When it comes to housing loans, many individuals don't refinance. A fundamental number are unaware they have the option of switching their loan to different financier; others are simply indifferent. They stick with their very first loaner and the "reward" for such loyalty tends to be higher interest rates. Due to the order of magnitude of mortgages and the tenure that the loan is amortised over, the interest we are talking about here can easily extend from 1000's to hundreds of thousands of dollars. Take a look at the following components to see whether it's time for you to consider refinancing.
Current Mortgage Interest Rate
It is decidedly a good 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 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 ordinarily 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 housing loan, there may be a lock-in period where your mortgage lender will charge you a penalisation fee, ordinarily a percentage of your outstanding loan amount, if you were to fully repay your 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 commendable for you to refinance due to such costs.
Loan Quantum
The larger your home loan 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 housing loan as fixed cost eats into a more significant part 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 believe 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, switching to fixed rates may be a solid choice.
Personal Financial Appraisal
If there is a change in your financial state, you may want to vary your package particulars via refinancing. For example, you are beginning your own business organisation 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 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 advisors 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 boring process.
Current Mortgage Interest Rate
It is decidedly a good 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 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 ordinarily 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 housing loan, there may be a lock-in period where your mortgage lender will charge you a penalisation fee, ordinarily a percentage of your outstanding loan amount, if you were to fully repay your 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 commendable for you to refinance due to such costs.
Loan Quantum
The larger your home loan 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 housing loan as fixed cost eats into a more significant part 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 believe 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, switching to fixed rates may be a solid choice.
Personal Financial Appraisal
If there is a change in your financial state, you may want to vary your package particulars via refinancing. For example, you are beginning your own business organisation 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 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 advisors 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 boring process.
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