Floating Interest Rate Housing Loan

Floating rate housing loans have rates that adjust itself on a weekly, monthly or yearly basis. It all depends on the kind of package that you have decided to take up. A floating rate package is normally pegged to an external rate, like the CPF interest rate, the bank’s internal board rate and etc.

Normally risk adverse consumers will avoid floating rate. They cannot live with the uncertainty of a floating interest rate. A floating interest rate can go down, but there is an equal chance that the rate might go up too. Another problem with floating rate is when it goes too high, the installments get more expensive plus if you are using CPF, you might have some administrative work to handle as well.

Investors with bearish outlook for the market and consumers with a larger appetite for risk can afford to take up floating rate housing loan. With the right research, sufficient cash flow and appropriate amount of guts, taking up a floating rate can be the right move in the right situation.

A floating interest rate normally has a low teaser rate to entice borrowers but how it actually performs in latter period is unknown. No advisor can predict the future accurately so ultimately the final decision has to do a lot with the consumer’s personal outlook and character.

A floating rate housing loan can come with a non lock in or lock in period. For those who are looking to stay short term, they can opt for a package with a non lock in period.

Talk to a mortgage advisor if you want to take up a floating rated home loan. The advisor can advise you on the mortgage and the implications it can have on your CPF. He or she can talk to you about the advantages and disadvantages of taking up a floating rate and provide some assessment on whether are you really suitable for it.

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