Interest Repayment Schemes - How to Defer your Mortgage in Singapore

As the COVID-19 pandemic in 2020 continues to affect all aspects of our lives, we may feel anxious about repaying our outstanding financial commitments. Thankfully, banks and other financial institutions in Singapore are doing their part to help all of us, especially those from industries hardest hit by local and global shutdowns.

As early as February, DBS was already offering various relief measures to homeowners affected by the developing COVID-19 situation. Called DBS Home Loan Payment Relief, it offered a 6-month deferment on the principal loan amount. This means that for 6 months, you only need to worry about interest repayment.

OCBC took it a step further and allowed homeowners who do not qualify for the 6-month interest payment scheme to opt for an instalment plan over 12 months.

As things escalated, more and more banks, like Standard Chartered, UOB, HSBC and Maybank, joined in as well as financial institutions such as Hong Leong Finance. We have no doubt that the remaining banks will follow suit and introduce similar interest repayment schemes and we give credit where it is due for their willingness to help.

UPDATE 31 March 2020 8pm: MAS announced, together with other organisations in the financial sector, that there are now standard COVID-19 relief measures for all banks and financial institutions.

Name: Special Financial Relief Programme (Mortgages)

What it is: Either A) deferment of your property loan principal repayment or B) deferment of your property loan principal and interest repayment, up till 31 December 2020.

How to qualify:

• You should not be more than 90 days past due on loan repayments as at 6 April 2020

Yes, that's it! You don't even need to prove that you're affected by the impact of COVID-19 to apply. Interest will accrue only on the deferred principal amount. The loan term may be extended by up to the corresponding principal deferment period.

This is the most comprehensive interest repayment scheme announced yet. Here's our analysis of it.

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What is an interest repayment scheme?

This is when a bank requires you to only repay the interest on your monthly instalment. Yes, just the interest, leaving the principal balance untouched. In a typical home loan in Singapore, that could mean less than 50% each month for a period of 6 months!

Here’s an example to illustrate.

Assume I have an outstanding home loan of $300,000, with 20 years remaining at an interest rate of 1.85%. Normally, I expect to pay the bank about $1,500 a month. That amount is divided between paying about $450 in interest and repaying $1,050 of the principal. However, in an interest repayment scheme, I only pay $450! That’s about 30% of my usual monthly instalment.

As you can imagine, this will make a big difference when you have cashflow problems due to retrenchment, no-pay leave or a pay cut!

Are there any disadvantages to such an interest repayment scheme?

With the interest repayment scheme, you are not paying the principal for several months. When you resume paying back the principal, your monthly instalment will be a little higher than before.

Using my earlier example, assume I had paid only interest on my $300,000 home loan for 6 months. That means I now have 19.5 years to repay the full $300,000 loan. Assuming the interest rate is still 1.85%, I would now expect to pay about $1,550 a month. That’s $50 more a month than before, or about 3.33%.

Calling that a disadvantage is a bit harsh, though. Think about it, for the past 12 months, you were only paying 30% of your monthly instalment!

How do I apply for my bank’s interest repayment scheme?

Since every bank offers a slightly different scheme, we have broken it up according to bank. You can click the links below to go to the specific bank. This is not an exhaustive list, and we will be adding to it as more banks provide the relevant information.

1. DBS
2. OCBC
3. UOB
4. HSBC
5. Maybank
6. Standard Chartered
7. CIMB
8. Hong Leong Finance

DBS

Name: DBS Home Loan Payment Relief

What it is: A 6-month principal deferment on your DBS Home Loan.

How to qualify:

• You are employed in one of the following industries – Food and Beverage, Hospitality, Retail, Tourism (including taxi drivers, aviation and travel agencies) and Transportation
• Your monthly income has been reduced due to the COVID-19 pandemic
• You have a good loan repayment history

If you don’t meet these eligibility criteria, and you need assistance with repayment, you can still contact DBS for help on a case-by-case basis.

How to apply: Fill in this convenient online form. Always read the terms and conditions first! DBS has also provided a concise FAQ if you need more information.

OCBC

Name: 6-month Interest-Only Scheme

What it is: A 6-month principal deferment on your OCBC Home Loan.

How to qualify:

• You or a member of your family is infected by COVID-19
• Your monthly income has been reduced due to the COVID-19 pandemic
• Your self-managed business has been financially impacted by COVID-19

If you don’t meet these eligibility criteria, or if your application is not successful for whatever reason, OCBC will offer an alternative 12-month customised instalment plan with full interest and partial principal repayment.

How to apply: Complete this PDF form and snail mail it to OCBC with supporting documents, or send them online via their Customer Care Unit.

UOB

Name: UOB’s Property Loan Payment Relief Programme

What it is: A 6-month principal deferment on your UOB Property Loan.

How to qualify:

• You are employed in one of the following industries – Aviation, Food and Beverage, Hospitality, Retail, Tourism and Transportation
• Your monthly income has been reduced due to COVID-19
• You have a good loan repayment history for the past 6 months

If you don’t meet these eligibility criteria, you can still contact UOB on a case-by-case basis.

How to apply: Fill in this convenient online form. Always read the terms and conditions first! UOB has also provided a concise FAQ if you need more information.

HSBC

Name:Mortgage Principal Repayment Deferment

What it is: 6 – 12 months principal deferment on your HSBC Home Loan.

How to qualify:

• You are employed in one of the following industries – Aviation, Food and Beverage, Hospitality, Retail, Tourism (including taxi drivers and travel agencies) and Transportation
• You have a good loan repayment history for the past 6 months

How to apply: Fill in this convenient online form.

Maybank

Name: Home Loan Repayment Relief

What it is: A 6-month principal deferment on your Maybank Housing Loan.

How to qualify:

• You must be employed or a business owner in one of the following industries – Aviation, Food and Beverage, Hospitality, Tourism and Transportation
• Your monthly income has been reduced due to COVID-19
• You have a good loan repayment history

How to apply: Download and complete the Application for Home Loan Repayment Relief form and send it to BDAMCT@maybank.com.sg. Read their FAQ for more information.

Standard Chartered

Name: Retail Mortgages Relief Measures

What it is: A 6-month principal deferment on your Standard Chartered mortgage, and/or late fee and default fee waivers, and/or repricing fee waivers

How to qualify:

• You must demonstrate that you have been impacted by COVID-19.

How to apply: Contact your Standard Chartered mortgage banker directly.

CIMB

Name: CIMB Bank Mortgage Financial Relief Scheme

What it is: A 6, 9 or 12-month principal deferment on your CIMB Property Loan.

How to qualify:

• You must be working in one of the vulnerable industries impacted by COVID-19, including Travel and Entertainment (i.e. car rental, lodging, recreation, spa, tour agencies, restaurants and retail outlet services), Hotels/Resorts, Restaurants and F&B, Transportation and Oil and Gas
• Your monthly income has been reduced due to COVID-19
• Not be past due as at 31 January 2020

How to apply: Fill in this convenient online form. Read their FAQ for more information. Don’t forgot to read the terms and conditions too!

Hong Leong Finance

Name: COVID-19 Housing Loan Reliefs

What it is: The option of A) an interest servicing loan OR B) a non-fully amortising loan (that means you pay off the deferred payment in a lump sum!) for existing Hong Leong Finance HDB and private housing loan customers

How to apply: Call Hong Leong Finance at 6579 6777 or fill up their contact form.

What do I do if I don’t qualify for any of the above measures?

You should check if you are eligible to refinance your home loan. Currently, due to the global economic downturn, coupled with the COVID-19 pandemic, floating interest rates are around 1.5%, thanks to 3M SIBOR dropping to 1% in the past week.

However, as SIBOR continues to fall, banks will compensate by increasing their spreads. In just this past month alone, bank spreads jumped from 0.3% to 0.5%. Therefore, if it suits your financial situation, you should refinance to a SIBOR-linked floating rate earlier than later.

But there’s no need to make the decision on your own!

At Mortgage Master, we believe in helping you make the best decision for your home loan. Our mortgage consultants take the time to learn your risk profile, and then advise you on the home loan package that best fits your preferences and financial situations. We don’t just help you decide what’s best in the short-term but have your long-term financial well-being in mind. Best of all, our consultation service is provided completely free!

So give us a call today or drop us a WhatsApp message and let us help you confidently make this important decision in your life.

Want to read more about home loan interest rates in Singapore?

• Choosing Fixed Rate home loans in Singapore
• Board Rate? What exactly is this?
• Three Reasons to Take a Floating Interest Rate Today
• Why Choose a Fixed Deposit Linked rate?