SORA Linked Home Loans Explained: Cost Guide 2025 | Homejourney

SORA Linked Home Loans Explained: Quick Definition & Cost Snapshot

A SORA-linked home loan in Singapore is a floating-rate mortgage where your interest rate is calculated as Compounded SORA (1M, 3M or 6M) + a fixed bank spread, and your monthly instalment will rise or fall as SORA moves.

In 2025, most new floating home loans from banks like DBS, OCBC, UOB, HSBC and others are pegged to 3‑month Compounded SORA, which has fallen to around the low‑1% range after peaking above 3% in 2023–2024, making SORA packages competitive again compared to many fixed rates.^[3][6][7]

This guide is part of Homejourney’s broader Mortgage Pillar on Singapore home loans, and zooms into “SORA Linked Home Loans Explained Complete Guide Cost Guide” so you can confidently compare SORA loan Singapore packages, 3M SORA vs 6M SORA, and SORA vs SIBOR, before you commit. For a full overview of all mortgage types, you can refer back later to our main pillar guide .

What Exactly Is SORA & How Do SORA Home Loans Work?

The Singapore Overnight Rate Average (SORA) is the volume‑weighted average interest rate of unsecured overnight interbank SGD cash transactions between 8am and 6.15pm daily, administered by the Monetary Authority of Singapore (MAS).^[6]

MAS then publishes this daily SORA, and banks use the compounded average of daily SORA over 1, 3 or 6 months (1M, 3M, 6M SORA) as the benchmark for home loans.^[2][6]

In practice, your SORA home loan interest is usually structured as:

1M / 3M / 6M Compounded SORA (benchmark, floating) +
Bank spread (fixed margin, e.g. 0.70%–1.00% p.a.)

Because SORA is compounded over a past period, your rate tends to be smoother and less volatile than a pure overnight rate, though it will still move broadly with global interest trends (especially the US Fed Funds rate).^[1][2]

3M SORA vs 6M SORA: What’s the Difference for Borrowers?

Banks in Singapore commonly offer 3M SORA packages and, less commonly today, 6M SORA for home loans, alongside some 1M SORA options.^[4][5] The key differences for a typical HDB upgrader or condo buyer are:

How 3M SORA & 6M SORA Affect Your Monthly Payments

In simple terms:

3M SORA: your mortgage rate is reset every 3 months based on the previous 3 months’ compounded SORA.
6M SORA: your rate is reset every 6 months based on the last 6 months’ compounded SORA.

This means:

With 3M SORA, your instalment adjusts more frequently, so you react faster to both rate cuts and rate hikes.
With 6M SORA, your repayment is more stable for longer, but slower to reflect falling rates.

In everyday terms, if you are staying in a 4‑room HDB in Punggol or a resale condo in Tampines and budgeting tightly, a 6M SORA peg can feel psychologically calmer, but many Singaporeans today choose 3M SORA to capture savings quicker when rates are trending down.^[1][5]

Cost Guide: How Much Does a SORA Mortgage Really Cost?

To understand the total cost of a SORA‑linked home loan, you need to look beyond headline spreads and consider:

Current and expected SORA levels
Bank spread (margin) across the lock‑in period
Lock‑in penalties and legal subsidies
Refinancing / repricing costs later

Illustrative Cost Example (Owner‑Occupied HDB)

Assume you buy a 4‑room BTO in Tengah and take a $500,000 loan over 25 years on a 3M SORA package. For illustration:

3M Compounded SORA: 1.20% p.a. (approximate late‑2025 level)^[3][7]
Bank spread: 0.80% p.a.
All‑in interest rate: 2.00% p.a.

Your starting monthly instalment would be roughly $2,120 (approximate, for illustration only). If 3M SORA later drops to 0.80% with the same spread, your rate becomes 1.60% and your monthly repayment could fall by around $90–$120, which is material if you are servicing the loan jointly with your spouse’s CPF.^[1][3][9]

On the flip side, if SORA climbs back towards 2.5%–3%, the same loan can see monthly instalments rise by a few hundred dollars. This is why Homejourney emphasises stress‑testing your loan with at least a 1.5–2.0 percentage‑point buffer when you compare packages via our bank rates page Bank Rates .

Important disclaimer: All numbers above are simplified estimates and for education only. Actual bank rates, SORA levels and instalments will differ and change over time. Always check live rates on Mortgage Rates and consult a licensed adviser before committing.

SORA vs SIBOR: Why the Market Switched

Singapore has fully transitioned from SIBOR and SOR to SORA as the main interest benchmark for SGD loans. MAS and MoneySense note that SORA is now the key reference for Singapore Dollar loans, and SIBOR has been discontinued after 2024.^[2][4][6]

Key Differences: SORA vs SIBOR

Feature	SORA	SIBOR
What it measures	Actual overnight interbank borrowing transactions, volume‑weighted average^[6]	Indicative interbank offered rate (banks’ quotes)
Compounding	Uses compounded average over 1/3/6 months	Simple tenor rate (e.g. 1M, 3M)
Transparency	Administered and published by MAS, based on actual trades^[6]	Based on bank submissions
Volatility	Generally smoother due to compounding	Can move more sharply
Status (2025)	Active benchmark for SGD loans	Discontinued

For homeowners in estates like Yishun or Queenstown who previously had SIBOR loans, banks have been offering conversion packages into SORA or fixed‑rate loans, often with an adjustment spread to reflect structural differences between benchmarks.^[2] If you’re unsure which benchmark your existing loan is tied to, Homejourney can help you read your loan letter and explain options in plain English via WhatsApp.

SORA vs Fixed-Rate Mortgages: Which Is Better in 2025?

As of 2025, Channel NewsAsia reports that while demand for SORA‑priced packages has grown, fixed‑rate home loans remain more popular, with about 4 in 5 OCBC customers choosing fixed packages for repayment certainty.^[3] To decide between a SORA rate mortgage and fixed rates, you should understand your risk profile.