Mortgage
Refinance Home Loan To Slash Your Existing Mortgage Rates
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If you are currently paying 3% or more on your housing loan, it does not take a genius to realize that it is time to refinance now.
This is especially so when there are home loan deals in the market at 1% fixed rate.
Home loan interest rates are at their lowest point in years. And if you fail to take advantage of refinancing your existing housing loan, you are voluntarily being taken for a ride.
Before you make that decision to refinance your home loan, here are a few questions to ask yourself.
1) Will refinancing lower my monthly installment payments?
2) Will I obtain lower interest rates if I refinance my home loan?
3) Can the term of the housing loan be shortened by a good few years?
4) Is the costs that I will incur insignificant to the savings that I will enjoy for home loan refinancing?
5) Can I obtain a cashout equity loan on my property if I want to?
If the answer to all of those questions are YES. Then it does make perfect logical sense to refinance your existing mortgage loan.
The key reason for refinancing is always to save on interest charges.
A difference of 1 percentage point can potentially save you thousands of dollars just over 2 to 3 years depending on your loan amount.
As refinancing a home can be a very big decision to make when your property is of considerable market value, here are some steps to take before you make that big decision.
Other than taking advantage of existing low housing loan interest rates, here are some other things you can do when you are considering Singapore home loan refinancing.
1) Change the loan tenor
If you are in a personal circumstance where you need to extend or reduce the home loan tenor, you can request for it during the refinancing process.
Extending the loan tenor through refinancing will mean that you will be paying more in interest charges, but will also be servicing a lower monthly installment in dollar amount.
The opposite hold true for decreasing the loan tenor.
However, if there is a very drastic reduction in housing loan interest rates because the bank felt charitable for one reason or another, everything may just go in your favour.
2) Change the interest rate structure
You may be currently be on floating and adjustable rate mortgages.
This can sometimes give you panic attacks when there are sudden market movements, especially so in the current unpredictable economy.
In this case, you can consider changing your housing loan to one with a fixed rate.
This can give you more peace of mind over your housing loan.
3) Harness the home equity in your property by generating cash for other investments
If you have good investments in the pipeline, taking up a loan against your property value can be a good move to maximise your personal financial returns.
The simple logic is to use the funds from your home equity loan on investments that has a higher return than the interest rates that you will be paying for the new home loan which would be replacing the old one.
However, these comes with risks and one must be pretty confident of good returns to go this route.
Quick 10 Step Housing Loan Singapore Refinancing Guide
1) Make sure you will not be charged a prepayment penalty for redeeming your housing loan.
Read and re-read the original facility letter given to you when you first accepted the original home loan.
Look out for the lock in period, legal clawback. and any other penalty fees which you might incur.
2) Compare your current mortgage rates against existing mortgage rates available in the market
It would make absolutely no sense whatsoever to refinance to a higher interest rate… unless you are seeking a cash out where freeing up funds from home equity is a priority.
If the focus is purely on interest rates, consider discussing with your lender about re-pricing first.
3) Use a proper relevant mortgage calculator to work out your existing home loan repayment schedule with amortization.
Note that there are thousands of housing loan calculators available online. But most of them are irrelevant and not useful.
If you need serious help on this one, you call always contact us.
4) Work out the repayment schedule and amortization table of the loan package that you are considering to accept.
Play with the numbers by keying in your desired tenure or monthly obligation to find out your comfort level regarding the repayment installment amounts.
Affordability should be a key factor in decision making for refinancing.
5) From the data generated from the analysis of your current home loan and proposed new loan, you should be able to tell how much you can save in interest charges by refinancing, including when would be the breakeven point.
At current prevailing rates, you may get a shock!
This is a basic yet critical step in making proper mortgage comparison between offers.
It also gives you a feel of the types of mortgage and interest rates that you can qualify for.
Many factors can affect what kind of interest packages a lender may be willing to offer you.
This is why it would be a HUGE mistake to only approach 1 lender.
At this point, it is also wise to obtain the indicative valuation of the property by the bank’s valuers.
7) Ask for legal subsidies.
There is legal work involved for refinancing. This means that you will pick up legal fees.
Some lenders can offer you full legal subsidies, while others will only subsidize a portion of the legal fees.
Some disguise them as cash backs, cash rebates, or even shopping vouchers.
So find out which are the lenders that will offer those subsidies and evaluate their offers.
8 ) Ask neutral parties who have your interest in mind about their opinion.
You can bet that every banker will communicate to you directly or indirectly that their deals are the best in the market.
It is not possible that every bank has the best deal in the market.
Maybe someone looking at what’s happening on the outside can give you a more objective picture of what is going on.
9) Ask the lender in detail about any extra charges that you will incur. Probe.
Failure to do this is like walking yourself into a slaughter house.
10) Take up the best suitable offer.
The above is a thorough guide to get the best refinancing package that puts your interest first.
Saying that, it is always best to talk to your existing lender about restructuring your current housing loan via re-pricing.
Because they probably have all your existing records, they can make you an offer very quickly.
However, when the offer from your existing lender is not competitive with what is available in the market, maybe it is time you switch lenders.
The prime directive of taking up refinancing is that the benefits has to absolutely outweigh the costs of sticking to your existing home loan.
It wouldn’t make sense to refinance otherwise.
If you find that it takes too much time and effort to do all these yourself, you can engage our FREE service to help you source for the best refinancing deal in the Singapore market today.
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