prepaymt penalty, the balance will be 1.5% of Prepaid Amt
- Full redemption penalty: 1.5% of Outstanding Loan amount
- Cancellation fee: 1.5% on loan amount
- Legal subsidy: 0.5% (to be refunded if loan is redeemed within 3 years from 1st loan disbursement date)

Hi evergreen,

Can you share with me which bank offers the above packages? Thanks.

[evergreen]

the SOR will rise faster when USD appreciates against SGD...
also foreign banks tend to raise loan rates faster when interest rates rise, as compared to local banks...

Agree.
Here's my opinion, open for discussion:
Sibor appears to "lag" SOR, i.e. rise slower than SOR and also fall slower than SOR. But Sibor will catch up eventually. Since we are looking at spans of time rather than a price/rate at a particular point in time, I believe the need for stability concerns borrowers who have tight cash flow.

Sibor has been higher than SOR by about 0.2% for the past 1 year. Effectively, the banks are collecting 0.2% more beforehand. If the rates go up, they have the ability to absorb some of the increase, otherwise the extra money goes into their profit.
Loan rates offered by local banks are usually higher than foreign banks so they have the ability to absorb slight increased in interest rates.

package A is nice. Heard citi offering 1m or 3m SIBOR +075% throughout with 2 yr lock in.

If you like to use SOR, Citi also has a package for 3mSOR+0.75% throughout entire term, not sure but probably with 2 years lock in. The spread may be reduced depending on your loan quantum.

Citibank, like ANZ, doesn't finance "shoebox".

[devilplate]

Citibank, like ANZ, doesn't finance "shoebox".

serious? really? even for those who bot from developers? how small is ur shoebox? 366sqft?

citibank cfm ok wif 4xxsqft units....

btw, banks earns on the loading....they dun earn on sibor/sor rates

the tiny wee bit difference on the loading doesnt really matter....its the lock-in, redemption clauses etc tats impt....and for me, service level aso vy impt!

[hopeful]

Loan rates offered by local banks are usually higher than foreign banks so they have the ability to absorb slight increased in interest rates.

don't understand what you mean here.
are you talking about spread? like 3M SIBOR + xx?
if based on SIBOR, SOR, it is fixed at a particular date for mortgages.
if your fixing date falls on 1 july 2011, then local and foreign will determine your mortgage rate to be the rate that particular day + spread.
I dont understand your statement about absorption of interest rates by local banks.

[devilplate]

don't understand what you mean here.
are you talking about spread? like 3M SIBOR + xx?
if based on SIBOR, SOR, it is fixed at a particular date for mortgages.
if your fixing date falls on 1 july 2011, then local and foreign will determine your mortgage rate to be the rate that particular day + spread.
I dont understand your statement about absorption of interest rates by local banks.

i am sure he is toking abt the spread or i usually call it 'loading'

and yes, dun understand 'banks abosrb slight increase'....hahaha

tot only for fixed rates....sibor/sor rates up, they LL 'absorb' during the fixed tenure

[evergreen]

serious? really? even for those who bot from developers? how small is ur shoebox? 366sqft?

citibank cfm ok wif 4xxsqft units....

btw, banks earns on the loading....they dun earn on sibor/sor rates

the tiny wee bit difference on the loading doesnt really matter....its the lock-in, redemption clauses etc tats impt....

Citibank said they don't finance <500 sq ft units.

Since sibor is the SG inter-bank lending rate, doesn't somebody earn something from it?

I don't mind lock-in package because I won't be cancelling the loan in the next 3 years but it appears that the lock-in packages aren't any better than the no-lock-in ones.

Yes, I agree service is important. One of the banks threw me their standard spreadsheet and told me to go calculate everything myself.

To answer your question, maybe I have to ask dnomyarw what he meant:

also foreign banks tend to raise loan rates faster when interest rates rise, as compared to local banks...

[newbie11]

How about

3M SIBOR / 3M SOR + 0.75%
free switch of 3M SIBOR or SOR every year
Free fire insurance for 2 years
1 Time Free conversion upon TOP for BUC

PM me for details.

[devilplate]

Citibank said they don't finance <500 sq ft units.

Since sibor is the SG inter-bank lending rate, doesn't somebody earn something from it?

I don't mind lock-in package because I won't be cancelling the loan in the next 3 years but it appears that the lock-in packages aren't any better than the no-lock-in ones.

Yes, I agree service is important. One of the banks threw me their standard spreadsheet and told me to go calculate everything myself.

To answer your question, maybe I have to ask dnomyarw what he meant:

nvr know citibank dun finance <500sqft!! since when?!?! or subject to individual citi bankers?!?! shocking to noe tat....hehe

i tink he meant those olden days floating board rates.....sibor/sor rates very transparent oredi

[devilplate]

How about

3M SIBOR / 3M SOR + 0.75%
free switch of 3M SIBOR or SOR every year
Free fire insurance for 2 years
1 Time Free conversion upon TOP for BUC

PM me for details.

cancellation fees on undrawn amt(if u wana sell b4/upon TOP), redemption fees(in case u wana refinance to other banks) more impt....

[evergreen]

How about

3M SIBOR / 3M SOR + 0.75%
free switch of 3M SIBOR or SOR every year
Free fire insurance for 2 years
1 Time Free conversion upon TOP for BUC

PM me for details.

cancellation fees on undrawn amt(if u wana sell b4/upon TOP), redemption fees(in case u wana refinance to other banks) more impt....

Can you share what are the charges and fees are? As devilplate mentioned, those fees are a major consideration.
For 3M sibor packages, banks are offering for 1st 3 years: 0.55%, 0.6%, 0.65%. I think people who prefer "stability" of sibor should just go for sibor package instead of get distracted by the option to switch.
I wonder whether I'll get to use up 1 year insurance but of course I won't reject 2 years free

nvr know citibank dun finance <500sqft!! since when?!?! or subject to individual citi bankers?!?! shocking to noe tat....hehe

i tink he meant those olden days floating board rates.....sibor/sor rates very transparent oredi

Maybe since KBW cautioned buyers about shoeboxes...

[newbie11]

cancellation fees on undrawn amt(if u wana sell b4/upon TOP), redemption fees(in case u wana refinance to other banks) more impt....

1.5% of outstanding amount if facility is fully repaid within 2 years lock-in period.

1.5% on amount cancelled or left undrawn after acceptance or upon expiry of the availability period

[devilplate]

1.5% of outstanding amount if facility is fully repaid within 2 years lock-in period.

1.5% on amount cancelled or left undrawn after acceptance or upon expiry of the availability period

quite high...tot usually 1% rite....

tat package A still da best la...0.75% cancellation fees

[dnomyarw]

nvr know citibank dun finance <500sqft!! since when?!?! or subject to individual citi bankers?!?! shocking to noe tat....hehe

i tink he meant those olden days floating board rates.....sibor/sor rates very transparent oredi

yes i meant those packages with board rates...

[evergreen]

quite high...tot usually 1% rite....

tat package A still da best la...0.75% cancellation fees

Most charge 0.75% of undrawn amount.
It can be 1.5% of loan amount.
Have to read carefully...


I don't have any reason not to choose package A.
Package A bank service is also the best.

[CondoSearch]

Evergreen,

i have gone thru this about a month ago for my new property purchase and have to say, it is really a huge and so much information to digest and decide.

I finally engaged a person whom provide mortgage assistance and realised they can be a very good helping hand and feed you with a best information of package avialable in town and help in making decision, you may want to give a try. Sometime you might be surprised by what other option might be out there for you to consider...

just a penny of thought to share over the 2 packages you provided(if this is the best option avialable for you). A package would be a better choice because:
1. lower spread after 4th year and for new BUC property loan, most of disbursement at TOP and after.
2. No patial and redemption fee

I would suggest you to go around and do more shopping perhaps might be more choice for you to decide... HSBC can be a good one to try too if you have yet to check with them, another one is DBS or CIMB...

Good luck!

[evergreen]

Hi CondoSearch,

Thanks for sharing!

I asked for rates from all the banks (I'm kiasu ), compared the rates and learnt the terms myself by reading blogs and forums like these.

You were lucky to meet a mortgage broker who knows his stuff. I tried contacting one but he appeared to be just a middleman who passes on my documents to the banks, and after that I have to liaise with the banks myself.

[DC33_2008]

hsbc has a loan package at 0.65% + 3 mth sibor two months ago with no lock-in and has legal subsidy.

Evergreen,

i have gone thru this about a month ago for my new property purchase and have to say, it is really a huge and so much information to digest and decide.

I finally engaged a person whom provide mortgage assistance and realised they can be a very good helping hand and feed you with a best information of package avialable in town and help in making decision, you may want to give a try. Sometime you might be surprised by what other option might be out there for you to consider...

just a penny of thought to share over the 2 packages you provided(if this is the best option avialable for you). A package would be a better choice because:
1. lower spread after 4th year and for new BUC property loan, most of disbursement at TOP and after.
2. No patial and redemption fee

I would suggest you to go around and do more shopping perhaps might be more choice for you to decide... HSBC can be a good one to try too if you have yet to check with them, another one is DBS or CIMB...

Good luck!

[newbie11]

some banks have raised their spread slightly.

[land118]

This Bank of China package which give u flexibility of switching between SOR and SIBOR, look quite attractive:

http://imcmsimages.mediacorp.sg/CMSF...0807SUF023.pdf

1st year: 3M SIBOR/SOR +0.55%
2nd year thereafter: 3M SIBOR/SOR+0.75%

Free fire insurance, legal subsidy,etc

2years lock in...

Very aggressive...., worth a look

[rattydrama]

can anyone share what is the best rate now with no lock in?