Understanding SORA-Linked Home Loans: Your Path to Better Approval Chances
A SORA-linked home loan is a floating-rate mortgage pegged to the Singapore Overnight Rate Average, a benchmark interest rate set by the Monetary Authority of Singapore (MAS).[1] Unlike the discontinued SIBOR rates, SORA offers greater transparency and stability because it's based on actual interbank transactions rather than estimates, making it more reliable for borrowers planning their finances.[1] If you're seeking a home loan in Singapore, understanding how SORA works and how to strengthen your approval chances is essential to securing favorable terms and managing your monthly repayments effectively.
The shift from SIBOR to SORA represents a significant change in Singapore's mortgage landscape. SIBOR was discontinued on January 1, 2025, and virtually all major banks—including DBS, OCBC, UOB, HSBC, Standard Chartered, and Maybank—now price their home loans using compounded SORA rates.[4] This transition matters because SORA-pegged loans can offer lower initial rates and greater flexibility compared to fixed-rate packages, though they come with variable interest rate risk.
How SORA Rates Are Calculated and Why It Matters
SORA is calculated as the volume-weighted average rate of borrowing transactions in Singapore's unsecured overnight interbank SGD cash market between 8am and 6:15pm.[5] The Monetary Authority of Singapore validates this data daily and computes the cumulative compounded SORA over 1-month, 3-month, and 6-month periods.[1] This daily calculation means SORA reflects real market conditions rather than estimated rates, reducing the risk of manipulation and providing borrowers with more transparent pricing.
Banks then apply a margin (typically 0.50% to 1.25% depending on your creditworthiness and loan terms) to the compounded SORA rate to determine your actual home loan interest rate.[2] For example, if the 3-month compounded SORA is 3.45% and your bank's margin is 1.00%, your effective rate would be approximately 4.45% per annum. Understanding this structure helps you evaluate whether a SORA-linked loan aligns with your financial situation and risk tolerance.
The chart below shows recent SORA trends to help you understand how rates have moved and what to expect:
As you can see from the chart, SORA has experienced significant volatility. In early January 2026, rates were around 3%, but by December 2025, SORA had fallen to 1.2%—its lowest level since August 2022.[3] This dramatic decline reflects the ongoing US Federal Reserve rate-cut cycle and easing global liquidity conditions. For borrowers, this means SORA-linked loans have become increasingly affordable, though future rate movements remain uncertain.
3-Month SORA vs 6-Month SORA: Which Should You Choose?
The primary difference between 3-month and 6-month SORA lies in how frequently your interest rate adjusts. A 3-month SORA loan bases your rate on the average SORA over the previous three months and typically adjusts quarterly, while a 6-month SORA loan adjusts semi-annually.[1] This distinction has real implications for your monthly repayments and financial planning.
3-Month SORA offers more responsive rate adjustments. In a declining rate environment (like we've seen recently), your monthly repayments can decrease more quickly as the 3-month average captures recent rate drops.[4] However, in a rising rate environment, your payments would increase more frequently. The 3-month option is ideal if you believe interest rates will decline or remain stable, and you want to benefit from rate cuts promptly.
6-Month SORA provides a lagging effect that acts like a temporary fixed rate. Because your rate is based on a 6-month average, it adjusts less frequently and changes more gradually. This creates greater stability and predictability in your monthly repayments, making budgeting easier.[4] The 6-month option suits borrowers who prefer consistency and are concerned about potential rate spikes, as you won't see immediate increases if rates rise suddenly.
In 2024, the 3-month compounded SORA averaged between 3.50% to 3.62%.[1] Given the recent sharp decline to 1.2%, many borrowers are now reconsidering their rate options. Track live 3M SORA and 6M SORA rates updated daily on Homejourney's bank rates page to make informed decisions about which tenor suits your situation.
SORA vs Fixed-Rate Home Loans: Which Offers Better Approval Chances?
Your choice between SORA-linked floating rates and fixed-rate packages significantly impacts both your approval chances and long-term costs. Understanding the trade-offs helps you select the option most likely to be approved and best suited to your financial profile.
SORA-Linked Floating-Rate Loans typically feature lower initial rates and greater flexibility. Because your rate adjusts based on market conditions, banks view them as carrying moderate risk if you have strong income stability and a healthy debt servicing ratio. Floating-rate loans are particularly attractive when rates are declining, as you benefit from lower monthly repayments automatically.[3] However, banks scrutinize your ability to handle potential rate increases when assessing your application.
Fixed-Rate Home Loans lock in interest between 2.4% to 2.9% for a 2-year package, providing complete certainty against market fluctuations.[1] Fixed rates are currently more popular—in 2025, four in five customers opted for fixed packages, with strong demand from first-time buyers seeking budgeting certainty.[3] From an approval perspective, fixed-rate loans may be easier to secure if your debt servicing ratio is tight, because banks don't need to stress-test your ability to handle rate increases.
The key consideration: a decline in SORA rates doesn't guarantee lower monthly repayments on floating-rate loans if market conditions shift unexpectedly or rates decline slower than anticipated.[1] This uncertainty can make approval more challenging if your debt servicing ratio is already at the maximum threshold.
How to Improve Your SORA Home Loan Approval Chances
Securing approval for a SORA-linked home loan depends on several factors within your control. Here are actionable strategies to strengthen your application:
1. Understand and Optimize Your Debt Servicing Ratio (TDSR)
The Total Debt Servicing Ratio is the single most important factor determining your loan approval and amount. Your TDSR limits total monthly debt obligations—including your new home loan, credit cards, car loans, and other debts—to 55% of your gross monthly income.[2] For example, if you earn $5,000 monthly, your maximum total debt obligations cannot exceed $2,750.
To improve your TDSR and approval chances:
- Pay down existing debts before applying. Clearing credit card balances or settling car loans reduces your monthly obligations, freeing up borrowing capacity.
- Increase your income through bonuses, promotions, or additional employment. Banks assess your gross monthly income, so higher income directly increases your borrowing power.
- Avoid new credit applications 3-6 months before applying for a home loan. Each credit inquiry and new account slightly impacts your TDSR calculation.
2. Maximize Your Down Payment
For your first property, the Loan-to-Value (LTV) ratio is up to 75%, requiring a 25% down payment with at least 5% paid in cash and the remaining 20% covered using CPF OA savings or additional cash.[2] While 25% is the minimum, providing a larger down payment significantly improves your approval chances by reducing the bank's risk.
Benefits of a larger down payment:
- Lower loan amount means lower monthly repayments, improving your TDSR
- Demonstrates financial discipline and savings capacity to lenders
- Qualifies you for better interest rates and margins from banks
- Reduces the risk of negative equity if property values decline
If you're an HDB upgrader, explore how to use CPF for your down payment to maximize your available funds without depleting cash reserves.
3. Strengthen Your Credit Profile
Banks assess your creditworthiness through your credit history and payment behavior. A strong credit profile directly influences the margin banks apply to SORA rates—borrowers with excellent credit may receive margins of 0.50% to 0.75%, while those with weaker profiles might face 1.00% to 1.25% margins.
Actions to strengthen your credit:
- Ensure all credit card and loan payments are made on time for at least 12 months before applying
- Keep credit utilization below 30% on credit cards
- Avoid late payments, defaults, or bankruptcy records
- Request your credit report from Credit Bureau Singapore (CBS) to identify and dispute any errors
4. Prepare Comprehensive Documentation
Incomplete or disorganized documentation delays approvals and can result in rejections. Banks require specific documents to verify your income, employment, and financial stability. Having everything prepared upfront accelerates the approval process and demonstrates professionalism to lenders.
Essential documents typically include:
- Last 3 months of payslips and employment letter
- Last 2 years of tax returns or Notice of Assessment (NOA)
- Bank statements (typically 3-6 months) showing savings and income deposits
- CPF statements showing your OA and MA balances
- Property purchase agreement or option to purchase
- Identification documents (NRIC, passport)
For detailed guidance, refer to our HDB loan documents checklist which covers the specific requirements for different loan types.
5. Leverage Homejourney's Multi-Bank Application System
Rather than applying to banks individually, submitting one application via Homejourney's bank rates page connects you with multiple lenders simultaneously. This approach offers several advantages:
- Faster approvals: Banks can verify your income and employment data instantly using Singpass/MyInfo integration, eliminating manual document submission delays.
- Better rate offers: Receive personalized rate quotes from DBS, OCBC, UOB, HSBC, Standard Chartered, Maybank, and other major banks, allowing you to compare and negotiate.
- Increased approval likelihood: Different banks have different lending criteria. Applying to multiple lenders increases your chances of approval, even if one bank declines.
- Expert guidance: Homejourney's mortgage brokers provide personalized advice on which loan structure and bank option best matches your financial situation.
The Singpass/MyInfo integration is particularly valuable—it auto-fills your application in seconds, reducing errors and accelerating the verification process. Banks can instantly confirm your employment and income details, dramatically speeding up approval timelines.
Comparing SORA Rates Across Singapore Banks
Interest rates and margins vary significantly across banks. As of January 2026, here's how major lenders structure their SORA-linked offerings:
- DBS Bank: Offers DBS Easy Switch with 2-3 year fixed rates at 2.45% p.a., switchable to SORA thereafter, plus floating loans pegged to SORA or FHR with lower initial rates and refinancing flexibility.
- Standard Chartered: Provides 3-month compounded SORA + 1.00% (approximately 3.45% today) with a 2-year lock-in period and quarterly rate adjustments.
- SBI Bank: Features 2-year fixed rates at 1.55% p.a. followed by 3M SORA + 1.00% p.a., plus flexible options with no lock-in (SORA + 1.00%), 2-year lock-in (SORA + 0.50%), or 3-year lock-in (SORA + 0.75%).
- OCBC Bank: Competitive SORA-pegged packages with quarterly adjustments and various lock-in periods.
- UOB: Offers SORA-linked loans with flexible repayment tenures up to 35 years for private properties.
The margin you receive depends on your credit profile, down payment size, and loan tenure. Stronger applicants typically secure margins of 0.50-0.75%, while standard applicants receive 1.00-1.25%. Compare rates from all major banks side-by-side on Homejourney's bank rates comparison page to identify the best offer for your situation.
Calculating Your Affordability and Approval Chances
Before applying, use Homejourney's mortgage calculator to determine your borrowing power and monthly repayments under different scenarios. This self-assessment helps you understand whether a SORA-linked loan is appropriate for your income and financial situation.
Key calculations to perform:
- Maximum loan amount: Based on your TDSR (55% of gross income) and LTV (75% for first property)
- Monthly repayment at current SORA rates: Using today's 3-month SORA (currently around 1.2%)
- Stress-tested repayment: Assuming SORA increases to 3.5-4.0% to understand your worst-case scenario
