Many first-time buyers in Singapore underestimate how easy it is to make costly home loan errors – from over-borrowing to choosing the wrong loan type – but most of these mortgage mistakes can be avoided with proper planning, clear numbers, and trusted tools like Homejourney’s bank rates comparison and eligibility calculator.
This guide focuses on Common Mortgage Mistakes First Time Buyers Make in Singapore, so you can avoid new buyer pitfalls and mortgage traps that might derail your first home purchase or future plans.
It sits within Homejourney’s broader first-time buyer and mortgage pillar guides, including resources on loan options, CPF usage, and the full buying timeline, which you can explore via our main mortgage and first-time buyer series First Time Buyer Mistakes: Avoid Costly Mortgage Traps | Homejourney and CPF-focused guides 使用CPF购房完整指南：新加坡买家Homejourney权威手册 .
Why Mortgage Mistakes Are So Costly For First-Time Buyers
In Singapore, a typical first-time buyer taking a S$600,000 loan for an HDB flat in towns like Punggol or Sengkang can easily pay more than S$200,000 in interest over 25–30 years, depending on rates and loan structure.
A small mistake – like over-stretching your tenure, picking the wrong interest package, or misusing CPF – can add tens of thousands of dollars to your total cost or even affect your ability to upgrade later.
Because Homejourney prioritises safety and trust, this guide focuses on risk management: avoiding first buyer mistakes before they lock you into long-term obligations.
Core Concepts: The Rules Behind Singapore Home Loans
Before diving into specific mortgage mistakes to avoid, it helps to understand the key rules that shape how much you can borrow and what kind of instalments you’ll face.
Key Terms Every First-Time Buyer Must Know
Total Debt Servicing Ratio (TDSR): MAS rule that caps your total monthly debt obligations (including mortgage, car loan, credit cards, etc.) at a fixed percentage of your gross monthly income. This applies mainly to private property and EC loans.
Mortgage Servicing Ratio (MSR): For HDB and ECs, the monthly mortgage alone cannot exceed a capped percentage of your gross monthly income (set by MAS and HDB). This is often what limits how much you can borrow for BTO or resale flats.
Loan-to-Value (LTV): The maximum percentage of the property price or value that you can borrow. For HDB loans, the LTV is typically higher than for bank loans, but subject to rules and your profile.
CPF OA Usage: You can use CPF OA for down payment and monthly instalments, but there are limits (Valuation Limit and Withdrawal Limit), and heavy CPF usage can affect your retirement savings.
Stamp Duties: Buyer’s Stamp Duty (BSD) applies to almost all purchases; Additional Buyer’s Stamp Duty (ABSD) applies for second and subsequent properties or foreigners. These upfront costs are often under-budgeted by first-time buyers.
HDB Loan vs Bank Loan: Why It Matters
Many new buyers sign whatever loan is suggested by family or their agent, without understanding the difference between an HDB concessionary loan and a bank loan – one of the most common mortgage mistakes to avoid.
- HDB Loan: Pegged at 0.1% above CPF OA interest (currently 2.6% p.a.), higher LTV cap for eligible first-timers, more flexibility for partial prepayment, but you must meet HDB eligibility and income rules.
- Bank Loan: Usually linked to fixed rates or floating SORA-based packages. Can be cheaper in certain interest environments but comes with stricter refinancing rules, lock-in periods, and lower LTV caps.
Homejourney helps you compare both, side-by-side, across major banks like DBS, OCBC, UOB, HSBC, Standard Chartered, Maybank, CIMB, RHB, and others via our bank rates comparison page Bank Rates .
Mortgage Mistake 1: Focusing Only On the Monthly Instalment
One of the most common new buyer pitfalls is judging a mortgage purely by the monthly repayment – for example, choosing a 30-year tenure instead of 20 years just because the instalment drops by a few hundred dollars.
For a S$600,000 loan at 3% interest:
- Over 20 years: monthly ~S$3,327; total interest ~S$198,480
- Over 30 years: monthly ~S$2,530; total interest ~S$311,000+
By stretching to 30 years, you save about S$800 a month but pay over S$110,000 more in interest across the loan, a classic costly home loan error.
Actionable Tip: Use Homejourney’s mortgage calculator Mortgage Rates or Bank Rates to simulate 20-, 25-, and 30-year tenures and check both monthly instalments and total interest. Aim for a balance where your monthly payment is comfortable even if rates rise, but the total interest remains reasonable.
Mortgage Mistake 2: Ignoring Interest Rate Structures and SORA
Another frequent mortgage mistake first-time buyers make is picking a loan package just because the headline rate looks lowest, without understanding whether it is fixed, floating, or hybrid, and how it reacts to SORA.
Today, many bank loans are pegged to SORA (Singapore Overnight Rate Average), the key benchmark rate in Singapore. A typical package might be: 3M SORA + 0.80% with a 2- or 3-year lock-in period.
The chart below shows recent interest rate trends in Singapore:
When SORA rises, your monthly instalments can increase significantly. For example, if SORA climbs by 1%, a S$600,000 loan’s monthly payment can jump by around S$300–S$400 depending on tenure.
Actionable Tip:
- Decide your priority: stability (fixed rate for a few years) vs flexibility (floating SORA packages with lower initial rates but more volatility).
- Use Homejourney’s real-time SORA tracking and bank rates comparison Bank Rates to see how 3M and 6M SORA have moved before committing.
- Plan for a buffer: assume rates could be 1–2% higher than today and check if you can still comfortably afford the instalment.
Mortgage Mistake 3: Overstretching Because MAS Allows It
Many young couples I’ve met in mature estates like Tampines or Ang Mo Kio feel reassured once the bank or HDB officer says, “You’re approved for this amount.” They then buy right at the maximum loan quantum, forgetting that TDSR/MSR limits are regulatory ceilings, not comfort guidelines.
For example, a couple with a combined income of S$9,000 might qualify for a loan that results in a S$3,000+ monthly instalment. On paper this fits TDSR/MSR rules, but it leaves little buffer for childcare, parents’ support, or emergencies.
Insider Tip (Local Context): If you live in suburbs like Punggol or Jurong West, factor in rising transport and childcare costs. A S$200–S$300 increase in monthly mortgage because of interest rate changes can squeeze your lifestyle more than you expect.
Actionable Tip:
- Set your own “personal TDSR” – for example, keep mortgage + other debts within 30–35% of income, even if MAS allows more.
- Run different scenarios with Homejourney’s eligibility and affordability calculator .
Mortgage Mistake 4: Misusing CPF and Ignoring Long-Term Impact
Using CPF OA feels painless because you don’t see cash leaving your bank account, but overusing CPF is another major mortgage trap.
Common first buyer mistakes include:
- Using CPF for 100% of monthly instalments, leaving no CPF buffer for future interest changes or job loss.
- Ignoring the CPF accrued interest you must “refund” if you sell, which can reduce your cash proceeds and affect your upgrade plans.
- Not balancing between CPF use and building cash savings for emergencies.
Example:
