(F) commercial property loan singapore

Best Interest Rate For Commercial Property Loan

(This article was first published on 7-Aug-2020 and last updated as of 25-Sep-2022)

Commercial Property Loan – Under Company or Personal Name?

We’ve always stated our position on commercial property loans (includes industrial property loans) – where possible, it’s always better to purchase and finance under a company name be it for investment-holding or an operating company with a core business. There are at least three obvious benefits:

  1. Generally lower interest rates
  2. Potential for GST tax savings where you can do GST pre-registration
  3. Reserve your TDSR (total debt servicing ratio) capacity for more residential properties.

As complete mortgage advisors, we broker commercial & industrial property loans both for new purchase as well as refinancing. In this article, we present the best financing options for commercial properties (under company name) in Singapore at the moment.

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Lowest Rate 2.98% Fixed For Commercial Property Loan!

(Purchase & refinance under operating company or investment-holding company IHC)

FLOATING1-YEAR FIXED
Year 1
3M SORA + 1.00
2.98% (Fixed)
Year 2
3M SORA + 1.00
3M SORA + 1.08
Year 33M SORA + 2.00
3M SORA + 2.08
Year 4 onwards3M SORA + 2.00
3M SORA + 2.08
Lock-in
2 years2 years
Processing Fee
$1,000$1,000
Legal Subsidy
0.40% capped $3,0000.40% capped at $3,000
Valuation Subsidy
$500$500
Min Loan
$300,000$200,000
Available For
Refinancing & purchase
Commercial & industrial properties
Operating company only
(IHC – higher spreads)
Refinancing & purchase
Commercial & industrial properties
Operating company only
(IHC – higher spreads)
chart showing mortgage interest rate going up

Interest rate especially fixed rates for commercial property loans has risen substantially in Singapore following the fastest tightening cycle by U.S.Fed in 2022. Speak to our consultants to see if it still makes sense to switch to fixed rates. We showcase here two of the best packages for commercial & industrial property loans, both fixed as well as floating, subject to availability (banks typically stop the promotion when fixed tranche for the promotion is used up, so hurry.)

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In general, other than headline-grabbing interest rates for the initial few years of the loan, we tend to recommend packages pegged to market indices like 3-month compounded SORA with reasonable thereafter spreads (the mark-up above the loan peg) when the lock-in is over.   This goes against what most brokers will do as they would like owners to refinance instead of staying put with the same bank.

However, at MortgageWise, our philosophy is to work long-term with all clients and we understand the frustrations of most commercial property owners. The problem with most commercial property loans is that the spreads once lock-in period ends can shoot up to obscene levels like above 6.50% especially when they are pegged to commercial BOARD lending rates.  This often pose a headache for most companies or business owners who are at the mercy of banks when it comes to repricing offers, or be forced to pay back the legal fee subsidy (clawback).

(F) hands chained: being locked in or tied up in a home loan

If commercial property owners continue to jump from one lock-in period to another, it becomes very hard to sell off the commercial property at a good price, without incurring a hefty redemption penalty of 1.5% (of the outstanding loan) due to sale within the lock-in period.

Commercial property packages with a more reasonable thereafter rate are especially useful for commercial property owners who are looking to sell their asset at the right price in the short to medium term, especially in a post-covid world where liquidity becomes more important.  Even if they do not sell off the office, retail, industrial or shophouse unit, they could rest easy knowing they are paying what is essentially a fair market-based financing rate which will rise and fall according to economic cycles.

Speak to us now if you have a commercial property loan with interest rates expiring within the next 6 months.

Compare Singapore home loan rates quick and fuss-free at MortgageWise.sg.  Work with the team who can bring value to you at all five levels including our expert viewpoints & forecasts which helps you to navigate interest rate cycle astutely be it for residential or commercial property loan. Work with us today and help support our social cause too!

Compare All Latest Rates 2022