Finding a new home for your growing family is an exciting but expensive move. In Singapore, buying a new home will require high initial down payment costs. A bridging loan could be a convenient option if your existing home is yet to be sold.
Bridging loans are offered by the government, banks, and other private financial institutions. Depending on the bank, you can get these loans at interest rates of five to six percent per annum. Alternatively, you can get bridging loans from licensed moneylenders at competitive monthly interest rates between one to four percent.
Upgrading your property soon need not be a hassle with the right financial tool. Read through to know your bridging loan options and compare interests from Singapore’s top providers.
Best Bridging Loans in Singapore 2023
Bridge loans are ideal for covering expenses while awaiting long-term financing. Here are some of the best bridging loan offers in Singapore’s market.
1. DBS Bridging Loan
DBS Bridging loan is designed to tide you over your new home purchase while waiting for the sales proceeds from your old home. DBS and POSB customers have a better advantage and will benefit from a quick loan application.
DBS’ bridging loan features an interest-only loan period of up to six months. You must make a full payment at the end of the loan term.
Features
- Can be used for all property types
- Fast and easy online application
- Pegged at a 4.25% interest rate
2. Standard Chartered’s HDB Bridging Loan
Standard Chartered’s HDB Bridging Loan can help you bridge the financial gap between buying and selling your property. This loan is available only to second-time buyers of HDB flats and has a maximum loan term of six months.
Features
- No processing fees
- Hassle-free online application
- Competitive interest rates of 3-months SIBOR plus 2% p.a.
3. Maybank’s HDB Home Loan
Maybank’s HDB home loan packages are among the most competitive offers in the market. It offers flexible packages at either fixed or floating rates, depending on your preference. Moreover, you can get up to 75% financing and smoothly proceed with your goals.
Features
- Low interest rates of 1.3 to 1.6%
- Pre-payment flexibility
- Easy application with Singpass
4. UOB HDB Home Loan
UOB HDB Home Loans is another competitive product that offers fixed and floating rates and a combination of both. These packages are designed to give property buyers more savings. This loan is available only to borrowers with no other existing property loans.
Features
- Flexible interest rates (3-month compounded SORA/fixed-rate/or combination of both)
- Free package conversion after the lock-in period
- Same-day approval for qualified borrowers
5. Alternative Option: Licensed Moneylenders
Bridge loans from licensed moneylenders can be among the cheapest and most convenient options for securing quick cash in Singapore. Homebuyers can use the funds to get excellent property deals that are up for a limited time only. It can also be used to renovate your existing home and quickly put it up for sale at an increased value.
Features
- Flexible repayment period (one month or until the property is completed)
- Large sums of up to six times your monthly salary
- Low-interest rates between 1 to 4% monthly
Singapore’s Top Bridging Loans: At a Glance
| Bridging Loan | Type of Property | Bridging Loan Amount | Interest | Tenure |
|---|---|---|---|---|
| DBS Bridging Loan | All property types | Up to 75% LTV | Prime Rate4.25% p.a. | Up to 6 months |
| Standard Chartered’s HDB Bridging Loan | HDB | Up to 75% LTV | 3 months SIBOR plus 2% annual interest | Up to 6 months |
| Maybank HDB Home Loan | HDB | Up to 75% LTV | 1.33% to 1.60% | 2 to 5 years |
| UOB HDB Home Loan | HDB | Up to 75% LTV | 4% to 5% | Up to 6 months |
| Licensed Moneylenders | For any property type | Up to six months your monthly salary | 1% to 4% monthly | One month or until the property’s completion date |
Typically, you need to make full payment of your bridge loan once you receive the sales proceeds of your old property. Thus, you should have a good estimate of this time to choose the bank that offers the loan tenure that will fit your needs. If you think the transaction will go beyond six months, choose a more flexible loan term like Maybank’s offer.
Licensed moneylenders can also be an excellent alternative. They allow a longer repayment period and you can choose to pay up until the property transaction’s completion date.
Bridge Loans: Key Considerations
A bridge loan is a financial tool that should be carefully understood due to the high risks and its complexity. Below are some key factors to consider:
Loan Amount
The loanable amount for a bridge loan depends on property value and creditworthiness factors. Often, they come in large sums and are used as working capital and pay for the required initial costs for your property purchase.
With banks, you can get up to 75% of the property’s loan-to-value amount. Meanwhile, you can get up to six times your monthly income if you choose to borrow from a licensed moneylender.
Interest Rates
Bridge loans come with higher interest due to their high risks and short-term nature. Still, interest rates are crucial since it affects a borrower’s overall budget.
Bridging loan interest rates vary between lenders. With banks, the rates may also depend on factors such as the borrower’s financial standing and credit score. Meanwhile, licensed moneylenders do not rely on credit score and impose a rate between 1 to 4% per month.
Monthly Repayments
A bridge loan that is taken from a bank is secured against your property, so you need to choose a monthly repayment that you can handle. Defaulting on your payment will cause you to lose your hard-earned property, and you don’t want this to happen.
Estimate your net sales proceeds accurately to avoid a lack of funds to pay for balances. So, plan carefully and use a bridging loan calculator to get accurate costs on expected monthly loan repayments.
You can choose to take a bridge loan from a moneylender as their bridge loans are unsecured.
Tenure
The loan tenure is another crucial factor in choosing a bridge loan option. Bridge loans are typically short-term loans. Thus, borrowers need an accurate estimate of how long it will take to complete the property sale.
Most banks usually offer terms between one to six months. Licensed moneylenders offer a more flexible period wherein borrowers may pay anywhere from one month or until the property’s completion date.
Applying for a Bridging Loan
Lenders need to assess several things when deciding whether your application will be approved. But even before your application is considered, you must be eligible and submit the required documents.
For Banks
Banks provide easy access to bridge loans to qualified applicants. Yet, while bridge loans are secured loans, banks still consider credit scores as one factor to approve. Most banks will also require tedious documentation.
Eligibility
- Singapore Citizens and Permanent Residents who are in the process of selling their current property
- Must be at least 21 years old
- Must have proof of the sale of existing property
Requirements
- Option to Purchase
- Latest CPF withdrawal statements
- Bank loan balances
For Moneylenders
Licensed moneylenders are a convenient alternative to getting bridge loans. Aside from the more relaxed credit checking, they also offer competitive packages to suit your home bridging needs.
Eligibility
- Minimum monthly income of:
- S$2,000 (for Singapore Citizens and Permanent Residents)
- Must be at least 21 years old
- Must exercise the Option to Purchase (OTP)
Requirements
- NRIC/proof of identification
- Proof of Income/Employment (recent payslips)
- Proof of Residence (utility bill or mailed letter addressed to the borrower)
- Copy of OTP
FAQs on Bridge Loans
1. What are Other Alternatives to Bridging Loans?
Depending on your needs and preferences, you can choose cheaper alternatives like HELOCs, personal loans, a second mortgage, or a bridging loan from licensed moneylenders. These loans have lower interest rates and more extended repayment periods.
- HELOCs – These loans are also secured against your assets. It works like a credit card where you can get funds as needed.
- Personal Loan – You can either opt to get one from a bank or a licensed moneylender. Banks may offer up to ten times your monthly income, while with moneylenders, you can get up to six times.
- Second Mortgage – Also called cash-out refinancing, this loan allows you to secure cash by borrowing against your property’s value for the second time.
- Bridging Loans from Licensed Money Lenders – No credit score is required and is best for borrowers who are looking for fast cash up to six times your monthly income.
2. What are the types of bridging loans in Singapore?
There are two types of bridging loans in Singapore – capitalised interest bridging loan and simultaneous repayment bridging loan. Both types are offered only by banks.
- Capitalised interest – The bank pays for the entire purchase of the new home. You will only pay for the mortgage once the sales transaction is completed.
- Simultaneous repayment – You will be paying two loans at the same time – the home loan and the bridging loan.
5. Does HDB offer bridging loans?
HDB does not offer a bridging loan at the moment. However, they allow borrowers to take a second mortgage on your HDB flat.
4. Can use CPF to pay the bridging loan?
Yes. Your CPF savings are immediately refunded after the property sales. You can use this to pay for the bridging loan, except for the interest which needs to be paid in cash.
Closing
Make sure that you have a clear understanding of how a bridge loan works before taking out one. When used correctly, it can be an ideal tool for achieving your goals. It is always a good idea to consult a financial advisor to make sure that you get the right fit for your needs.
Key Takeaways:
- Bridge loans can be used to capitalize on excellent property deals quickly.
- Borrowers should weigh the benefits and risks involved with bridging loans.
- Bridge loans also allow you to sell your property at a better price.
- Licensed moneylenders are your best bet if you want a faster approval of unsecured bridging loans.
Considering a bridging loan? 1 Fullerton Credit, a reliable and trusted moneylender in Singapore, offers fast loan application approvals and quick cash disbursements. Get a bridging loan up to 6x your monthly income with a repayment period up to your property’s completion date. Fill up a quick form to get your free loan quote today.
