How To Calculate Housing Loan Monthly Installment In Singapore
Buying a home is one of the biggest financial decisions you’ll make—especially in Singapore, where property prices are among the highest globally. To manage this responsibility well, it’s crucial to understand how your housing loan monthly instalments are calculated. Whether you’re a first-time buyer or upgrading to a larger flat, knowing your repayment structure helps you plan better and avoid financial strain.
This guide breaks down the key components of monthly instalments, including loan tenure, interest rates, and repayment formulas. We’ll also cover the differences between HDB loans and bank loans, and how tools like amortisation tables and online calculators can aid your planning.
If you’re considering alternatives beyond traditional banks, a licensed money lender in Singapore can offer tailored loan options. However, always ensure they are legally registered and transparent about terms to protect your financial well-being.
What Is a Housing Loan Monthly Instalment?
A housing loan monthly instalment is the fixed amount you pay each month to your lender—whether it’s a bank or the Housing & Development Board (HDB)—until your entire mortgage, including interest, is fully repaid. Each instalment typically consists of two parts:
- Principal: The original amount you borrowed
- Interest: The fee charged by the lender for lending you the money.
Grasping how these payments are calculated is essential for effective long-term budgeting, especially since most home loans in Singapore span 20 to 30 years. If you’re exploring alternatives to traditional mortgages, some homeowners even consider a personal loan Singapore option for smaller property-related expenses like renovations or furniture, offering quicker access to funds with shorter repayment terms.
Key Factors That Affect Monthly Instalments
Several key variables determine how much you’ll need to pay each month:
1. Loan Amount
This is the total sum you borrow from the lender to finance your property. Naturally, the larger the loan, the higher your monthly repayments.
2. Loan Tenure
Loan tenure refers to the period over which the loan is to be repaid. In Singapore, HDB loans can go up to 25 years (or until the borrower turns 65), while bank loans can stretch to 30 or even 35 years in some cases.
3. Interest Rate
The interest rate is the cost of borrowing money and is usually expressed as a percentage per annum. Bank loans can have fixed, floating, or hybrid rates, while HDB loans offer a concessionary rate, typically pegged at 0.1% above the CPF Ordinary Account (OA) interest rate (currently 2.5%).
4. Type of Loan
- HDB Loan – More predictable, lower initial cash outlay, and a consistent interest rate.
- Bank Loan – Possibly lower initial interest, more flexibility, but higher risk of rate fluctuations.
The Basic Formula for Calculating Monthly Instalments
Most housing loans in Singapore are based on reducing balance loans, where interest is calculated on the outstanding principal balance. The most common method used for monthly instalment calculation is the amortisation formula:
E=P⋅r⋅(1+r)n(1+r)n−1E = \dfrac{P \cdot r \cdot (1 + r)^n}{(1 + r)^n – 1}E=(1+r)n−1P⋅r⋅(1+r)n
Where:
- EEE = Monthly instalment
- PPP = Principal loan amount
- rrr = Monthly interest rate (annual rate ÷ 12)
- nnn = Total number of payments (loan tenure in months)
Worked Example
Let’s assume the following:
- Loan amount: S$500,000
- Annual interest rate: 2.6%
- Loan tenure: 25 years
Step 1: Convert interest rate to monthly
2.6% ÷ 12 = 0.2167% → 0.002167 as a decimal
Step 2: Convert tenure to months
25 years × 12 = 300 months
Step 3: Plug into the formula
E=500,000×0.002167×(1+0.002167)300(1+0.002167)300−1E = \dfrac{500,000 \times 0.002167 \times (1 + 0.002167)^{300}}{(1 + 0.002167)^{300} – 1}E=(1+0.002167)300−1500,000×0.002167×(1+0.002167)300 E ≈ S$2,269.51
So, your monthly instalment would be approximately S$2,269.51 for the next 25 years.
HDB Loan vs. Bank Loan: Monthly Instalment Comparison
| Criteria | HDB Loan | Bank Loan |
|---|---|---|
| Interest Rate | 2.6% (fixed) | 1.5% to 3.5% (variable) |
| Loan-to-Value (LTV) | Up to 80% of property value | Up to 75% of property value |
| Downpayment | 20% (can be fully paid with CPF) | 25% (5% cash, 20% CPF/cash) |
| Flexibility | Limited | Higher flexibility (refinancing etc.) |
| Monthly Instalments | Higher due to fixed rate | Potentially lower initially |
It is crucial to weigh the predictability of HDB loans against the potentially lower—but fluctuating—bank loan rates.
Using Online Mortgage Calculators
If the amortisation formula seems too complex, you’re not alone. Thankfully, many Singapore banks and financial websites offer free online mortgage calculators, such as those from:
- CPF Board
- HDB website
- DBS, OCBC, UOB loan portals
- PropertyGuru or iCompareLoan
These tools usually ask you to key in:
- Property price
- Loan amount
- Interest rate
- Loan tenure
The calculators will instantly show:
- Monthly repayment
- Total interest payable
- Amortisation schedule (breakdown of principal vs. interest over time)
Amortisation Tables: Breaking Down the Repayment
An amortisation table helps you understand how much of each payment goes toward paying off the interest vs. reducing the loan principal.
For example, in the early stages, a larger portion of your monthly payment goes toward interest. Over time, more of the payment reduces the principal. This understanding can help you:
- Plan prepayments to reduce interest
- Decide when refinancing might be beneficial
How CPF Contributions Come Into Play
Many Singaporeans use their CPF Ordinary Account (OA) savings to fund part of their housing loan. You can use CPF OA funds for:
- Monthly instalments
- Downpayment
- Legal fees and stamp duties
However, it’s important to note that CPF-accrued interest must be refunded if you sell the property later, which may impact your net returns.
Tips to Reduce Your Monthly Instalments
- Opt for a longer tenure
This lowers monthly payments but increases total interest paid. - Refinance for lower interest rates
Shop around after lock-in periods; even a 0.5% reduction can result in significant savings. - Make partial prepayments
Reducing the principal early will reduce total interest and future instalments. - Use CPF Wisely
Don’t empty your OA completely—retain some balance as a buffer. - Avoid overborrowing
Borrow only what you truly need, even if you qualify for more.
Legal and Regulatory Caps
The Monetary Authority of Singapore (MAS) imposes certain limits to ensure borrowers don’t overextend themselves:
- Mortgage Servicing Ratio (MSR) – max 30% of gross monthly income for HDB loans
- Total Debt Servicing Ratio (TDSR) – max 55% of gross monthly income for all property loans
- Loan-to-Value (LTV) – up to 75% for bank loans, 80% for HDB loans
These regulatory measures impact how much you can borrow and, in turn, your monthly repayment obligations.
Common Mistakes to Avoid
- Ignoring floating rate risks – Bank loan rates can increase over time, raising your instalments.
- Overlooking total cost of loan – Focus not only on monthly payment but the full interest paid.
- Underestimating additional costs – Include insurance, maintenance, property tax, and legal fees in your financial planning.
- Not factoring in lifestyle changes – Think about career changes, children, or retirement that may affect income levels.
Conclusion
Understanding how housing loan monthly instalments are calculated in Singapore is not just about crunching numbers. It’s about making informed decisions that align with your financial goals, lifestyle, and risk appetite. From knowing how amortisation works to choosing between an HDB and a bank loan, each element plays a role in ensuring you can meet your obligations comfortably.
If you are ever unsure, consult a financial advisor or use mortgage comparison platforms to explore the best packages for your situation. After all, a home should be a place of security—not stress.