You will compare four loan options on the cost that matters: total interest over the lock-in and the full tenure.
Farah and Hakim now had four options for their S$427,000 loan: an HDB loan and three bank packages. Each lesson in this module had compared two of them on one point. Hakim wanted the cheapest. Farah wanted to know cheapest over what, and what would happen if rates rose. This exercise answers both, in one sheet, for any four loans you're considering. Allow about 35 minutes.
All rates and fees below are invented for the example. Use current quotes from banks or a broker, and the current HDB loan rate from the HDB website.
Make one row per option and these columns: name, rate in each year of the lock-in, rate after the lock-in, lock-in length, penalty, subsidies, clawback period, and any fees you would pay to take it.
Farah and Hakim's four rows:
HDB loan: an example 2.8% a year throughout, no lock-in, no subsidy Package A: 2.50% fixed for two years, then SORA plus 1.00%, which is 3.40% at an invented SORA of 2.40%; two-year lock-in; S$2,000 legal subsidy clawed back within three years Package B: SORA plus 0.30%, which is 2.70% today; two-year lock-in; no subsidy Package C: 2.35% fixed for three years, then SORA plus 1.20%, which is 3.60% today; three-year lock-in; no subsidy
Legal and valuation fees that would be the same for every option can be left out, since they don't change the ranking. Fees that differ go in.
For each option, build a small schedule with one row per year. At the start of each year, calculate the instalment with PMT, using that year's rate, the months remaining and the balance at the start of the year. Then work out the interest paid in the year and the balance at the end. A month-by-month version is more exact, but yearly rows with the rate changing at the right year are close enough for ranking.
Recalculating PMT each year matters for packages whose rate changes. When Package A moves from 2.50% to 3.40% in year three, its instalment rises from S$1,915.59 to about S$2,100. That jump is the reason to model the rate after the lock-in at all.
Then add two totals for each option: interest over the first three years, and interest over the full 25 years if you kept it to the end.
Farah and Hakim's totals, with the invented rates:
Over three years, the HDB loan came to about S$34,382 of interest. Package A came to about S$34,230, or S$32,230 after its subsidy. Package B came to about S$33,136, if SORA stayed where it was. Package C came to about S$28,782.
Over 25 years, if they never switched, the HDB loan came to about S$167,223. Package A came to about S$198,655, Package B to about S$160,666, and Package C to about S$203,045.
Now add the column that tests your choice. Assume the benchmark rises one percentage point after each package's fixed period, or from year three for the floating package, and recalculate.
With that rise, Package A's 25-year interest rose to about S$258,445, Package B's to about S$218,237 and Package C's to about S$258,341. The HDB loan stayed at about S$167,223 in the example, because its rate follows the CPF rate rather than SORA. That isn't a promise that it will never change, but it has moved far less than market rates.
The numbers give different winners depending on the question. Over three years, Package C is cheapest by about S$3,450. Over 25 years with no switching, Package B is cheapest if rates hold. With rates one point higher, the HDB loan wins by tens of thousands.
So the ranking depends on two things: how long you'll keep the loan before acting, and what rates do. Write both conditions down beside your choice.
Farah and Hakim chose Package C. Their reasoning, written under the table: "We will reprice or refinance when the lock-in ends, so the three-year cost matters most, and C is cheapest over three years. We accept that we give up the HDB loan for good, as lesson 5.1, HDB loan or bank loan, warned. If the rate offered to us at the end of year three is more than about half a point above the current HDB rate, we will compare every option again before signing."
That last sentence is their switch trigger, and it goes into the watchlist they'll build in lesson 8.5, Build your home plan and five-year watchlist.
A different couple, with less cash, more worry about rates or no wish to watch the market, could look at the same table and choose the HDB loan, and be right to. The table doesn't decide. It shows what each choice costs under each condition.
A finished sheet has four options with every rate, fee, subsidy and clawback on one row each, a yearly schedule behind each, three totals per option, and two short paragraphs: the option you would take, and the change in rates or plans that would make you switch. Build yours with current quotes or published rates in the activity below.
Build the comparison with current quotes or published rates and write which option you would take and the rate change that would make you switch.
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