Singapore Refinancing Your Home

When it comes to housing loans, numerous individuals don’t refinance. A fundamental number are oblivious they have the option of shifting their loan to another financier; others are simply indifferent. They stick with their very first loaner and the “reward” for such loyalty tends to be higher interest rates. Due to the magnitude of mortgages and the tenure that the home loan is amortized over, the interest we are talking about here can easily extend from 1000′s to hundreds of thousands of dollars. Take a look at the following components to see whether it’s time for you to consider refinancing.

Current Mortgage Interest Rate

It is decidedly a good indication for you to explore refinancing when your current interest rate is higher than available home loan packages on the market. A first step to take is to go back to your existing bank or financial institution and ask them to revise your package, otherwise known as repricing. If your lender comes back with an offer, it will usually be better than your current one. You can then compare this offer with offers from other lenders to see whether you should switch or stay put.

Lock-in and Clawback Periods

When you take up a housing loan, there may be a lock-in period where your mortgage lender will charge you a penalisation fee, commonly a percentage of your outstanding loan amount, if you were to fully repay your loan. Almost all home loans also come with a clawback period where the lender will claim back “freebies”, such as legal subsidies, that they “gave” you when you take up your loan (Note: lock-in period is separate from clawback period). It may not be worthwhile for you to refinance due to such costs.

Loan Quantum

The larger your loan amount, the greater your savings for the same decrease in interest rates. For instance, 1% on a loan of S$100,000 is much less than 1% on a loan of S$500,000. However, fixed cost to refinancing, which represents mainly of legal fees, do not vary much with loan quantum. The difference between your existing and refinancing interest rates, therefore, has to be bigger for a relatively smaller home loan as fixed cost eats into a more substantial portion of your interest rate savings.

Perceived Interest Rate Movements

Your view on how interest rates is moving can be a factor when thinking whether you should refinance. If you are currently on a fixed rate package and think interest rates are dropping, you may want to refinance to a floating rate package. Conversely, if you are on floating rates and believe interest rates are skyrocketing, changing to fixed rates may be a good choice.

Individual Financial Appraisal

If there is a change in your financial state, you may want to vary your package particulars via refinancing. For example, you are beginning your own company and do not want unpredictability in other areas. Give some consideration to taking up a fixed rate package. Maybe you want cash to invest in another place. Consider raising your loan quantum. Or your monthly income has increased and you want to reduce interest loan payments. Contemplate reducing your loan tenure.

Consider calling us today if you are looking for refinancing in Singapore. We can save you a lot of money plus give you the latest advice all for free.