If you are paying more than 1.5% for your housing loan, you should consider refinancing the Singapore home loan as the interest rates are around 1.3% rate in 2017. With low home loan interest rates returning to the market, taking the opportunity to refinance will maximise your money efficiency. We share 9 tips on how to refinance your home loan without stress.
Refinance tips
- Find out if refinancing will lead to reduced monthly installments or whether you can stretch the loan tenure to take advantage of the low interest rates. If all these answers are yes, and if you can get cash out equity on your property if required, then it’s logical to refinance your existing home loan. Even a difference in 1% can save you thousands of dollars over your loan tenure.
- You can also request for an extension of your loan tenure. 30-35 years are allowed for refinancing only. Although you pay more interest in the end, your monthly payment amount is reduced. You can also have your interest rate structure changed from your existing floating and adjustable rates to a fixed rate loan. Fixed rate loans don’t change with market movements, and thus give you peace of mind with your Singapore housing loan, although it may not necessarily reduce your repayments.
- Remember that today’s low interest rate environment is an opportunity to stretch the tenure and reduce repayments. When interest rate rises, you will have opportunities to make partial prepayment or reduce the loan tenure.
- You can also harness your property’s increased home equity by generating cash for other investments and to maximize your personal financial returns. Basically you have to make investments with higher returns than the interest rates you pay for your refinance home loan.
- Make sure you compare your current loan rates with the market rates using a refinance home loan calculator to find out how much you will save on your interest charges. Make sure you make comparisons between at least 3 lenders to find the best refinance home loan for yourself. Be careful of the many simple housing loan calculators and use a smart one that’s customized for Singapore mortgages that considers different interest rate over the years for calculation.
- You should not be charged any penalty for refinancing your home loan. So re-read your papers and look out for the legal clawback (typically 3 years and not pro-rated) and lock in period of the current loan.
- There is legal work involved in refinancing home loans. While some lenders offer full legal subsidies, some subsidize only a portion of the fees. So you can find or negotiate with the lenders to offer full subsidies and evaluate their offers. Also find out if the lender has any extra charges you will incur.
- You can always ask your existing lender to restructure or reprice your loan for a typically small fees; however if the new loan is not competitive with other offers in the market, it’s time to change lenders to refinance.
- With so many considerations, an alternative is to engage an independent mortgage broker who has your interest in mind to refinance home loan to pick the right rates, restructure the loan and adjust the loan tenure.
- With these tips, it’s time to compare the latest refinance rates.
Contact us today for the best mortgage advice!
