8 ways to make your home loan more affordable

By Jermaine Koh

If you’ve only got a minute,

• Fixed-rate mortgage packages are currently attractive, with rates between 2.40% and 2.70%, down from 2.5% to 2.9% in 2024.
• Consider refinancing about 4 months before your existing home loan renewal to potentially lower monthly payments and achieve long-term savings.
• Compare fixed vs. floating rates, leverage bank promotions and use online tools to evaluate potential savings, while factoring in refinancing costs and clawback periods.

Singapore's property market in 2025 presents a nuanced landscape for prospective homeowners. While prices are expected to stabilise, increasing only moderately (1-2% PPI growth, aligning with inflation), elevated prices and interest rates necessitate a cautious and strategic approach to home financing.

Despite projected interest rate cuts which could lead to substantial monthly savings on mortgage repayments, new home prices are expected to hold steady due to consistent land prices and elevated construction costs.

Buying a home in this environment demands careful planning, particularly concerning upfront costs. For example, purchasing a new Rest of Central Region (RCR) condominium priced at S$2.4 million may require a substantial downpayment of approximately S$600,000 (including S$120,000 in cash) and considerable monthly repayments thereafter.

As such, thorough financial planning and the exploration of options to optimise your home loan becomes paramount.

Whether you are a first-time buyer or seeking to refinance an existing mortgage, here are 8 practical tips to help you to make your home loan more manageable.

1. Making a larger down payment

Making a larger downpayment when purchasing a property can significantly reduce your overall loan burden and monthly repayments. Here’s how it works:

• A larger down payment means a smaller loan amount, resulting in less interest paid over the loan tenure.
• Your monthly mortgage payments will be lower and more manageable.
• It also helps you stay within your Total Debt Servicing Ratio (TDSR) limits – less than or equal to 55%, which is crucial for loan approval. This means a smaller portion of your total monthly income is allocated to debt repayment.

Do ensure you have sufficient emergency funds before making the downpayment.

2. Use windfalls for partial repayments

Leveraging financial windfalls, such as annual bonuses, inheritance or investment returns, for partial repayments on your home loan can significantly reduce your outstanding principal and interest costs.

This strategy offers multiple benefits: it directly reduces your loan balance, lowers the interest accrued over time and potentially shortens your loan tenure, allowing you to pay off your loan faster.

Review your loan agreement for any penalties or restrictions on partial repayments. Additionally, consider the opportunity cost of using these funds for loan repayment versus other potential investments.

3. Utilise CPF funds effectively

Utilising CPF funds for home loan repayments can provide significant relief, especially during periods of tight cash flow.

Ensure that your CPF OA has sufficient funds to cover these payments consistently. This approach can free up cash for other essential expenses or investments. However, it's important to view this as a temporary measure rather than a long-term solution.

When using CPF funds for your mortgage, you'll need to repay the accrued interest to your CPF account when you sell your property. This accrued interest is calculated based on the amount you've withdrawn from your CPF OA, plus the interest that would have been earned if the funds had remained in your account.

As your financial health improves, consider switching back to cash payments for your mortgage so as to preserve your CPF funds for retirement as the CPF OA offers a base interest rate of 2.5% p.a. (unless your investments can generate better returns than the CPF OA).

4. Refinance or Reprice your home loan

Refinancing or repricing your home loan can be a powerful strategy to reduce your mortgage costs, especially in a changing interest rate environment. Refinancing involves switching your existing home loan to another bank offering more favourable terms, while repricing means adjusting your loan package within the same bank. Some banks do offer a one-time free repricing offer so you can switch to another package without any fees. However, not all banks offer this so do check before switching.

When considering this option, it's crucial to compare both fixed and variable rate loans. As of March 2025, fixed-rate packages offer stability with rates ranging from 2.40% to 2.70%, a notable decrease from previous years. Variable rate packages, often pegged to the Singapore Overnight Rate Average (SORA), may be attractive if you anticipate further rate declines.

• Fixed Rate Packages: Protect yourself from unpredictable interest rate changes with fixed rates, ensuring consistent monthly repayments. DBS offers fixed-rate options ranging from 2 to 5 years.
• Floating Rate Packages: Move in sync with the market with floating rates, which fluctuate based on market conditions. While offering flexibility, be aware that monthly repayments may change.
• Hybrid Packages: Enjoy the best of both worlds by combining a fixed-rate portion for stability and a floating-rate portion to potentially benefit from lower rates. DBS offers options to split your loan, such as allocating 30-70%, 40-60%, or 50-50% between fixed and floating rates. For example, a 2-Year Lock-in package offers 3M SORA + 0.75% p.a.

When switching from an HDB loan to a bank loan, remember that the decision is irreversible. HDB loans offer benefits like no early redemption penalties, while bank loans may have varying fees.

DBS bank loans do however provide greater flexibility with various packages tailored to different needs, including fixed-rate and floating rate options. This allows you to choose a loan structure that best suits your financial situation and market outlook.

Before deciding, carefully compare the long-term savings against any switching costs to ensure it aligns with your financial goals.

 

5. Downsize to a smaller house

Sell and downgrade to a smaller house so that you can have reduced or no mortgage to pay in comparison to your previous flat.

Carefully consider the emotional and practical implications of downsizing before making a decision. Factor in aspects such as:

• Family needs and space requirements
• Proximity to work, schools and amenities
• Potential costs associated with moving and renovating a new place
• Long-term financial goals and retirement planning

6. Renting out rooms or the whole house

Renting out part of your home if you have the extra space, will help in earning extra income. But if it really comes to a situation where things get tough, you can consider moving in with your parents and renting out your entire house, to generate higher rental income.

7. Purchasing mortgage insurance

Purchasing mortgage insurance helps make home loans more affordable by providing peace of mind at a relatively low cost. The premiums are typically small compared to the substantial financial protection offered.

In the event of unforeseen circumstances like death, terminal illness or total permanent disability, the insurance pays off the outstanding mortgage, preventing your family from inheriting the debt. This reduces the financial burden and allows you to enjoy your home without worrying about potential future hardships for your loved ones.

Additionally, some policies offer decreasing coverage that aligns with your diminishing loan balance, resulting in lower premiums over time.

When considering mortgage insurance, it’s important to compare different policies to find one that suits your needs and budget. Factor in premium costs, coverage and policy terms.

8. Utilise digital financial tools

Financial prudence is key to managing your home loan effectively. Digital tools like the Plan & Invest tab in digibank allows you to track and plan your finances, categorise expenses and maintain healthy cash flow.

By integrating such digital solutions into your financial routine, it provides deeper insights to your spending patterns and cash flow and helps ensure you have sufficient funds for monthly debt obligations.

With careful management and the right approach, your home loan can become a stepping stone to long-term financial stability rather than a burden.

Start Planning Now

Check out DBS MyHome to work out the sums and find a home that meets your budget and preferences. The best part – it cuts out the guesswork.

Start Planning

Alternatively, prepare yourself with an In-Principle Approval (IPA), so you have certainty on how much you could borrow for your home, allowing you to know your budget accurately.

Apply In-Principle Approval