Singapore Refinancing Your Home
October 15th, 2009 by Felicia ChewWhen it comes to mortgages, many individuals do not refinance. A significant number are oblivious they have the choice of changing their loan to different 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 housing loans and the tenure that the loan is amortized over, the interest we are speaking about here can well extend from thousands to hundreds of thousands of dollars. Take a look at the following factors to see whether it's time for you to consider refinancing.
Current Interest Rate
It is definitely a positive indication for you to explore refinancing when your current interest rate is higher than available housing loan packages on the market. A first step to take is to go back to your current banking company or financial institution and ask them to revise your package, otherwise known as repricing. If your lender comes back with an offer, it will normally 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 mortgage, there may be a lock-in period where your housing lender will charge you a penalty fee, commonly a percentage of your outstanding loan value, if you were to fully repay your loan. Almost all mortgages also come with a clawback period where the lender will claim back "freebies", such as legal expenses, that they "gave" you when you take up your mortgage (Note: lock-in period is separate from clawback period). It may not be valuable for you to refinance due to such costs.
Loan Quantum
The larger your home loan amount, the larger 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 comprises mainly of legal fees, do not vary much with loan quantum. The difference between your current and refinancing interest rates, therefore, has to be bigger for a comparatively smaller loan as fixed cost eats into a more fundamental part of your interest rate savings.
Perceived Interest Rate Movements
Your view on how interest rates is moving can be a factor when considering 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, switching to fixed rates may be a good choice.
Personal Financial Appraisal
If there is a change in your financial state, you may want to change your package particulars via refinancing. For instance, you are beginning your own business organization and do not want unpredictability in other areas. Give some thought 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.
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