Your home is probably the most important investment you’ll ever make, and many people need a loan to pay for their home. But if you find yourself paying more than 2% interest on your home loan, then it might be time to find a lower interest rate.
To refinance your loan, it could mean changing your bank or signing up for a new package deal with your current bank. If you choose to do the latter, that is considered repricing. Though repricing means you do not pay new legal fees nor need a reevaluation of the property, it doesn’t mean that it’s cheaper than refinancing. Refinancing Home Loan Singapore brokers are more competitive than banks to provide homeowners with the lowest rates possible.
Who can refinance?
Basically anyone needing a loan. Outstanding loans of $500,000 or over are better to refinance than reprice.
You can refinance if you meet the following conditions:
1. Ended a bank’s lock-in period
You’re obliged to stay paying the rate you signed up for during this period if there is a lock-in duration. Start searching around for new, lower packages some months before ending your current deal.
2. Ended a bank’s claw-back period
Banks used to pay subsidies such as fire insurance or valuation, and banks would try to get that back when you try to break free. It has legal implications. Generally, claw-backs, since 2012, have been paid by the owner and not the lender. Yet, check to see if your current lender has a claw-back stipulation because you could wind up paying claw-backs to the old lender and subsidies to the new lender.
3. Finding other banks or companies with a better interest rate
At the time, you’re bound to come up with another bank or broker with a lower interest rate.
When should you refinance?
There are peak times when refinancing is a smart move. Usually, you will find low rates during the first two years of a loan from a bank, yet starting after that, loan hikes begin to happen and this is the time to make your move. An online search will show you what packages are out there and suitable for you. The whole idea is to find a cheaper rate, so you should be looking for at least at 0.5% difference between your current rate and the new one. If you have an outstanding loan, this will make a substantial difference in what you pay.
Loan tenure
It’s the monthly payments of a loan that is often the load on people. While you might have been comfortable with payments, you could lose a steady income for any reason over-night and stay that way for some time without a good income to pay the loan comfortably. Here, refinancing is helpful where you could extend the tenure for more years. While this means extra interest increasing the overall cost, it is a lower monthly payment.
If your loan interest rate was fine at one point, it might not be anymore. But you can find other options and better rates with home loan brokers and put your mind at ease.