SINGAPORE – DBS Bank launched two new home loan packages on Thursday, one targeted at Housing Board flat owners.
One of the deals lets new and existing owners of HDB flats who earn less than $2,500 a month take out a mortgage from POSB, which is part of DBS Group, at 2.6 per cent a year.
The package is also available to home owners who have already taken up two or more mortgages from the HDB, which makes them ineligible for another HDB concessionary loan.
Borrowers who take up the POSB HDB home loan package and have a DBS multiplier and a POSB Save As You Earn account can earn higher interest on their savings.
Mr Alfred Chia, chief executive of financial services provider SingCapital, said the POSB loan rate is similar to the HDB loan rate, which is pegged at 0.1 percentage point above the Central Provident Fund Ordinary Account (OA) rate of 2.5 per cent.
Mr Chia noted that the down payment of 15 per cent of the purchase price for an HDB loan can be paid using OA savings, unlike a bank mortgage, where at least 5 per cent of the down payment must be paid in cash.
There are other benefits of taking an HDB loan. One is that a home buyer can borrow up to 85 per cent of the purchase price of the flat, while a bank mortgage can go only as high as 75 per cent.
Take a home buyer who needs to borrow $400,000 for an HDB flat and can choose between an HDB loan or one from POSB.
If he takes an HDB loan, he can borrow $340,000 and use his CPF savings to pay the remaining $60,000.
The POSB loan can go only as high as $300,000, so he will have to put in $20,000 in cash and $80,000 from his CPF for the down payment.
The upside of taking the POSB loan is that he earns additional interest on his savings accounts and gets a cash bonus of $500.
DBS also announced the DBS HomeSaver on Thursday.
This allows home buyers with DBS Multiplier and POSB Save As You Earn accounts to earn higher interest and a cash bonus when they take up a home loan and a mortgage insurance plan with the bank.
Mr Jeremy Soo, DBS’ managing director and head of the consumer banking group (Singapore), said the sustained rise in interest rates and volatility in the markets are eroding the value of customers’ savings and making it difficult for them to plan for their financial needs.