Financing your mortgage may present you with a whole new dilemma as well. There are many different types of mortgage packages available in the market for you today, but your decision on which package to take on ultimately hinges on one factor: your risk appetite. Here are the two most common types of mortgage packages in the market as of today:
(i) Floating Rate Mortgage
Floating interest rates are pegged to a separate, reference rate. These are usually indexes, such as the Singapore Interbank Offered Rate (SIBOR) or the fixed deposit home rates with a spread. Examples of the latter include the DBS FHR Loan where their interest rates are pegged to the average of the 12-month and 24-month fixed deposit rates, for deposits ranging from $5,000 to $9,999. If you’re someone who’s able to take risks and ride through fluctuating interest rates or have strong sentiments and forecast about future interest rates, the floating rate might be for you.
(ii) Fixed Rate Mortgage
If you’re more risk-averse and prefer to know exactly what the interest rate is for your monthly payments, the fixed rate mortgage might be for you. Fixed rate mortgages feature a fixed interest rate for a certain, specified time period. After which, it will become a floating rate loan. However, do note that fixed rate mortgages usually have lock-in periods with possible prepayment penalties.