Fixed Rate Housing Loans

Fixed rate housing loans are the most traditional type of housing loan that a bank can offer. Its feature is just like its name, meaning that the rate that you are being offered is fixed.

Fixed for how long? Generally, as a rule of thumb, the longer you fix your loan, the higher interest rate you will be charged. When interest rates are low, it makes much sense to lock into that rate for a couple of years. Having a fixed rate home loan has its benefits. You do not have to worry about fluctuating interest rates. You do not have to bother about writing in to CPF to adjust your monthly payment just because the interest rate shot up.

Fixed rate is especially suitable for those who want to be sure and certain of the future. Some of the clients that I have worked with needs to have a grasp of the future so they can do the precise calculation on how much they have to fork out for a certain period. For these types of people, the financial security of having a fixed set of payment over a certain period greatly outweighs what other types of mortgages offers.

At any point in time, fixed rate home loans will have higher interest than floating rate home loans. If you are planning to stay in your house for a long period of time, a fixed rate housing loan is pretty sensible to you. Your kind of job plays an important factor in determining if a fixed rate is for you. If you work in a relatively safe job and are looking forward to a promotion every one to three years, it makes sense to go for a fixed rate housing loan as well. With the increase in your paycheck, the burden of paying off a fixed rate housing loan gets smaller each year.

A fixed rate housing loan is also suitable for a person who is going to retire soon. Unless you have a lot of cash waiting for you, retirement requires careful planning. To ensure your finances do not deviate too far from your planning, it is better to fix your rates and know the exact amount of installment to work with every month. It is no joke missing out on your installments when you are in your retirement age. You risk having the bank foreclosing on your house and even if you declare bankrupt, it is pretty useless too. A housing loan does not get wiped out when you declare as a bankrupt.

Some people do not mind paying slightly more on their monthly installment as long as they have the certainty of having a set payment. If you feel you belong to these group of people, consider a fixed rate housing loan.

Zeng Han Jun is the Business Financial Manager of Chan & Partners Consulting Group. He actively contributes articles about business and finance on a weekly basis, so as to share his knowledge with the financial consumers. He specializes in mortgage advisory and business brokering services in Singapore. He has been directly involved and plays a crucial role in marketing and sales of businesses in CPCG. He also provides advice on various kinds of mortgages and construction financing for private individuals.