One of the most basic human needs is shelter. And a good percentage of individuals in Singapore get to the point of owning their own properties.
Along the way, you may want to upgrade and buy a new property, but you do not have the funds. Getting a bridging loan in Singapore helps homeowners wanting a property upgrade to get the capital they need to clear any late payment fees for the next property purchase.
While you await the sale proceeds, this bridging loan acts as a down payment. It also covers any other expenses linked to the new property transaction.
What is a Bridging Loan?
A bridging loan is a loan that property owners use to buy and sell properties even when they do not have the finances to clear the new property since some cash is tied to the old property. Even if you are still awaiting the proceeds from the sale of your current home, a bridging loan provides you with the funds you require for your next home purchase.
Types of Bridging Loan
There are two main types of bridging loans in Singapore.
1. Capitalised Interest Bridging Loan
A capitalised interest bridging loan is one in which the bank pays the entire amount of your new property. You will start clearing the outstanding bank loan statements as a mortgage once you entirely sell your existing property.
This is the ideal route to go if you do not want to carry out two loan repayments at the same time.
2. Simultaneous repayment Bridging Loan
Simultaneous payment bridging loan is when you are paying both home loans simultaneously: the new home and the bridging loan. You usually have 12 months to sell the existing home and start with the loan payment.
What Is the Interest Rate For A Bridging Loan?
Banks’ bridging loans in Singapore usually come with interest rates within the range of 5% to 6% p.a. These rates may be steep compared to certain personal loans in Singapore. However, the best thing about them is that the tenure period is always shorter.
The interest rate offered by money lenders for the best Singapore bridging loan is up to 4% per month.
For instance, the proper property valuation may be at $1 000 000 000, but at the end of a standard bridging loan, you pay a total calculated per month on the standing balance. The extra money on top is the interest amount typically given as a percentage calculated against time and installments.
Bridging loan interest rates on a longer tenure means you pay lower monthly installments, but a higher total interest paid. But with a short-term loan (as in bridging loans given by money lenders), you pay higher monthly installments but a total interest paid by the end of the property purchase. But it is worth it if you do not want to be tied to paying a loan for years.
Best Bridging Loan in Singapore
Most major banks in Singapore that offer home loans also offer HDB bridging loans. Take a look at the table below:
|Loan Provider||Standard Chartered Bank HDB Bridging Loan||DBS Bridging Loan||OCBC Home Loan||UOB HDB Home Loan||Maybank HDB Home Loan||Fortune Credit (Licensed Moneylender)|
|Property type||HDB||All property types||Home||HDB||HDB||All property types|
|Tenure||6 months||Up to 6 months||Up to 6 months||At least 6 months||At least 6 months||Up to 1 month or up to when the old property is sold|
|Interest Rate||3M SIBOR + 2.00% p.a.||Prime Rate||1.55% p.a.||4% to 5% p.a.||1.4% to 1.6% p.a.||1 to 4% per month|
DBS, OCBC, UOB, SC, and Maybank offer a tenure of up to 6 months. However, they differ in interest rates and the property types in which you can use the bridging loans.
Licensed moneylenders in Singapore also offer financial products such as bridging loan packages for the same purpose.
Some insights that make getting a bridging loan from a money lender better than getting one from a bank in Singapore are:
- Faster loan processing time.
- Shorter loan tenure.
- You do not need the perfect credit score to qualify for a loan.
- You do not have to place collateral for the loan.
Pros and Cons of a Bridging Loan
Here are some advantages and disadvantages of using a bridge loan to acquire commercial or private property.
- It has flexible bridge loan requirements, mostly by moneylenders
- It has a short processing period
- You get the entire loan amount upon approval
- Higher interest loans compared to banks
- You have a shorter loan tenure to pay
- Late repayments incur late fees
Tips When Applying for a Bridging Loan
If you want your bridging loans to get approved, follow the following tips.
- Ensure that you are eligible to get a bridging loan. Permanent residents, Singapore citizens, and foreigners may qualify.
- Ensure you have all the documentation required.
- Decide on the types of bridging loans you can comfortably repay.
- Factor in extra expenses in your loan borrowing budget.
- Ensure you pay all your fees on time to mitigate any late payment fees.
- Check your credit report from the Credit Bureau Singapore, as a bad credit may deter you from getting a bridging loan from banks.
Applying for a Bridging Loan
In Singapore, foreigners, permanent residents, and citizens wanting to get a new property can acquire a bridging loan from a bank or a money lending company.
Even so, there is specific documentation needed for the process. For both money lenders and banks, you will need the Option to Purchase (OTP) document, which shows your right to sell that property to a potential buyer.
The main similarities and differences in eligibility when borrowing from a moneylender or a bank are as follows:
|Collateral||You need collateral. (it is a secured loan)||You do not need collateral. (It is an unsecured loan.)|
|Age||21 years and above||18 and above|
|Credit score||High credit rating/good credit score||Your credit score is not required|
|Who is eligible||Singapore citizens, permanent residents, and foreigners.||Singapore citizens, permanent residents, and foreigners.|
|Income cap||Proof you can pay the loan using past salary payslips.||$1,500 for Singaporeans and $2,000 for foreigners|
|Loan processing time||Within a week||Same day|
1. Does HSBC offer bridging loans?
If they have already secured the mortgage for your current home, HSBC does provide private property bridging loans. If the opposite is true, or if you’re looking for a commercial bridging loan, you should research the alternate solution lending market.
2. Which banks offer bridging loans?
Some banks offering bridging loans are DBS, Standard Chartered, UOB, and Maybank.
3. Is there an alternative to a bridging loan?
When you’re running a business and need money to keep it going, there are two types of loans that might be helpful. Business loan options include longer repayment periods while personal financing offers shorter durations.
Business loans can come in handy if your company has been doing well enough for some time now but needs help getting through an emergency situation or major setback.
|Business Loan||Personal Loan|
Bridge loans are a great way to upgrade your existing property or acquire another one. Money lenders are better than banks. The only thing you must ensure is that the moneylender is licensed.
- The “Big 3” banking giants–DBS, UOB, and OCBC–all offer bridging loans. This means you can get the best rates from either of these banks.
- The money lender’s requirements for a bridging loan are better than banks because the loan processing time is brief, and you do not need collateral.
- Most money lenders have flexible and negotiable requirements, unlike stringent bank rules. For instance, money lenders do not require a credit score, and you can get a loan with a low minimum income.
Finding a trustworthy loan provider in Singapore can be challenging, given the city’s over a hundred licensed moneylenders. You can feel secure knowing that Fortune Credit has your best interests in mind. Our loan officer will respond to your request for a free quote.