Refinancing Your Home

Even though refinancing a housing loan can save you thousands of dollars you will be startled that not that many people actually take the time to do it. If you considered the time it takes and calculate the cost saving 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 decidedly a positive indication for you to research 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 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 ordinarily 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, commonly a percentage of your outstanding loan amount, if you were to fully repay your housing loan. Almost all housing loans 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 home 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 mortgage amount, the larger 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 relatively smaller 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 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 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 change your package particulars via refinancing. For instance, you are starting your own business organization 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.

If looking through this article is giving your a headache or you simply want to save yourself the trouble, contact us for a non-obligatory loan consultation. Our professional consultants not only frees up your time but also do not charge any fees to help you get the best deal. Refinancing does not have to be a tedious process.

Find out more about a premier Housing Loan advisory firm, providing Housing Loans with free mortgage broking.