Home Loan Terms and Conditions You Must Know in Singapore (2026)
The home loan terms that cost money in 2026: SORA and spreads, lock-in and prepayment penalties, clawbacks, fees and bank rights, with worked examples.
How we made this. Updated for 2026 with AI-assisted research. Figures are linked to their sources — check them before you act.
Two home loans with the same headline rate can cost very different amounts. The difference sits in the small print: what the rate is pegged to, how long you are locked in, what you pay to leave, and what the bank can change. This guide explains the terms that matter in a Singapore letter of offer in October 2026. It replaces an older list that was built around SIBOR and SOR. Both benchmarks are gone.
At a glance
- Floating packages are pegged to SORA now, usually the 1-month or 3-month compounded rate, plus a spread. SIBOR and SOR no longer exist.
- A lock-in of about two years with a 1.5% prepayment penalty is common. On a S$800,000 loan, leaving early costs S$12,000.
- The first-year rate is not the cost of the loan. Spreads often rise after year one, so ask for the effective interest rate (EIR).
- Free legal and valuation subsidies usually come with a clawback of two to three years.
- Your bank must give you a Residential Property Loan Fact Sheet. Read it before the letter of offer.
1. Reference rate and spread
A bank loan has two parts: a reference rate and a spread. The banks’ association (ABS) says the reference rate can be a bank-set “board rate” or an interbank rate such as compounded SORA. The spread is a discount or a premium on that rate.
| Old term (2010s) | What it means now |
|---|---|
| SIBOR, SOR | Discontinued. Replaced by compounded SORA. |
| Board rate | Still used by some packages. The bank sets it. |
| Fixed rate | Fixed for the first years, then floating. |
| Spread | Usually a premium over SORA (for example SORA + 0.25%), and it may change each year. |
SORA is published by MAS. In early October 2026 the 3-month compounded rate was about 1.2%, according to MAS data as reported by HousingLoanSG. After the US Federal Reserve raised rates on 16 September 2026, floating packages moved to about 1.5–1.8% and fixed packages to about 2.0–2.2% (Business Times, 2 October 2026). For how SORA works and how it compares with a fixed rate, read our SORA guide.
2. When the rate resets
The SORA tenor sets how often your instalment changes. PropertyNet describes 1-month SORA as monthly repricing, more responsive, and 3-month SORA as quarterly repricing, more stable. Neither is “better”. A shorter tenor follows the market faster, in both directions.
Some other points from ABS:
- Floor rate. Some packages set a minimum rate. It stays in force even if SORA falls.
- Notice of changes. Banks must tell you at least 30 days before they change a bank-set reference rate. That notice period does not apply to loans pegged to an external rate like compounded SORA on pre-agreed dates, or to the year-to-year spread changes written into your letter of offer.
- Fixed means fixed. Your bank must not change a component that the package states as fixed, for the fixed period.
3. The spread schedule and the EIR
Many packages start cheap and rise. ABS gives this example of a S$500,000 loan over 30 years, where the reference rate is 5% a year:
| Year | Rate |
|---|---|
| 1 | Reference rate minus 3% = 2% |
| 2 | Reference rate minus 2% = 3% |
| 3 | Reference rate minus 1% = 4% |
| 4 onwards | Reference rate = 5% |
The loan is advertised at “2%”. The effective interest rate (EIR) over 30 years is 4.62% a year, according to ABS (we recomputed it: that is the yearly equivalent of about 4.52% compounded monthly). The EIR is the single number that lets you compare packages with different schedules and tenures. You can ask the bank for the EIR for the whole loan, and also for the lock-in period only, because you may switch after the lock-in. Today’s packages are priced much lower. The lesson is the same: compare the rate in year three and later, not only year one.
4. Lock-in period and prepayment penalty
The lock-in (also called the commitment period) is the time when fees apply if you repay all or part of the loan, or refinance. The older version of this article said lock-ins range from 1 to 3 years, with penalties of 0.75% to 2%. The current norm, according to PropertyNet (4 September 2026), is that most packages have a two-year lock-in with a 1.5% prepayment penalty. DBS, for example, charges 1.5% of the amount repaid during its lock-in. Check your own letter of offer.
Example. Say you borrow S$800,000 and refinance in month 18, inside a two-year lock-in. At 1.5%, the penalty is S$12,000. If you prepay S$100,000 of the loan in the lock-in and the penalty applies to partial prepayments, it is S$1,500. Some packages have no lock-in and a slightly higher rate. That can be cheaper if you may sell soon. Our how to choose a mortgage guide shows a way to compare.
Notice. ABS says you must give one month’s notice for a partial prepayment and two months for full repayment. If you do not, the bank may charge a penalty. Banks usually set a minimum prepayment amount, with further prepayments in multiples of S$1,000.
5. Subsidies and clawbacks
Banks may offer a legal fee subsidy, a valuation fee subsidy, a cash rebate or free fire insurance for a limited time. These sweeteners come with two catches.
- Clawback. You may have to repay some or all of the benefits if you repay the whole loan within a stated period. PropertyNet says subsidies are usually clawed back if you refinance again within two to three years.
- Smaller loans. For loans below S$500,000, most banks do not fully subsidise legal and valuation fees. PropertyNet puts them at about S$2,000 to S$3,000 in total.
Example. Say a bank pays your S$3,000 of legal and valuation costs with a three-year clawback. You refinance after 18 months to save S$150 a month. The saving over those 18 months is S$2,700, but you must repay the subsidy. The clawback is the number you should add to the cost of switching. Our refinancing guide shows the full break-even maths.
If you receive any discount, rebate or voucher from a developer or seller, you must declare it. The bank deducts it from the price when it sets your loan.
6. Fees you may meet
ABS lists the usual charges. Ask the bank for its schedule of fees and charges.
- Processing the loan application, and cancellation if you accept the offer and then do not take the loan.
- Late payment, changing the tenure and restructuring the loan.
- Refinancing or repricing during the lock-in, and prepayment during it.
- Safekeeping of title deeds, loan statements and other documents.
- Using an insurer other than the one your bank recommends.
- Legal work when you take the loan and when you discharge the mortgage, and valuation of the property.
The older version of this article put cancellation fees at 0.5% to 2% and conversion fees at S$500 to S$5,000. Today’s fees differ by bank. DBS, for example, charges 0.75% of the undisbursed loan if you reject the loan after accepting the letter of offer, and lets you switch package free at the end of a fixed-rate period. Ask for your bank’s figures in writing.
7. Insurance the bank requires
Your bank will need fire insurance on the property for the whole loan term, or, for some private apartments, a Mortgagee Interest Policy. You do not need both. You can choose your own insurer, but the bank may charge an annual administration fee if you do not use its recommended one. Life cover is different. For an HDB flat, the Home Protection Scheme is compulsory if CPF pays your instalment, and for private homes, MRTA is optional. See our guide to mortgage loan insurance.
8. What the bank may do
Read the clauses that give the bank rights. ABS flags these:
- Right of review. The bank may revise terms in extraordinary or unforeseen circumstances. If the clause is in your letter, the bank must tell you when it can use it, and give at least 30 days’ written notice.
- Joint and several liability. If you borrow with others, the bank can claim the whole balance from any one of you.
- Default. The bank can recall the loan, charge a higher rate, repossess and sell the property, and bring bankruptcy proceedings if the sale does not cover the debt.
- Negative equity. The bank may act if the property is worth less than the loan.
A checklist before you sign
- Ask for the Residential Property Loan Fact Sheet. Banks must give you one.
- Find the reference rate and spread for each year, and the EIR.
- Note the lock-in length, penalty and notice period, for full and partial repayment.
- Note the clawback period on any subsidy.
- Check the fees list and whether a repricing fee applies.
- Read the right-of-review and default clauses.
- Test your budget at 4%, the rate banks use in the TDSR stress test. Use our mortgage calculator.
Bottom line
A home loan is a rate plus a set of conditions. Compare the EIR, the lock-in and penalty, and the clawback, not just the first-year rate. Ask for every figure in writing, and remember that a bank can change some terms but not the ones it calls fixed. Spend an hour on the fine print before you sign. It is cheaper than a penalty.
Sources
- Home loan fees and charges — DBS, accessed 2 Oct 2026
- Housing loans: key questions to ask the bank — Association of Banks in Singapore, updated Aug 2026
- Latest bank mortgage loan rates across Singapore — PropertyNet, 4 Sep 2026
- Singapore mortgage rates rise following Fed hike — Business Times, 2 Oct 2026
- 3-month compounded SORA, 1 Oct 2026 — MAS data, as reported by HousingLoanSG
- Protecting against losing your home (Home Protection Scheme) — CPF Board, updated 18 Mar 2026