In the current interest rates climate where SIBOR and SOR are hovering around their all all-time lows, it is easy to forget SIBOR and SOR have historically been considerably higher than what it is now. This can be especially misleading to first time home buyers who could be aware of these 2 benchmark rates for the first time.
Mortgage loan deals that start with low interest spread can look very attractive. However, do not forget that the interest rate spread for the later and thereafter years can be much more important than interest rates in the first few initial years. This means that although a mortgage loan can appear very tempting with 0.50% spread in the first year, be sure not to neglect looking at the interest spread in the later years. This is because a mortgage loan is very often a long term commitment that property buyers stretch over 20 to 30 years.
Also note that your own calculation for the affordability of the mortgage loan installments will vary from year to year depending on the details of the home loan that you take up. Monthly installments for the first year can be very different from the second year and onwards. So when you make your own financial analysis, do not make the mistake of only taking into consideration of the installments for the first year.