Learn How Much
You Can Save
By Refinancing Your Home Loan

Refinancing a home loan means obtaining a new loan from a different lender or renegotiating the terms of your current loan with your lender. This is typically done to secure a lower interest rate, which can lead to lower monthly payments and potentially shorten the overall term of the loan.

An interest rate risk analysis is the first step to take when considering refinancing a home or HDB loan. Here's an example of how it works:

Let's say John has a $1 million mortgage loan for 25 years with an interest rate of 1.4% per year. He currently pays $3,953 per month. If interest rates were to increase by 0.1% to 1.5% per year, his monthly payments would increase by $47, or $564 per year.

However, it's important to note that while John would pay an extra $564 that year, he would also end up paying an additional $1,000 in total interest that year. This is because when interest rates rise, a smaller proportion of the monthly payments go towards paying off the principal, resulting in a higher outstanding loan balance at the end of the year.

In Singapore, home loans and mortgage refinancing involve switching from one bank's mortgage loan to another, typically in order to secure a lower interest rate, increase the loan amount, or adjust the loan term to align with one's financial objectives. The process also requires the involvement of a lawyer who will draft the necessary legal documents for the refinancing.

A lock-in period is a set time frame during which an individual is required to remain with a bank for a specific loan package. If the borrower chooses to refinance, or make partial repayment or full repayment before the lock-in period ends, a penalty fee may be imposed.

When refinancing, there are two types of costs to consider: legal fees for the services of a law firm and valuation fees charged by the bank. In many cases, if the remaining loan amount is $300,000 or more, banks will often cover some or all of the legal and valuation fees, making the overall cost relatively low and often less expensive than renegotiating with the current lender.

Repricing is the process of switching to a different interest rate package within the same bank. It typically comes with a fee of between $800 and $1000. Additionally, for existing customers, the package offered by the current bank is often less favourable compared to the one offered to new customers.

Refinancing, on the other hand, is the process of obtaining a new housing loan package from a different bank. Banks typically offer incentives, such as subsidies, to attract new customers and their interest rate packages are generally more favourable. As long as the borrower is eligible for these incentives, it can be a financially beneficial decision to refinance.

In Singapore, home loan packages offered by banks are subject to change and can fluctuate based on various economic factors. This means that no single bank consistently offers the best deal. It is important to compare different home loan options before making a commitment to a particular package.

Home Loan Whiz offers the advantage of speaking with experienced home loan experts who are well-informed about current home loan rates. This eliminates the need to visit multiple banks, saving time and effort. Furthermore, our service is offered at no cost, ensuring that our analysis is unbiased and focuses on providing you with the best possible home loan rate.

SIBOR stands for Singapore Interbank Offer Rate. It is a reference rate that represents the cost of borrowing for banks operating in Singapore. It is used as a benchmark for pricing a wide variety of financial products, including mortgages, personal loans, and fixed deposits. The SIBOR rate is determined by the Association of Banks in Singapore and is based on the interest rates at which banks lend to one another in the interbank market. The SIBOR rate fluctuates daily based on market conditions and is widely used as a benchmark for interest rates on a wide range of financial products offered in Singapore.

SORA (Singapore Overnight Rate Average) is a measure of the average rate at which banks borrow and lend in the interbank market for Singapore Dollar overnight funds. It is calculated based on the volume-weighted average of all borrowing transactions in the market between 8am and 6.15pm.

A fixed rate is a type of interest rate that is set for a certain period of time, typically between 1-30 years, and remains unchanged during that time period. This means that the borrower will have the same monthly mortgage payments for the entire term of the loan, regardless of changes in market interest rates. This can provide a sense of predictability and stability for borrowers, as they know exactly how much their mortgage payments will be for the entire term of the loan. However, it also means that if market interest rates decrease, the borrower will not benefit from the lower rates.

Board rates refer to the interest rate set by the central bank of a country, such as the Federal Reserve in the United States or the Monetary Authority of Singapore. These rates are used as a benchmark for other interest rates in the economy, such as those on mortgages, loans, and savings accounts. Banks and other financial institutions use the board rates as a guide when setting their own interest rates on loans and other financial products. The central bank adjusts these interest rates according to the economic conditions in order to achieve its policy objectives, such as controlling inflation or stabilizing the economy.

Refinancing your housing loan is essential for achieving cost savings. To ensure that you are not overpaying for your home loan, it is recommended to refinance every 2-3 years. This is because most home loan packages will have an increase in interest rates after the lock-in period has ended, particularly for those with fixed-rate packages. Additionally, if you have a floating-rate loan that you took out 2-3 years ago, it is likely that the interest rate has risen and you may now be paying a higher rate. This is when you can consider refinancing to a bank offering a more favourable interest rate package, or if you expect interest rates to continue increasing, consider refinancing to a fixed rate to protect against that risk.

It is worth noting that refinancing your home loan may result in a temporary and minimal decrease in your credit score. However, it's important to keep in mind that this effect is only temporary and your credit score will recover quickly.

There is no restriction on the number of times you can refinance your home loan, as long as you are able to secure lower interest rates. However, it's important to plan your refinancing strategically to avoid incurring penalty fees.

Yes, banks pay our fee through their commission, so it doesn't affect the rates being offered to you. This mutually beneficial arrangement allows the banks, our company and the bankers to continue providing you with the best rates, and unbiased advice for home loans while helping you save money.

Home Loan Whiz is here to guide you in the right direction, you can trust us to always find the best deal for your home loan.

Home Loan Whiz is dedicated to providing assistance to our clients, whether you are seeking help now or in the future. Our belief is that everyone should have access to knowledge and expertise when it comes to a new purchase or refinancing decisions. We invite you to reach out to us and allow our mortgage specialists to provide you with expert advice.

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