Refinancing housing loans including HDB in Singapore is often advertised with a lot of pomp and colour. However, there are red tapes to cross and fees to pay.
If You Are Yet to Exhaust Your Lock-in period – Prepayment Penalty
Some banks to refer to it as the “commitment period”, while others call it the “lock-in period”. If you have yet to exhaust this time lapse as stipulated in your mortgage loan contract, banks will levy a fee of approximately 1.5% of the outstanding loan amount. It is also known as a prepayment penalty. As the name suggests, the fee is punitive and penalizes the borrower.
You could have purchased a house through a new housing development, and the building is yet to be issued with a Certificate of Statutory Completion (CSC). In such a case, the bank will not disburse your loan in full.
Ensure that you are thorough on what costs you will incur when refinancing the housing loan. However, you will incur cancellation fees, like how you would incur a penalty for prematurely cancelling any other contract. Cancellation fees often range between 0.75% and 1.5% of the amount yet to be disbursed.
All mortgage loans attract legal charges due to the amount of paperwork and intricacies of mortgage contracts. Refinancing a mortgage loan in Singapore often means going through the same paperwork all over again. If your loan value does not attract sufficient interests for the bank to consider subsidizing this fees, you will incur legal charges afresh.
Legal fees range from between $ 1,800 for HDBs and $ 3,000 for private properties and what’s worse, in 2012 the Monetary Authority of Singapore (MAS) set in rules to make it more difficult for banks to give subsidies for residential homes.
Where your bank has extended a legal subsidy for your mortgage, taking steps at refinancing your mortgage loan in Singapore, will prompt the bank to levy clawback fees. Clawback periods (different from lock-in periods) are like temporary guarantees you give that you will retain the facility with them for helping you offset the legal charges.
Typically, claw back periods last about three years, and if you refinance your housing loan in Singapore before fulfilling this period, the bank is entitled to “clawback” the legal fees.
Clawback fees are paid to your previous lender. However, the facility will still need to go through various legal processes with your new lender. The new lender will engage a conveyancing lawyer to handle this work whose charges often exceed $ 2,000. Fortunately you can pay by cash or through funds in the CPF OA.
Refinancing housing loan in Singapore requires that the new lender evaluates the property’s value once again. Depending on the value and type of property, the new lender will charge a valuation fee.
Here’s the bottom line, refinancing a housing loan or HDB bank loan in Singapore is a good idea. However, you have to weigh the costs against the benefits. The fees mentioned above will give a good idea of what the costs of refinancing are like.