When comparing between 2 Singapore mortgage loan offers, the one with the lower mortgage rate will always be chosen if everything else being equal. However it is rarely the case where you get to decide on a mortgage solely based on the interest rates. Although mortgage loan features can sometimes distract the home buyer or owner from the home loan rates, they can be a crucial factor determining your decision.
Here are the most common mortgage loan features that you will run into when choosing and comparing between mortgage loans in Singapore.
Free fire insurance.
If your property is mortgaged, you will have to buy fire insurance for it. However, it is not necessary to buy it from the lender itself or from an insurer that the bank recommends. The premium payable and coverage depends on your property type, size, location, etc. Like general insurance, there are many options that you can choose from including excess, coverage, etc. But if you choose to take up the free fire insurance from the mortgage lender, your options can be very limited. It really depends on what exactly is included in the package for free fire insurance. You might want to think hard before accepting a mortgage loan with premium mortgage rates just to obtain the free fire insurance.
Do not confuse home contents insurance for fire insurance for your house.
To eliminate the uncertainty of whether you have chosen a suitable Singapore mortgage loan, banks may offer you free conversion of your mortgage loan structure type. This is so that you have the flexibility to amend your loan details in future. Depending on which lender you can have the option of changing between loan structures, between different SIBOR rates, or even from SIBOR to SOR rates. However, when the time comes when you wish to exercise the conversions, you may be limited to what is available from the particular lender at that point in time.
Lock in period.
One of the biggest dilemma of home buyers when choosing a Singapore mortgage loan is deciding on the lock in period preferred. When lenders are generous enough a promotional rate deal, it is fair that the lender want the borrower to stay with the lender for a number of years. So usually you can obtain lower mortgage interest rates when you are agreeable to a lock in period. If you have no intention of redeeming your home loan within the next few years, a lock in period is really irrelevant if it is only 2 years or 3 years. You might as well accept an attractive interest rate in exchange of your commitment to a lock in period.