How to negotiate for a lower mortgage rate in Singapore?

You might think that finding the best home loan rates in Singapore is a simple matter of calling the banks and asking; or perhaps just using a comparison site. In reality, you’re not likely to get the best deal that way.

The key thing to understand is that, most of the time, banks don’t state their best rates upfront. 

The market for home loans is very competitive especially during periods where mortgage rates are going down, and mortgage bankers also have quotas to meet. This can be tough, given that there’s little difference between bank loans other than the interest rate. So to meet those quotas, mortgage bankers are given a bit of leeway to disburse cheaper loans. 

You just need to convince them to give you those lower rates. 

How do you even start negotiating your home loan rate with the bank?

Firstly, it is important to understand that there are different types of housing loan rates in Singapore and choosing the right home loan interest rate type is the key before getting the bank to give you a lower mortgage rate.

That being said, sadly, it’s not as simple as picking up a phone and just asking “can it be cheaper?” over and over again. You need to build up some leverage (pun intended), to convince the bank to give you a better deal. 

Some ways to do this are:

1. Demonstrate willingness to do more business with the bank
2. Subtly remind them you can also take your business to a competitor
3. Apply for a home loan with other family members
4. Become a privilege or priority banking customer
5. Show them you’re reliable 
6. Use the other banks’ offers 
7. Press for other home loan perks, if they won’t budge on the rate
8. Use your job and the organisation you work for

1. Demonstrate willingness to do more business with the bank

Banks are always after two things from the average customer: deposits (so they have more money to lend out or invest), and fees (the more they move your money around, the more service fees they can charge).

If you can bring this to the table, the bank may be willing to sweeten the deal and lower their rates. One example of this is agreeing to take up a fixed deposit with the bank (e.g. agreeing to put down $100,000 over the fixed deposit period, instead of parking it in some other competing product).

Another way is to open more savings or current accounts with the bank. For example, if you credit your income to another bank, you could switch this over to them instead.

Here’s a bonus tip: say that not only you, but your spouse, in-laws, and children will all switch over to the bank; the bank stands to gain multiple accounts at once (if those people agree of course). 

2. Subtly remind them you can also take your business to a competitor

If you’ve had the same bank for years, why can’t they reward you for being a loyal customer? 

Point out that you’ve kept your savings account with them, despite some other banks having better bonus tiers, cashback, etc. You can also point out that you have existing fixed deposits with them, or – if you own a business – that you’ve always used their SME credit lines or business accounts.

Given all the business you do with them, they should be willing to give you a better rate for your housing loan in Singapore.

If you want to push harder, you can subtly hint that you might take your business elsewhere, should they disappoint you.

3. Apply for a mortgage at the same time with other family members to a specific bank

It is no secret that bundle deals make sense for both a business and benefits the customer.

Banks are no different and chances are that if you apply for a mortgage to a specific bank and are able to have your family members either refinance or get a new mortgage from the same bank, you might be able to secure a very favourable package.

The key point to note for executing this well is to ensure that there is a clear familial link (having groups of friends applying doesn’t really interest the bank).

Having family members getting a mortgage from the same bank increases the chances of more products – think insurance, investments, credit cards etc being taken up by different individuals within the same family and increases loyalty to the bank. Nothing sells better than a family bond!

4. Become a privilege or priority banking customer

This is the time to put that 200k that you have lying around in your bank account (lucky you!) to good use.

Being a priority or privileged banking customer of a bank ensures that you secure a lower mortgage rate than what is publicly available as you hold the promise of letting the bank use your deposits to earn interest generating revenue (taking your 200k and giving it out as other types of loans to earn interest).

Of course, there are certain requirements to qualify for a priority or privilege banking client which generally consists of having cash deposits ranging from 200k to 250k with the bank, having an annual income of more than 120k and holding investment products over 150k with the bank.

Any of these methods or a combination of all puts you in a good position to get a discount of anywhere from 0.10% to 0.20% in your housing loan interest rate.

Before you think, “Huh!?, so little??”, consider that annual interest savings by just 0.10% on a 1 million loan comes up to roughly 1k and with a loan tenure of 30 years, that leaves you with 30k in your pocket instead of with the bank.

5. Show them you’re AA credit worthy and a reliable borrower

One of the bank’s chief concerns, when it comes to home loans, is your creditworthiness. It’s rather a big risk for a bank to disburse million-dollar loans to regular Singaporeans.

As such, many banks are alright with earning a little less interest, if it means securing a customer who is a proven low-risk borrower.

So point out that you have an AA credit score, or that you’ve never missed a payment before. Produce your various credit card or personal loan repayment records, to show that you’re the kind of borrower they want. You can also point out your sizeable savings, or low amount of debt.

(Note that you would need to bring your documentation to the bank branch, if you’re going to bargain this way. There’s no point claiming all of this over the phone!)

6. Use the other banks’ offers

This is the oldest bargaining tactic in the book, and one almost every Singaporean is familiar with:

Point out that a competitor is cheaper.

To do this, you’ll need to research various banks with the cheapest home loans, until you find one that really does have a lower rate. Then, you can request that the bank at least match this rate.

This tactic is best used in conjunction with the other methods above. For example, tell the mortgage banker that:

• I do a lot of business with your bank
• I can take my business elsewhere
• I am a low-risk prospect, and hence…

You should just match the lower rate, and both of us will win.

7. Press for other home loan perks, if they won’t budge on the rate

If the bank won’t lower its rates for your home loan in Singapore, you can still negotiate for other perks as a last resort. For example, you can ask that the bank help to absorb some of the costs, such as the conveyancing fees, or any valuation fees that might be needed.

You can also ask for features such as free conversions (repricing). This would mean that, if the same bank later offers a better housing loan package, you can switch to that package at no cost.

But don’t bother asking for things like airline tickets or shopping vouchers. This was possible a long time ago, but such perks are no longer allowed as they’re a form of inducement.

8. Using your job and the organisation you work for

Not really in your control but hey if you happen to have a position like any of the below:

• Lawyer
• Doctor
• C – Suite in an MNC (MD, CFO, CEO)
• Statutory board in Singapore

Congratulations, you are regarded as a less risky mortgage customer to the bank.

Apart from the detailed background checks that you go through for any of those positions, there are also ongoing reviews for credit health as well litigation history to ensure that your profile is squeaky clean.

That gives the bank the assurance and allows them to dedicate a lower risk profile when underwriting your mortgage during the application process. Having a lower risk profile means the bank is more likely to give you a better interest rate if you ask for it.

Despite your best efforts, it’s not always possible to get a lower rate this way

But given that you stand to save hundreds of dollars a month, it is worth at least trying to bargain. Remember that every bit of interest you pay eats into your capital gains, when you eventually resell your house.

It is also somewhat free to bargain – there’s a cost in time and effort to do so. As such, you may want to consider getting the help of a home loan specialist.

The home loan specialist doesn’t charge you anything, and they can drive a harder bargain than the average borrower. Not only are they familiar with the bankers, they also provide hundreds of mortgage applications to the banks, which gives them more bargaining power to get you the lowest housing loan rates.