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)