Even though refinancing a housing loan can save you thousands of dollars you will be astounded that not that many individuals actually take the time to do it. If you considered the time it takes and figure out the cost saving benefits and equate that to how much you get paid per hour it could be like not going to work for several weeks. Consider the following aspects so that you can see how easy it is to refinance your mortgage today.
Current Mortgage Interest Rate
It is definitely a positive indication for you to explore refinancing when your current interest rate is higher than available 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 penalty fee, commonly a percentage of your outstanding loan value, if you were to fully repay your home loan. Almost all 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 mortgage (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 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 existing and refinancing interest rates, therefore, has to be bigger for a relatively smaller loan as fixed cost eats into a more substantial 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 presently 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, shifting to fixed rates may be a good choice.
Personal Financial Appraisal
If there is a change in your financial state, you may want to alter your package details via refinancing. For instance, you are opening your own business and do not want volatility in other areas. Give some thought to taking up a fixed rate package. Maybe you want cash to invest in different place. Consider raising your loan quantum. Or your monthly income has increased and you want to minimise interest loan payments. Consider 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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