Are you outgrowing your current home? One of your many options is to sell your old home and buy a new one. To help you get the funds you need during this transition, consider getting a bridging loan or home loan.
Bridging loans offer short-term financial assistance so you can close your new property purchase as you wait for your old home to sell. A bridge loan is typically used to tide over the financial gap between paying your downpayment and receiving the sale proceeds of your old property.
A home loan, on the other hand, is long-term financing that facilitates the purchase of a new property – no need to sell the old property. To better understand, here is a comparison guide between the two loans and things to consider before applying.
Home Loan vs Bridging Loan
Bridge loans and home loans are similar in that they both help finance the purchase of a property. The key difference between the two is that a bridging loan is a short-term loan while a home loan is typically taken out on 25-35 year terms.
|
|
Bridging Loan |
Home Loans |
|---|---|---|
|
Purpose |
Helps pay the down payment of your new property while waiting for the sales proceeds from your old home |
Used to buy a new property or refinance your property at a lower rate. |
|
Loan Amount |
Banks: Up to 75% of LTV Licensed Moneylenders: Up to six times monthly income |
HDB Concessionary Loans: max. LTV of 85% to 80% For banks: max. TV of 75% |
|
Interest Rates |
Banks: 5% to 6% p.a., depending on the bank Licensed Moneylender: 1-4% per month |
Around 3.75% (floating rate, as of 1 March 2023) |
|
Repayment Period |
Banks: Typically up to 6 months to 2 years Licensed Moneylenders: one month or until the property’s completion date |
30 years for HDB flats 35 years for non-HDB properties |
|
Loan Processing Time |
Banks: Up to two weeks Licensed Moneylenders: Within the day |
A few weeks to a couple of months |
|
Flexibility in Terms of Repayment |
Banks: Depends on the bank’s existing policies Licensed Moneylenders: Offers custom-tailored bridge loans to suit your needs |
Depends on the bank’s existing policies |
Bridge Loan: Best for Raising Funds For Property Purchase
A bridging loan will help you raise capital for your next property purchase while you wait for your old home to sell. While waiting for the sale proceeds, the loan amount can be used for the downpayment and other expenses related to the new property purchase. In Singapore, some banks offer bridging loans to existing home loan clients.
Two types of bridging loans in Singapore:
- Capitalised interest bridging loan wherein repayments commence after you sell your old home.
- Simultaneous repayment bridging loan wherein you will repay your home loan and your bridging loan simultaneously.
Note: Only banks offer these bridging loan options; licensed money lenders in Singapore do not.
Features
|
|
Banks |
Licensed Moneylenders |
|---|---|---|
|
Loan Amount |
Up to 75% of LTV |
Up to six times monthly income |
|
Bridging loan Interest rates |
5% to 6% p.a., depending on the bank |
1-4% per month |
|
Repayment Period |
Typically up to 6 months to 2 years |
One month or until the property’s completion date |
When Should You Get a Bridging Loan?
- Timing gap between property sale and purchase so you will not come short of a certain financial issue to meet the purchase requirements
- You must make a down payment on your new home before selling your old one.
- You found a property you want to buy at a property auction and need to pay quickly to close the transaction.
Pros and cons
Pros:
Banks
- Promotional bridge loan interest rates for existing home loan borrowers.
- You have the option to repay the bridge loan when you receive the sales proceeds of your property.
Licensed Moneylenders
- Quick cash – receive the lump sum amount within 24 hours.
- Flexible repayment terms to suit your financial situation.
- Easy application process
Cons:
- High-interest rates: Bridging loans often come with higher interest rates than traditional loans, such as personal loans
- Additional fees: Bridging loans may come with additional fees, such as processing fees, legal fees, and early repayment penalties
- Short loan tenure
- Risk of default
Things To Consider Before Getting a Bridging Loan
- Repayment terms
- Interest rates
- Eligibility criteria
- Fees and charges
- Loan amount
- Consultation with a loan advisor or financial consultant
Top Bridging Loans in Singapore
|
|
Property Type |
Interest Rate |
Loan Amount |
Loan Tenure |
|---|---|---|---|---|
|
DBS Bridging Loan |
All property types |
Up to 75% LTV |
Pegged to prime Rate 4.25% p.a. |
Up to 6 months |
|
Maybank |
HDB |
Up to 75% LTV |
4% to 5% p.a. |
Up to 6 months |
|
Standard Chartered HDB Bridging Loan |
HDB |
Up to 75% LTV |
3 months SIBOR plus 2% annual interest |
Up to 6 months |
|
Licensed Moneylenders |
All property types |
Up to 6x your monthly income |
1%-4% per month |
One month or until the property’s completion date |
Applying for a Bridging Loan in Singapore
From Banks:
Eligibility:
- Singapore Citizens, Permanent Residents, or Foreigners who are selling their property
- Must be at least 21 years old
Documents:
- NRIC (for SCs and PRs)
- Passport (for foreigners)
- HDB flat and financial information
- Option to Purchase (OTP)
- Valuation reports
- Letter of Offer
- Proof of Income: CPF statements, latest payslips
- Outstanding bank loan statements
From Licensed Money Lenders
Eligibility
- Must be at least 21 years old
- Minimum income requirement: S$2,000
Documents
- Identity card / NRIC
- Proof of residence (utility bill, a letter addressed to you and/or tenancy agreement)
- Proof of employment (certificate of employment or recent 3 months payslip)
- SingPass (To log into CPF, HDB, IRAS website)
- Copy of the “Option To Purchase” (OTP)
Home Loans: Best for Financing a Property Purchase
A home loan is the most popular form of financing when you want to buy a new property. It is a long-term financing option, typically a 25 to 35-year loan tenure, for purchasing HDB flats or non-HDB properties.
Borrowers with good credit histories can have access to lower interest rates. Additionally, home loans typically have lower interest rates than bridging loans.
Features
|
Loan Amount |
HDB Concessionary Loans: max. LTV of 85% to 80% For banks: max. TV of 75% |
|---|---|
|
Interest Rates |
Around 3.75% (floating rate, as of 1 March 2023) |
|
Repayment Period |
30 years for HDB flats 35 years for non-HDB properties |
Pros and Cons
Pros:
- Lower interest rates
- Longer loan tenure
- No requirement to sell your current property
Cons
- You’ll need to pay the downpayment in cash
- Longer loan processing time
When Should You Consider a Home Loan
- Purchasing a new property
- Home construction
- Home improvement
- Property refinancing
Top Fixed Home Loans For HDB Flats
|
|
(First Year) Interest Rate |
Lock-in period |
|---|---|---|
|
DBS |
4.25% p.a. |
2 years |
|
Citibank |
3.65% p.a. |
2 years |
|
HSBC |
4.25% p.a. |
2 years |
|
OCBC |
4.3% p.a. |
2 years |
Top Floating Home Loans For HDB Flats
|
|
(First Year) Interest Rate |
Lock-in period |
|---|---|---|
|
DBS CPF Home Rate |
2.50% + 0.10% p.a. |
3 years |
|
Citibank 3M SORA |
2.67% + 0.65% p.a. |
2 years |
|
UOB 3M SORA |
2.67% + 0.70% p.a. |
2 years |
|
OCBC Eco-Care Home Loan (3M SORA) |
2.67% + 0.98% p.a. |
Not specified |
Read on to learn more about the difference between fixed and floating home loan
Applying for a Home Loan in Singapore
HDB and different banks in Singapore have their own eligibility criteria, including:
- Minimum monthly income
- Buyer’s minimum and maximum age
- Residency status
- Fulfillment of the Monetary Authority of Singapore’s property loan rules and HDB’s or the bank’s internal credit requirements
If you’re planning to take a home loan from HDB, check out the full eligibility conditions here.
Things To Consider Before Getting a Home Loan
- Household income
- Interest rates
- Repayment terms
- Fees and charges
- Loan amount
- Consultation with a loan advisor or financial consultant
So Which is Better?
A Home Loan May Be a Better Option If:
- You’re buying your first property
- You need to borrow a larger amount of money for a longer period of time, such as for home construction or home renovation
- You are comfortable using your home as collateral
- You are looking for lower interest rates
A Bridging Loan May Be a Better Option If:
- You are in the process of selling your existing property and need a short-term loan to finance the purchase of your new property
- You need flexibility in terms of the repayment period
- You are looking for a loan that may not require collateral
- You are comfortable with higher interest rates
The Best Option for You Will Depend On:
- Your financial situation
- Your repayment ability
- The purpose of the loan
It is advisable to consult with a loan advisor or financial consultant to help you understand the terms and conditions of each loan type and determine the best option for your specific needs.
Conclusion
Bridging loans and home loans can help finance your new property transaction. Both loans use your property as collateral so it is best not to miss repayments or default on the loan as you may risk losing your property.
Key takeaways:
- While waiting for the sale proceeds, use the bridging loan proceeds for the downpayment and other expenses related to the new property transaction
- A home loan will help you buy a new property at a much longer loan tenure and lower interest rates compared to bridging loans.
- You can take out a bridging loan with a licensed money lender at attractive rates and receive the loan amount within 24 hours.
Quickly and easily compare the best bridging loan packages from the top licensed moneylenders with Loan Advisor. Offering up-to-date, bias-free information, you can find the best rates and loan terms with a tap of a button. Request up to 3 loan quotes today at no cost and no obligation to apply!
