7 Factors to Check When Comparing Home Loan Rates (2026)

Buying a home is a significant life transition. It’s also one of the largest financial commitments you’ll make. As such, many Singaporeans compare home loan rates in Singapore to ensure they’re making the best financial decision.

However, when it comes to comparing home loan rates, there’s more to the decision than just looking at the advertised interest rate.

Though these advertised rates make marketing simple, home loans are anything but straightforward. We’ve outlined a guide to help you identify what to look for beyond these attractive rates, so you can make the best decision for your situation and timeline.

Key Takeaways

• Look Beyond the Advertised Rate: The “advertised rate” is only a starting point. Your real cost depends on your all-in Total Cost of Borrowing, which includes interest and fees such as legal, valuation, processing/admin charges, and sometimes insurance-related costs (e.g., fire insurance premiums).
• EIR is the Gold Standard: Use the Effective Interest Rate (EIR) to perform an “apples-to-apples” comparison of different bank offers, as it reflects upfront fees that may not be obvious from the headline rate.
• Loan Size Isn’t Everything: A higher loan amount does not necessarily translate to better negotiating power—especially when market interest rates are already relatively competitive. Focus on the overall package terms and total cost instead.
• SORA Helps You Understand Floating Rates: Many floating packages are pegged to SORA, a transparent, transaction-based benchmark. Your total payable rate will still depend on the bank’s spread and the package terms.
• Plan Your Exit Strategy: Always check for “Waiver on Sale” and “Free Conversion” clauses to ensure you can sell your home or switch rates without incurring significant early-exit penalties, which are often around 1.5% of the outstanding loan amount (subject to the loan’s terms).
• Local vs Foreign Banks: Don’t assume local banks are automatically “better.” Banks operating in Singapore are licensed and regulated by MAS, and foreign banks here operate as Singapore entities subject to local requirements—so compare based on the package terms, fees, and service.

Advertised Rate vs. Total Cost of Borrowing

When you are comparing home loans, the bank will often highlight one headline figure first—the Advertised Rate. But when you review the final paperwork, the actual financial impact is the total cost of borrowing, which can be significantly higher than what you expected to pay.

If a bank says “1.5% p.a.”, that is your advertised rate. All extra costs required to obtain the loan (legal fees, valuation fees, administrative fees) are not reflected on the bank’s website or in its advertising.

This advertised rate is meant to keep the bank’s services simple and attractive.

The Total Cost of Borrowing represents the overall cost you incur over the life of the loan. In addition to interest, it includes upfront fees and charges—and these can vary by bank and by the law firms on the bank’s panel—such as:

• Upfront fees
• Legal conveyancing fees and property valuation fees.
• Any penalties you might incur (e.g., full redemption before the lock-in period ends)

When you compare home loan rates in Singapore, it helps to look beyond the advertised rate and dig deeper.

Our guide outlines these additional fees, as well as other factors to consider, when deciding on your home loan.

Seven Factors To Look At When You Compare Home Loan Rates in Singapore

The complexities and fine print of home loans can be best summarised through the seven factors below:

Item 1: Interest Rate vs. Effective Interest Rate

The Interest Rate is the percentage the bank uses to calculate your monthly interest expense based on your outstanding loan balance.

If your loan is $500,000 and the rate is 1.5%, the bank calculates your monthly interest as:

($500,000 x 0.015) / 12 = $625.

When people see a 1.5% interest rate, they assume they’ll pay a monthly interest payment of $625. But this is usually only the starting point. In reality, borrowers may pay more than just this $625.

The Effective Interest Rate (EIR), on the other hand, represents the actual economic cost of the loan. It is the standardised rate that allows you to compare different loans.

The EIR accounts for administrative, processing, and legal fees as “prepaid interest.” Even if the interest rate is 0%, an admin fee makes the EIR positive.

So, let’s say the advertised interest rate is 1.5%. However, there’s a $5,000 processing fee included with that service. In that case, the EIR might be 1.8%.

That’s why it’s worth asking the bank for the EIR—so you can compare different packages on an apples-to-apples basis.

Item 2: Fixed vs. Floating Home Loan

A fixed-rate loan is a contract in which the interest rate remains the same for a set period (usually 2 to 3 years).

Regardless of what happens to the economy or the housing market, your monthly instalment is locked at a fixed rate (for better or worse)

Fixed interest rates will be displayed as “1.5%” and be explicitly labelled “fixed”.

A floating home loan, on the other hand, is a variable rate. It varies with market conditions. This means it can be higher or lower than what you’d pay on a fixed rate.

Floating home loans will be displayed like this:

“1M SORA + bank spread”

SORA is the Singapore Overnight Rate Average—an industry benchmark that is calculated as the volume-weighted average rate of actual borrowing transactions in the unsecured overnight interbank SGD cash market in Singapore.

You may also see “1M” or “3M” before it (often written as “1M/3M Compounded SORA”). This typically refers to the compounded SORA benchmark used for the interest period, rather than a simple “refresh” of the overnight SORA rate.

The bank spread, on the other hand, is the bank’s profit margin. So, if the 1M SORA is at 1.4%, and the bank’s spread is at 0.8%, your floating home loan’s total interest is 2.2%.

Item 3: Lock-In Period

A lock-in period is essentially a commitment period with the bank. It is a specific timeframe—usually between 1 and 5 years—during which you are contractually obligated to keep your loan with that specific lender.

The lock-in period applies to your loan in the following ways:

• Fully paying your loan off before the lock-in period ends results in penalties. This is because the bank forgoes potential interest charges when you pay off your loan in full.
• Refinancing your loan with another bank before the lock-in period ends may incur exit penalties.
• Paying your loan in full or refinancing your loan with another bank forfeits the subsidies or incentives you are given. This is commonly done through a subsidy clawback (explained below).

Understanding your lock-in period will allow you to plan your finances accordingly.

Item 4: Subsidy Clawback

A subsidy clawback is a penalty that prompts you to return the upfront subsidies the bank provided if you close or switch your loan too early.

While a lock-in period penalizes you with a percentage of the outstanding loan amount, a clawback is the bank simply saying, “We covered certain upfront costs (e.g., legal and valuation) on the condition that you stay for a minimum period. If you leave early, you’ll need to repay those costs.”

If a bank advertises a “subsidy,” check the terms to confirm whether a subsidy clawback applies, and how it is calculated.

Item 5: Free Conversion

Normally, if you want to switch from a floating rate to a fixed rate (or vice versa) within the same bank, they charge an administrative fee.

A Free Conversion clause allows you to switch your current loan package to another one offered by the same bank without paying the standard conversion fee.

Some banks also offer free repricing within the lock-in period (switching to another package within the same bank without repricing fees), so check whether your package includes this and how many times it applies.

You’ll see a number next to FC, usually FC24 or FC36.

• FC24 (Free Conversion at Month 24): This means that after you have stayed with the bank for 24 months, you are granted one free switch to any other internal interest rate package.
• FC36 (Free Conversion at Month 36): This is the same concept, but you must wait 36 months before the fee is waived.

Item 6: Penalties for Early Repayment

Sometimes, there comes a point in a person’s or family’s life when their financial situation improves and they are in a position to fully repay the loan.

However, depending on the bank, it may not be in the best interest of these accounts to fully pay off their loans early. Paying off a loan early means the bank forgoes potential interest payments, which is why they have lock-in periods.

The penalties for early repayment are as follows:

• The Prepayment (Early Redemption) Penalty. Because you are ending the loan during the lock-in period, the bank may charge a fee based on your outstanding loan balance (often expressed as a percentage).
• The Subsidy Clawback. If your bank provided subsidies (e.g., support for legal and valuation fees), you may be required to repay them if you leave within the lock-in period.
• Interest in Lieu of Notice. You must provide a formal Redemption Notice (typically 2 to 3 months) if you intend to repay a loan in full. If you want to close the loan immediately before the notice period ends, the bank may charge interest in lieu of notice. For example, if your monthly interest is $1,200 and you give zero notice on a 3-month requirement, you would owe $3,600 in interest in lieu of notice.
• Also check partial prepayment terms: Some packages allow free partial prepayment (up to a stated limit) without penalty, which can reduce interest costs if you expect bonuses or lump-sum savings.

Some banks and packages may have no penalty for early redemption after certain conditions are met (for example, after the lock-in period ends), which can be preferable. So always confirm the penalties and conditions for early redemption before committing.

Item 7: Waiver On Sale

A “Waiver of Prepayment Penalty due to Sale” is a clause that may override the bank’s right to charge a standard early redemption penalty when you fully redeem (close) your loan during the lock-in period because you are selling the property. Depending on the bank’s terms, a subsidy clawback may still apply even if the prepayment penalty is waived.

Without a “Waiver on Sale,” redeeming your loan during the lock-in period may trigger an early redemption penalty.

To apply the waiver, the bank typically requires documentary proof of the sale and change of ownership, such as:

• Signed Option to Purchase (OTP): Proof the OTP has been signed and the option fee has been paid.
• Exercise of Option: Proof that the buyer has exercised the option (often communicated via the conveyancing lawyer).
• Sales & Purchase Agreement: The formal legal contract for the transfer of the property title.

Note: If you are transferring the property to a spouse or family member (e.g., decoupling), the bank may not consider this a “sale,” even if money changes hands.

If you’re buying and selling property, look for banks that provide a waiver on sale feature as part of the loan package.

Why You Should Consider These Seven Factors

Navigating the Singapore mortgage market in 2026 requires more than just a calculator; it requires a clear understanding of the full package terms. While a 0.1% difference in the Advertised Rate might seem like a small detail, failing to account for these seven factors can lead to thousands of dollars in additional costs.

By looking at the Total Cost of Borrowing and understanding clauses like Free Conversions or Waiver on Sale, you protect your financial future in three ways:

• Cash Flow Protection: Ensuring your monthly instalments remain manageable even if market benchmarks like SORA fluctuate.
• Operational Flexibility: Giving yourself an option to refinance or sell if your plans change, without incurring unnecessary penalties.
• Meaningful Comparison: Looking beyond marketing headlines to see which bank is actually offering the better deal once subsidies, clawbacks, and fees are considered.

Ultimately, the best home loan isn’t just the one with the lowest rate today—it’s the one that aligns with your life plans for the next three to five years.

Apply with Dollarback Mortgage Today!

Don’t leave your biggest financial commitment to chance. At Dollarback Mortgage, we strip away the jargon and provide you with a transparent, side-by-side comparison of the latest 2026 home loan rates from all major banks in Singapore. 

Whether you are a first-time buyer looking for the stability of a fixed rate or a seasoned investor seeking the best SORA-pegged floating deal, our specialists are here to guide you.

Our service to you is 100% free. We handle the heavy lifting—from calculating your TDSR/MSR eligibility to managing the paperwork with the banks—so you can focus on what matters most: your new home.

Frequently Asked Questions

Can I use my CPF Ordinary Account (OA) to pay for home loan legal and valuation fees?

Yes, for most residential properties, you can use your CPF OA savings to pay for the legal fees and stamp duties incurred during the purchase. Valuation and other administrative fees may be payable upfront depending on the transaction and the appointed professionals, so it’s best to confirm the exact payable items with your lawyer and/or the bank.

What happens if the SORA rate becomes negative?

Many bank letters of offer in 2026 include a “floor” clause. This means that if SORA drops below zero, the benchmark rate will be considered 0%, and you will still be required to pay the bank’s spread (e.g., if the rate is 3M SORA + 0.8%, you would pay 0.8%). Always check the specific floor and calculation method stated in your letter of offer.

Is it possible to switch from a bank loan back to an HDB concessionary loan?

No. Once you have refinanced your HDB flat with a private bank, you cannot switch back to an HDB concessionary loan. The move is permanent, so it is vital to compare long-term costs before making the switch.

What is a “Bridging Loan” and when would I need one?

A bridging loan is a short-term loan (usually up to 6 months) that covers the down payment of your new home while you wait for the sales proceeds from your existing property. It “bridges” the financial gap during the transition between two homes.

What is the difference between “Repricing” and “Refinancing”?

Repricing is switching to a new loan package within your current bank, which is often faster and cheaper in terms of legal fees. Refinancing involves moving your loan to a different bank to secure a better rate, which usually involves higher upfront costs.

How do “Stress Test” interest rates affect my loan application?

When calculating your TDSR (55%) and MSR (30%), banks do not use the current market rate. They are required to use a stress-test rate (4% or the prevailing rate, whichever is higher) to ensure you can still afford the property even if interest rates rise significantly in the future.

Get the best home loan in Singapore across all major banks and compare mortgage rates with the highest rewards.