What Is Mortgage Loan?
A mortgage is a loan in which property or real estate is used as collateral. The borrower enters into an agreement with the lender (usually a bank) wherein the borrower receives cash upfront then makes payments over a set time span until he pays back the lender in full.
Different Rate Packages
Fixed – A constant rate maintained over the lock in period, usually ranging from 1 – 5 years. Safe and not affected by the market. Upon expiry, the fixed rate will become a floating one. Floating – A variable interest rate that changes over the duration of the debt obligation. It may or may not have a lock in period
- Board rate – An interest rate that is determined internally and solely by the bank. The bank usually adds in a spread
- Fixed Deposit – Pegged to the bank’s fixed deposit rate, plus the bank’s spread.
- SIBOR – (or Singapore Interbank Offered Rates) A reference rate based on the interest rates used by banks in Singapore when lending unsecured funds to each other, revised daily. The package usually consists of Sibor + a bank determined spread.
- SORA – Compounded SORA rates are backward-looking overnight rates, thought to offer more stability than forward-looking term rates commonly used for floating packages, such as SIBOR. This rate is likely to replace SIBOR in the near future as forward-looking term rates are more exposed to market factors on a single day’s fixing, such as quarter or year-end volatility. SORA will avoid market fragmentation, facilitate transparency and easier comparison of loan pricing, and promote the development of deep and efficient SGD financial markets.