Bridging finance is a powerful financial tool used by many homebuyers and property developers in Singapore. Using it correctly allows you to transition smoothly between real estate transactions and secure great property deals.
Depending on the bank, the average interest rate of bridge loans is around five to six percent per annum. For licensed moneylenders, monthly interest rates hover around one to four percent. Bridging loans also have fast approvals. Thus, making bridging loans an ideal solution for the required cash while waiting for the sales proceeds of your current property.
This guide will help you understand better how a bridge loan works and compare the latest rates from top home bridge loan providers in Singapore.
Best Bridging Loans in Singapore 2023
Bridge loans are a fast way to solve short-term monetary constraints like pledging for a new home’s down payment. They are best for homeowners who are sure that sales proceeds will be available within the set loan term, usually a short period of six months. If you are confident that a bridge loan is what you need, here are some of the best offers.
1. DBS Bridging Loan
DBS’ Bridging Loan is for all types of private property purchases. It is designed to help homebuyers pay for the downpayment of their next property purchase while waiting for the sale of their old property. During the loan period, you will only need to repay the interest. Once the sales proceeds become available, you will be paying the balance in full.
Key Features:
- No lock-in period
- With a prime rate of 4.25% (for residential properties)
- Loan tenure: Up to six months only
2. Standard Chartered’s HDB Bridging Loan
Like DBS Bridging Loan, this loan is also designed to help homebuyers pay for the downpayment of a new home while waiting for sales proceeds. However, this loan is available only for HDB flat buyers, except for first-time buyers. Similarly, it also comes with a maximum loan tenure of six months.
Key Features:
- Competitive rates at three months SIBOR plus 2% per annum
- No processing fees
- Fast and hassle-free application
3. UOB HDB Home Loan
With UOB’s HDB Home Loan, you can secure a second HDB flat or a property upgrade while enjoying more significant savings. However, this loan is not applicable for borrowers with other existing property loans, including equity term loans.
Key Features:
- Flexible repayment options and interest rates (3-month compounded SORA/fixed-rate/or combination of both)
- Free fire insurance
- Same-day approval for qualified borrowers
4. Maybank HDB Home Loan
Maybank’s home loan packages for HDB property purchases are flexible and offer competitive interest rates. They offer HDB Home Loans at fixed-rate and floating-rate packages. These loans are best for homebuyers who are looking for low first-year interests. Note, however, that these interests will rise after the lock-in period.
Key Features:
- Low-interest rates of 1.33 to 1.60% for the first two years
- Hassle-free online application
- Pre-payment flexibility
5. Alternative Option: Licensed Moneylenders
Licensed moneylenders could also be an ideal alternative for bridging loans. These loans are available to eligible Singapore Citizens and Permanent Residents. Bridge loans are less risky with moneylenders as your property is not secured as a collateral.
Key Features:
- Low-interest rates between 1 to 4% per month
- Fast loan application approvals and disbursement of cash
- Can be paid from one month to until the property is completed
At a Glance
| 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 |
| UOB HDB Home Loan | HDB | Up to 75% LTV | 4% to 5% | Up to 6 months |
| Maybank HDB Home Loan | HDB | Up to 75% LTV | 1.33% to 1.60% | 2 to 5 years |
| Licensed Moneylenders | Can be used to finance all property types | Up to six months your monthly salary | 1% to 4% monthly | One month or until the property’s completion date |
Choosing a short term loan like a bridge loan ultimately depends on your current circumstances and preference. If you are certain that you are going to close the deal within six months, then you may choose packages that offer a maximum tenure of six months. Otherwise, Maybank’s attractive HDB loan packages could also be a good choice.
Licensed moneylenders can also be an excellent alternative. Aside from the less tedious credit check, they offer high loan amounts of up to six times your monthly income. Moreover, they offer a flexible tenure from one month or until the property’s completion date.
Factors to Consider When Applying for a Bridging Loan
Bridge loans may be a handy option to obtain fast cash for down payment purposes. But, you should understand the risks and implications that may come with it. Here are some factors to look at:
- Loan amount
If you are borrowing from the bank, the loan amount cap will depend on the property value and other factors like loan-to-value ratio and capacity to pay. On the other hand, you may also borrow from a licensed moneylender and get up to 6 times of your monthly income.
- Interest Rate
Bridging loan interest commonly ranges between 5-6%, while licensed moneylenders charge an interest rate of 1-4% per month. Choose a financial institution that offers fair rates and no hidden charges.
- Monthly Repayments
Paying your mortgage repayments diligently is essential when getting secured loans like bridge loans. By doing this, you’ll be able to secure your property and save on penalties and avoid incurring higher interests.
- Tenure
Choose a loan tenure that you can financially commit to. To avoid unnecessary inconvenience, choose a lender that offers flexible and extended tenure offers. Licensed lenders can give you up to a month or until the property’s completion date, while most banks offer up to 6 months.
Applying for a Bridging Loan
Bridging loans are an excellent financial tool to secure your dream home. Still, banks and other financial institutions have varying criteria and will also check your creditworthiness. Check your options here:
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Banks
While banks offer bridging loans that have excellent features and attractive rates, they also run tedious documentation and credit checks before granting these loans. Borrowers with good credit scores and debt-to-income ratios have better chances of being approved.
Eligibility
- Singapore Citizens/Permanent Residents who are in the process of selling their property
Requirements
- Option To Purchase (OTP)
- CPF withdrawal statements
- Bank loan statements
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Moneylenders
Licensed moneylenders are a great alternative for borrowers with a short credit history or those with poor credit scores. Getting a bridging loan from them is also a good way to build your credit scores and get better loan offers in the future.
Eligibility
- Should be at least 21 years old
- Must exercise the Option to Purchase (OTP)
- Minimum income of S$1,500
Requirements
- Singpass (to log in to CPF, IRAS, and HDB websites)
- NRIC
- Proof of Income/Employment(COE or recent payslips)
- Proof of Residence (can be a utility bill, or a mailed letter addressed to the borrower)
- Copy of exercised OTP
Most Frequently Asked Questions on Bridging Loans
- Can I use my CPF to pay for my bridging loan?
Yes. Your CPF savings are refunded right after the sale of your existing home is completed. You can immediately use these funds to repay your bridging loan. However, for interest and other fees, you have to pay cash.
- Does HDB provide bridge loans?
No. But you can get attractive bridging loan packages from various banks and licensed moneylenders in Singapore.
You can also get a second mortgage from HDB if it’s your second time to purchase a flat. This loan will factor in your CPF and sales proceeds. Wherein, you will get the concessionary rate if you use the cash proceeds to pay your housing loan.
- What are the types of bridging loans offered by banks in Singapore?
There are two types of bridging loans that banks offer. These are the capitalised interest bridging loan and the simultaneous repayment bridging loan.
With the capitalised interest bridging loan, the bank pays the entire cost of the new property. Your monthly loan repayment will start as soon as the sales of the old house or the property transaction is completed.
On the other hand, with a simultaneous repayment bridging loan, you will have to pay two loans in tandem – the home loan and the bridging loan.
- What are the best alternatives to a bridging loan?
Below are some cheaper alternatives to bridging loans:
- HELOC
A HELOC works like a credit card and may provide access to a credit line on an as-needed basis. With HELOCs, interests are only charged on the borrowed amount. The lower the amount you borrow, the lower the interests are.
This alternative works best for borrowers who are looking for access to a relatively lower amount to borrow and are looking for a longer repayment term.
- Personal Loans
Personal loans, whether from a bank or a licensed moneylender, often have longer loan tenure than a bridge loan. And because it has a more extended tenure, the monthly repayments are also easier to handle.
Banks offer up to ten times your monthly income, while moneylenders offer up to six months, payable up to twelve months.
- Bridging Loans from Licensed Moneylenders
Banks have a stricter approval process for granting bridging loans. As such, you can opt to apply for a bridging loan from licensed moneylenders.
They can offer up to a maximum amount of S$200,000, depending on your monthly income. Moreover, they offer a flexible loan tenure where you can pay up until the property’s completion date.
Closing
Bridging loans are a great financial alternative to help borrowers meet urgent real-estate needs. However, it is a complex tool that needs careful understanding. Make sure you have weighed all the benefits and drawbacks before plunging into a decision. You may also consult a financial advisor to help you find the right fit.
Key Takeaways
- Bridging loans are not for everyone and significantly depends on one’s financial and economic circumstances.
- Bridge loans allow you to buy your new home without delay.
- Licensed moneylenders are an easier alternative to avail of bridge loans.
Looking for a customized loan plan for an immediate boost in business cash flow? Bugis Credit, a licensed and reliable moneylender, offers competitive loan plans at low-interest rates. Visit our office today to check your best options, or apply online and get a free loan quote without commitment.
