When it comes to housing loans, numerous individuals don\’t refinance. A large number are unaware they have the choice of switching their loan to different financier; others are simply apathetic. They stick with their very first loaner and the \”reward\” for such loyalty tends to be higher interest rates. Due to the magnitude of housing loans and the tenure that the home loan is amortized over, the interest we are talking about here can well stretch from thousands to 100,000\’s of dollars. Take a look at the following components to see whether it\’s time for you to consider refinancing.
Current Interest Rate
It is definitely a good indication for you to research refinancing when your current interest rate is higher than available home loan packages on the market. A first step to take is to go back to your current 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 commonly 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 mortgage, there may be a lock-in period where your housing lender will charge you a penalisation fee, commonly a percentage of your outstanding loan amount, if you were to fully repay your loan. Almost all housing 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 mortgage (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 larger your savings for the same reduction in interest rates. For instance, 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 mortgage as fixed cost eats into a more significant share of your interest rate savings.
Perceived Interest Rate Movements
Your view on how interest rates is moving can be a factor when thinking 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, shifting to fixed rates may be a good choice.
Personal Financial Assessment
If there is a change in your financial state, you may want to vary your package particulars via refinancing. For instance, you are opening your own company and do not want unpredictability in other areas. Give some thought to taking up a fixed rate package. Maybe you want cash to invest in another place. Consider increasing your loan quantum. Or your monthly income has increased and you want to reduce interest loan payments. Contemplate 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.
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Variable Or Fixed What Will Be The Decision
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