Singapore Refinancing Your Home
When it comes to housing loans, numerous individuals don’t refinance. A large number are oblivious they have the alternative of switching their loan to different financier; others are simply apathetic. 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 mortgage is amortized over, the interest we are speaking about here can easy extend from thousands to 100,000′s of dollars. Take a look at the following elements to see whether it’s time for you to consider refinancing.
Current Mortgage Interest Rate
It is decidedly a positive 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 current 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 normally be better than your existing 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 housing lender will charge you a penalisation fee, ordinarily a percentage of your outstanding loan value, if you were to fully repay your housing 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 housing 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 mortgage amount, the greater your savings for the same decrease in interest rates. For example, 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 comparatively smaller mortgage as fixed cost eats into a more significant share 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 rocketing, shifting to fixed rates may be a effective choice.
Individual Financial Assessment
If there is a change in your financial state, you may want to vary your package details via refinancing. For instance, you are starting 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 different property. Consider increasing your loan quantum. Or your monthly income has increased and you want to minimise 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.
No related posts.