HJDS Investment Group BLOG

Even though refinancing a housing loan can save you 1000′s of dollars you will be dumbfounded that not that many people in reality take the time to do it. If you considered the time it takes and calculate the cost saving benefits and compare 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 home loan today.

Current Mortgage Interest Rate

It is decidedly a good 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 existing 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 penalisation fee, normally a percentage of your outstanding loan amount, if you were to fully repay your mortgage. Almost all mortgages 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 commendable for you to refinance due to such costs.

Loan Quantum

The larger your housing loan amount, the greater your savings for the same reduction 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 current and refinancing interest rates, therefore, has to be bigger for a comparatively smaller housing loan 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 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 effective choice.

Individual Financial Assessment

If there is a change in your financial state, you may want to change your package details via refinancing. For example, you are opening your own business and do not want volatility 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. 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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