Financial Glossary
Understand the key terms used in loans, mortgages, and property financing.
Principal
The original loan amount you borrow, excluding interest. Each monthly payment reduces the outstanding principal.
Amortisation
The process of spreading loan repayments over time through regular instalments. An amortisation schedule shows how much of each payment goes to principal vs interest.
Tenure
The total length of the loan, typically up to 30 years for HDB flats and 35 years for private properties. Longer tenures mean lower monthly payments but more total interest.
Income Weighted Average Age (IWAA)
Used for joint borrowers: a blended age calculated from each borrower's age and income share. Helps determine the maximum loan tenure.
Valuation
An independent assessment of a property's market value, conducted by a licensed valuer. Banks use this to determine the maximum loan amount.
Offer Letter
A formal document from the bank outlining the approved loan amount, interest rate, tenure, and conditions. Signing it commits you to the terms.
Credit Score
A numerical rating based on your credit history. Higher scores improve your chances of loan approval and better interest rates.
Notice Period
The advance notice required by the bank before you can fully redeem or partially prepay the loan. Typically 1–3 months.
Asset-Based Lending
A loan secured against an asset such as property, equipment, or receivables. The asset serves as collateral if you default.
Debt Consolidation
Combining multiple debts (credit cards, personal loans) into a single loan with one monthly payment, often at a lower interest rate.
Covenant
A condition or restriction in the loan agreement. Common covenants include maintaining insurance coverage and not selling the property without the bank's consent.
Lock-in Period
A period (typically 1–5 years) during which you cannot fully repay or refinance the loan without paying a penalty fee.
Loan-to-Value (LTV)
The ratio of the loan amount to the property value. A 75% LTV means the bank lends 75% of the property price and you pay 25% as down payment.
Refinancing
Replacing your existing home loan with a new one, usually from a different bank, to get a better interest rate or loan terms.
Repricing
Switching to a different loan package within the same bank, often after the lock-in period ends, to secure a better rate.
Bridging Loan
A short-term loan to bridge the gap between buying a new property and selling your existing one. Usually valid for up to 6 months.
Interest-Only Loan
A loan where you pay only the interest for a set period. The principal remains unchanged during this time, after which full repayments begin.
Fixed Rate
An interest rate that remains constant throughout the loan tenure. Monthly repayments stay the same, making budgeting easier.
Floating Rate
An interest rate that changes periodically based on a reference rate such as SORA or bank board rates. Payments may go up or down.
SORA
Singapore Overnight Rate Average — the benchmark interest rate for SGD loans. It reflects the average rate of unsecured overnight interbank SGD transactions.
Spread
The additional percentage on top of a reference rate (like SORA) that makes up your effective floating interest rate. Example: SORA + 0.80%.
Board Rate
An interest rate set internally by each bank for their floating-rate loans. It can change at the bank's discretion, unlike SORA which is market-driven.
Freehand Conversion
Converting a floating-rate loan to a fixed-rate package, or vice versa, within the same bank without penalty during a specified window.
Prepayment Penalty
A fee charged by the bank if you repay part or all of your loan before the lock-in period ends. Typically 1–2% of the prepaid amount.
Cancellation Fee
A penalty if you cancel the loan after accepting the offer letter but before disbursement. Usually 0.5%–1% of the loan amount.
Valuation Fee
A one-time fee paid to the bank-appointed valuer for assessing the property value. Usually S$300–S$600, refunded by some banks upon loan acceptance.
Legal Fees
Costs for conveyancing lawyers to handle property purchase paperwork, mortgage documentation, and registration. Typically S$2,000–S$4,000.
Stamp Duty
A tax on property purchase documents. Buyer's Stamp Duty (BSD) applies to all purchases; Additional Buyer's Stamp Duty (ABSD) applies to subsequent properties.
Clawback Period
A period after accepting cash rebates or legal subsidies where repaying the loan early means you must return the benefits received.
Total Debt Servicing Ratio (TDSR)
A cap set by MAS: your total monthly debt repayments cannot exceed 55% of your gross monthly income.
Mortgage Servicing Ratio (MSR)
Applies to HDB flats and executive condominiums: monthly mortgage repayment capped at 30% of gross monthly income.
CPF Housing Grant
A government grant for eligible HDB buyers, deposited into your CPF Ordinary Account. Amounts vary by income, citizenship, and flat type.
Fire Insurance
Mandatory insurance for mortgaged properties covering damage from fire. Banks require it; premium is typically low and added to your monthly payment.