Shophouse financing 101: What every investor should know before signing

Illustration of a person meeting a banker

Buying a shophouse isn’t quite like buying a condo or HDB flat, especially when it comes to financing. Because most shophouses fall under the commercial category, the way banks assess loans, downpayments, and interest rates can be quite different.

Whether you’re a first-time investor or expanding your portfolio, understanding these nuances can help you avoid surprises and plan your purchase more strategically.

Commercial vs. residential financing

The first distinction is zoning. If your shophouse is purely commercial, banks typically classify it under commercial property loans, which come with higher interest rates.

However, if the property is mixed-use, you might still qualify for a residential loan depending on the proportion of residential space. This is where professional advice and a bank valuation come in handy.

Interest rates and bank options

Commercial loan rates tend to fluctuate more frequently because they’re pegged to business lending benchmarks such as SORA.

Consult experts to evaluate your options before committing to a purchase.

Some investors prefer fixed-rate packages for stability, while others take floating rates if they expect short-term holding periods. 

Comparing packages across local banks and private lenders can make a significant difference.

Hidden costs to budget for

The property price is just the beginning.

Investors should also budget for:

• Buyer’s Stamp Duty (BSD): Typically 4–6% of purchase price or valuation, whichever is higher.

• Additional Buyer’s Stamp Duty (ABSD): Generally not applicable for commercial-only properties

• Legal & valuation fees: Usually around 0.3–0.5% of property price.

• Renovation and compliance costs: Conservation shophouses may require URA approvals for certain works, which can add both time and cost.

Financing a shophouse requires a bit more homework, but it also opens doors to long-term, resilient investment. Understanding how loans, tenure, and hidden costs work together helps you see the full financial picture, not just the sticker price.

Need help mapping out your financing options? The PropNex Shophouse Elites team works closely with trusted partners to help investors make informed, confident decisions. Speak with us today before you sign the dotted line.