Home Loan 101: 4 Mistakes to Avoid



Planning to finance a new property purchase? Or looking to refinance a mortgage? To maintain a healthy credit score, you will want to avoid certain home loan mistakes at all costs that might risk qualification problems for that brand new mortgage down the road.

You could end up getting declined, or with a higher-than-necessary mortgage rate that results in you paying more than initially intended.

What are the home loan mistakes you should avoid?

1. Taking out other loans before you apply for a home loan

Your financial history and outstanding debt will be evaluated thoroughly by the bank. This means that your Total Debt Servicing Ratio (TDSR) should ideally not exceed 60% of your income. Otherwise, you will be risking tipping over the TDSR with other loans before applying for a home loan.

2. Trusting a friend’s recommendation blindly

Your friend might mean well by recommending the “best” home loan deal from months ago, but it will by no means guarantee the same for you. Earn the benefits of asking our friendly Mortgage Specialist for the best home loan interest rates available for free!


3. Failing to shop around

It is a deadly mistake to go along with a bank just because it pre-approves you, especially if it has a high interest rate. Instead, you will benefit from shopping around and seeking pre-approval from multiple banks, while keeping in mind that you can expect to borrow a similar amount across banks typically.

But shopping around is tedious, isn’t it? That’s why we have our in-house mortgage broker to do all the legwork for you. He will do the ‘shopping around’ for the best home loan rate across all banks suitable to your needs.

4. Choosing Internal Board Rate (IBR) loans

With not much transparency going on, IBR loans means the home loan interest fluctuates based on the bank’s internal decisions. In this case, you would fork out the interest rate decided by the bank, which is generally not visible to the public, and regulated only by the bank in question. Despite the lack of transparency, the Board rate packages are sometimes recommended only if they are competitive. But ideally, you want to choose other options such as the Singapore Interbank Offered Rate (SIBOR) based loan, that are not subjected to the banks’ discretion and provide more transparency.

Don’t let the excitement of taking out a new home loan for your new place rush you in without the proper planning in place. When you apply for a home loan, always make sure to keep an eye on the interest rates before and during the home loan process. Want to secure the best loan package across all banks? Call 6886 9009 and talk to our mortgage specialist. Learn more about Ohmyhome’s free mortgage advisory service, where we can value add by advising on the several types of packages pegged to Sibor, board rate, Fixed deposit, Fixed rate and more based on your individual needs.

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