When it comes to housing loans, many people do not refinance. A fundamental number are oblivious they have the option of changing their loan to another financier; others are simply indifferent. They stick with their very first lender and the “reward” for such loyalty tends to be higher interest rates. Due to the order of magnitude of housing loans and the tenure that the mortgage is amortized over, the interest we are talking about here can easy stretch from 1000′s to 100,000′s of dollars. Take a look at the following elements to see whether it’s time for you to consider refinancing.

Current Mortgage Interest Rate

It is definitely a positive indication for you to research 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 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 mortgage lender will charge you a penalty fee, normally a percentage of your outstanding loan value, if you were to fully repay your mortgage. Almost all home 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 housing loan (Note: lock-in period is separate from clawback period). It may not be valuable for you to refinance due to such costs.

Loan Quantum

The larger your mortgage 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 comprises 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 currently 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 rocketing, converting to fixed rates may be a effective 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 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 another 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.

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

Related posts:

1. Things to Consider When Reinvesting Your Home
2. When Is Home Refinancing The Right Decision?
3. The Pros And Cons Of Refinancing Your House
4. How Does Today’s Economy Effect Refinancing My Home?
5. Important Tips For Refinancing A Mortgage

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