Are you having trouble repaying your mortgage loan? Do you think the interest rate you are paying is too high? Do you want to shorten the loan term and become debt-free quickly? If your answer to all three questions is yes, then the solution could lie in refinancing your loan. Refinancing meaning trading your loan with another loan with a more favourable interest rate and term.
The first step in refinancing a home loan is to determine whether it’s the right time or not. You can’t move your loan at any time you like. Banks won’t just let you go without penalising you. The first 2 – 3 years after you have taken the loan is called the lock-in period. If you move your loan during this period, you will have to pay a fine of 1.5 – 2 percent of the outstanding loan.
If you have a loan with interest rate pegged to Singapore Inter-Bank Offered Rates (SIBOR) or Swap Offered Rate (SOR), then the bank may ask you to redeem your loan before the interest rates are reset. SIBOR and SOR interest rates are reviewed every month or every quarter.
The right time to refinance your home loan is when the lock-in period has expired and before the SIBOR and SOR rates are reviewed.
Once you have decided to refinance your loan, the next step is to inform your bank of your intentions. Since banks usually take three months to approve your request, you will have plenty of time to find another lender. You can either refinance with the same bank or another bank. The important thing is to find a refinancing package that has a lower interest rate and other things you are looking for.
When applying for refinancing, you will be required to submit a copy of your SingPass, last 15 months’ CPF contribution history and last 3 months’ play slip along with the completed application form. The documents and information you have provided must be accurate to the smallest detail and must not contradict each other. If the bank’s loan reviewer finds even a small discrepancy, he or she may reject your application.
The application, along with the valuation, is reviewed by the bank’s credit officer whose job is to determine that you have financial resources to pay back the loan. He or she may ask you a number of questions to ascertain that the information you have provided are correct. If he is suspicious, you may even be asked to submit additional documents.
Once the credit officer is satisfied, he will issue a letter of approval. The next step is to get your loan agent to lock the mortgage rate. This protects you from a rate rise.
The final step in refinancing a home loan is to sign the loan agreement and obtain the loan. Make sure to do this before your rate lock expires. Otherwise, you will have to pay the current, floating rate. After signing the document, the fund will be released to pay off your loan. Now you will have a new loan with a different interest rate and a different term.
Refinance packages for Singapore Home Loans
Why refinance your home?
Refinancing means taking a new home loan to pay off your current mortgage.
Before refinancing, borrowers should consider their financial situation over the next three to five years. You should ask yourself whether flexibility (no lock in period), a lower interest or predictable interest is the goal. It is also wise to consider if there will be any significant changes to your financial situation. Examples, a change in job, a new child or plans to sell the property. There is a range of reasons when refinancing makes sense.
- Your current interest rate is no longer competitive.
- You are switching from a variable home loan to a fixed home loan or vice versa.
- You like to draw home equity to pay for renovations, child’s education or investments.
- A major change in your financial situation
When should you refinance?
Around every three years is a good time to fully reassess your home loan. Majority of loans will default to their thereafter rates after the third year. Moreover over the years, loan packages may have improved, and there might be a better deal out there. If you have a lock in period on your current loan, it would be a good idea to start looking to refinance your home loan at least three months prior to expiry.
Can I refinance a home loan?
You can refinance you home loan anytime throughout the loan period. Before you refinance, you should consider factors such as penalty during lockin period and offer from your existing bank. Other factors include guidelines set by Monetary Authority of Singapore (MAS).
Can you refinance home equity loan?
Home equity allows the home owners to borrow against its property. Home owners will receive home equity in cash. Usually the interest rate is the same as the home loan. Because it’s a loan against the property, you may be able to refinance your equity loan.
What does refinance a home loan means?
Refinance a home loan means switching your home loan from your existing bank to another bank. Usually you will refinance to lower your interest rates.
Those considering to refinance their home loans should consider the following:
Be confident about your choice
We have created a resource that allows you to compare home loans currently available to your existing one. This means that you can see all of the available options in one place. This easily allows you to have all available information regarding housing loans in front of you, making comparisons easy, and ensuring you select what is best for you.
How to refinance Singapore home loan?
To start your refinance, you should approach other banks and check what their offers are. You can also use various mortgage comparison websites to do a quick calculation to gauge if there is any significant savings. When you are ready to refinance, contact the bank you want and start the application.
When to start refinancing my home loan?
You should consider refinancing your home loan when your existing home loan is 3-6 months before the lockin period is over. Refinancing may help you to lower your interest rates and thus your monthly payments.
Should I refinance my home loan?
You should consider to refinance your home loan when 1) your interest rates are higher than what others are paying 2) you like to switch to another package 3) there is a major change in your financial arrangement.
Can I refinance my HDB loan?
Yes. You can refinance your HDB loan from HDB to a bank or from your existing bank to another bank.
Can I get equity loan from my HDB?
No. Equity loan is only available to private residential property. It is not available to HDB.
How to refinance my HDB home loan?
To start your HDB refinance, you should approach other banks and check what their offers are. You can also use various mortgage comparison websites to do a quick calculation to gauge if there is any significant savings. When you are ready to refinance, contact the bank you want and start the application.
Will bad credit affects my refinance?
Yes, if you have bad credit. Depending on the borrowers’ credit rating, the banks may reduce the loan amount or reject the loan application.
How to contact us?
For any enquiries, please drop us an email at firstname.lastname@example.org.
Which Home Loan Type Should I Choose?
|The type of home loan may affect your monthly payments and interest rate. Here’s a look at the pros and cons of some common loan types.|
|Fixed Rate||Variable Rate|
|Spread||N.A||SIBOR||Fixed Deposit||Board Rate|
|Suitable for||Homeowners who prefer stable payments.||Homeowners who are comfortable with changing payments.||Homeowners who prefer some stability in their monthly payments.||Homeowners who prefer some stability in their monthly payments.|
|Interest Rate||Usually rates are fixed for the first few years. Thereafter it will be a variable rate.||Commonly use rates are 1 Month SIBOR and 3 Month SIBOR. Rate is transparent and can be found in papers.||Uses the bank’s fixed deposit rate as a benchmark. Rates are priced internally by the bank.||Uses the bank’s board rate as a benchmark. Rates are priced internally.|
|Monthly Payment||Stable during the period rates are fixed.||Variable payments during the loan period. May increase when SIBOR rises.||Variable but change in payments may be less volatile than SIBOR||Variable|
|Advantages||Not affected by fluctuating rates like SIBOR and SOR during the fixed period.||May enjoy lower payments when SIBOR falls.||Perceived as more stable rates than SIBOR||Rates are usually lower for the first few years.|
|Additional Details||Usually there will be a penalty for partial or full redemption during the lock in period.||Provide a lot of flexibility in terms of repayment or switching of packages.||Usually there will be a lock in loan period for completed property.||Provide a lot of flexibility in terms of repayment or switching of packages.|