By Winfred Quek · CEA R073319H · Published 28 October 2026
Facts verified: 28 October 2026 · Sources listed below
Two home loan offers can both say "1.7% in year one" and still cost very different amounts by the time you sell or refinance. The headline rate is one line of a package that also has a reference rate, a rate schedule, a lock in, a possible clawback of subsidies, and rules on prepayment. This page gives you a worksheet to put those lines side by side, and a worked comparison of three hypothetical packages that shows how the cheapest looking rate can end up the dearest. No bank names or real offers are used. For live bank rate tables, use our mortgage rate comparison tool, and for the general landscape see the bank mortgage rates guide. This is general information, not advice on which loan to take.
Start with the documents the bank must give you
The Association of Banks in Singapore (ABS) guide to housing loans says that when you approach a bank about a housing loan, the bank must provide a Residential Property Loan Fact Sheet. It sets out the key features and shows what possible interest rate increases would do to your monthly instalments. The guide also says to rely on the official written documents, such as the fact sheet and the letter of offer, and to read the fine print on rates, fees and benefits like a legal subsidy.
Source: Association of Banks in Singapore, What You Should Know About Housing Loans: Key Questions to Ask the Bank Before Taking a Housing Loan (file marked updated August 2026), checked 28 October 2026. https://abs.org.sg/docs/library/home-loan-%28english%29-%28updated-august-2026%29.pdf
The comparison worksheet
Ask each bank for the same items, and fill one column per package. The ABS guide lists these among the features to compare: the reference rate the interest is benchmarked against, the lock in period and fees (especially penalties for partial and early prepayment), cancellation fees, any mandatory insurance, and subsidies for valuation, legal and conveyancing fees or cash rebates.
| Item to fill in | Package 1 | Package 2 | Package 3 |
|---|---|---|---|
| Rate in year 1, year 2, year 3 and after | |||
| Fixed or floating, and for how long | |||
| Reference rate (3 month compounded SORA, or a bank board rate) | |||
| Spread over the reference rate, and floor rate if any | |||
| Lock in length and the penalty if you exit inside it | |||
| Legal or valuation subsidy, or cash rebate | |||
| Clawback window and amount | |||
| Partial prepayment: notice, minimum, fee | |||
| Effective interest rate for the full tenure and for the lock in only |
The reference rate: what it is and today's value
A floating package is a reference rate plus or minus a spread. The reference rate may be a publicly available rate such as Compounded SORA, or a rate set by the bank, such as a fixed deposit board rate. The ABS guide notes that a rate like Compounded SORA reflects economic conditions rather than the actions of a single bank, whereas a board rate is determined by factors the bank sets and can differ between banks and between packages of the same bank. It also notes that a floor rate, if the package has one, is the minimum rate you pay even if the reference rate falls below it.
As a reference point, the MAS Domestic Interest Rates table showed the 3 month Compounded SORA at 1.2671% for 26 October 2026, the latest value in the table when I checked on 28 October 2026. This rises and falls over time, so use the current figure on the day you compare. This page makes no forecast.
Source: MAS, Domestic Interest Rates, 3 month Compounded SORA, checked 28 October 2026. https://eservices.mas.gov.sg/statistics/dir/DomesticInterestRates.aspx
For how fixed and floating packages differ in everyday terms, see fixed versus floating mortgages and SORA explained.
Lock in, clawback and prepayment, as general features
- Lock in. The ABS guide says banks may impose penalties or fees if you settle the loan in full, or prepay, before the lock in or commitment period ends. See our lock in guide.
- Clawback of subsidies. The guide refers to a bank subsidies clawback period, which can run separately from the lock in, and suggests reviewing your loan after both have ended. See legal subsidy and cashback packages explained.
- Prepayment. The guide says you must inform the bank in advance, one month for a partial prepayment and two months for full repayment, and that banks typically require a minimum prepayment amount with further prepayments in multiples of $1,000. See partial prepayment rules.
- Effective interest rate (EIR). The guide describes the EIR as a common denominator for comparing packages with different rates and tenures, and says you can ask for the EIR over the lock in period only.
Worked comparison: three hypothetical packages
Everything in this section is hypothetical. The packages do not belong to any bank. I assumed a $1,000,000 loan over 30 years with monthly reducing interest, and held the 3 month compounded SORA flat at 1.2671% purely to keep the arithmetic clean. That is not a forecast. The question is how much each package costs if you exit by refinancing at month 30 or month 60.
| Hypothetical package | Year 1 | Year 2 | Year 3 onward | Lock in and penalty | Legal subsidy and clawback |
|---|---|---|---|---|---|
| A: fixed 2 years | 2.10% | 2.10% | SORA + 0.65% = 1.92% | 2 years, 1.5% of balance | $2,500, clawed back if exit within 3 years |
| B: floating, no lock in | SORA + 0.75% = 2.02% | 2.02% | 2.02% | None | None |
| C: low start floating | SORA + 0.45% = 1.72% | SORA + 0.60% = 1.87% | SORA + 0.75% = 2.02% | 3 years, 1.5% of balance | $2,800, clawed back if exit within 3 years |
The 1.5% penalty and the clawback terms are assumed for illustration. Your letter of offer states the real ones. Net cost below means interest paid, plus any exit penalty, minus the subsidy you keep (a clawed back subsidy counts as zero kept).
| Exit by refinancing at | Package | Interest paid | Exit penalty | Subsidy kept | Net cost |
|---|---|---|---|---|---|
| Month 30 | A | $50,089 | $0 | $0 | $50,089 |
| Month 30 | B | $48,924 | $0 | $0 | $48,924 |
| Month 30 | C | $44,458 | $14,041 | $0 | $58,499 |
| Month 60 | A | $93,530 | $0 | $2,500 | $91,030 |
| Month 60 | B | $94,633 | $0 | $0 | $94,633 |
| Month 60 | C | $90,083 | $0 | $2,800 | $87,283 |
Source: author's calculation using the assumed packages above and the MAS 3 month Compounded SORA of 1.2671% (26 October 2026).
Three things to take from this. Package C has the lowest rate in year one and year two, yet at month 30 it costs about $9,600 more than package B, because the exit falls inside its assumed lock in and clawback window. At month 60, with the lock in behind you, C is the cheapest of the three. And the answer depends on when you leave, which is why the worksheet asks for your likely holding period before anything else.
A rate stress check (not a forecast)
To see how much of the result rests on the reference rate, the same packages were rerun with the 3 month compounded SORA 1 percentage point higher for the whole period. Package A is fixed for its first two years, so it moves less.
| Net cost with SORA 1 point higher | A | B | C |
|---|---|---|---|
| Exit at month 30 | $54,829 | $73,511 | $83,190 |
| Exit at month 60 | $118,871 | $142,857 | $135,445 |
The ranking changes, which is the point: a comparison on today's rate alone says little about a package whose rate floats. Whether to accept that exposure is a personal decision, and the ABS guide recommends factoring in that interest rates may increase over the term of the loan. For a broker's role in gathering packages, see mortgage broker versus going direct.
Before you sign
- Write down how long you expect to hold the loan before you read any rate.
- Fill the worksheet from the fact sheet and letter of offer, not from advertisements.
- Ask for the EIR for the whole tenure and for the lock in only.
- Check the notice you must give before a partial or full prepayment.
- Confirm in writing any subsidy you must declare or may have to repay.
Frequently asked questions
What should I compare in a home loan besides the interest rate?
Compare the reference rate and spread, how the rate changes by year, the lock in period and penalty, any legal or valuation subsidy and its clawback window, partial prepayment notice and fees, and the effective interest rate. The Association of Banks in Singapore guide lists these among the features to compare, and the bank must give you a Residential Property Loan Fact Sheet.
What is the 3 month compounded SORA now?
The MAS Domestic Interest Rates table showed 1.2671% for 26 October 2026, the latest value when checked on 28 October 2026. It changes over time, so check the MAS page on the day you compare packages.
How can a package with the lowest rate cost the most?
If you exit inside its lock in or clawback window, the penalty and repaid subsidy can outweigh the interest saved. In the hypothetical comparison on this page, the package with the lowest early rates cost about $9,600 more than a no lock in package at month 30, but was the cheapest at month 60. The figures are assumed, not real offers.
What is the effective interest rate on a home loan?
The Association of Banks in Singapore guide describes it as the cost of interest expressed on an annual basis over the loan tenure, which lets you compare packages with different rates and tenures. You can ask your bank for the EIR over the full tenure and over the lock in period only.
Want your own loan offers laid side by side?
Share the packages you have been offered and how long you expect to hold the loan, and Winfred will help you set them out on the same worksheet so the real differences show. General information only.
Ask Winfred on WhatsApp Book a free 30 minute callWinfred Quek, CEA R073319H, Crestbrick Pte Ltd (L3010886H). General information as at 28 October 2026, not legal, financial, tax or property advice. Figures are from MAS and the Association of Banks in Singapore and may change. The package comparison uses hypothetical figures and names no bank. This page makes no rate forecast.