How To Save More On Your Mortgage

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Refinancing a home loan is an opportunity for homeowners to switch their home loan to another bank for a lower interest rate. This can help you save money in the long run.

Refinancing is usually done when you hit the 4th year of your home loan or after. That’s because typical home loan packages raise their interest rates after 3 years, after which the interest rate is likely to rise. So this is the best time to see if another bank can offer you a lower interest rate.

If your home loan is currently charging you more than 2.4% interest, you might be paying more than you need to, and should definitely consider refinancing.

Refinancing your home loan in Singapore means reducing your monthly repayment amount by switching to a lower interest rate.

When & Why Should You Refinance Your Home Loan Lock-in Period is About to End

Home loan refinancing should always be a strategic move. That’s why it’s important to know when your lock-in period will end. While it’s possible to refinance at any time, you’ll incur a penalty fee if you switch during the lock-in period. However, you shouldn’t wait until the very last day of the lock-in period. Bear in mind that there’s a 3-month notice requirement before you can jump ship. So plan ahead and start the refinancing process at least 4 months before the new interest rate cycle kicks in.

Loan Tenure Extension

Some home buyers refinance to improve their cash flow by extending their loan tenure. However, this can only apply if the existing loan tenure is less than the maximum loan tenure. Whether you’re looking at refinancing your HDB or private property, you can extend your loan tenure for a maximum of 35 years or until you reach the age of 75. Take note that the period served since your current loan’s first disbursement will be deducted from the maximum loan tenure extension.

Better Interest Rate

Another reason for refinancing your home loan would be changing to another loan type. Whether you’re converting from a fixed interest rate to a floating interest rate or vice versa, each type has its own merits.

With a fixed rate package, the interest rate is locked in for a certain period of time, ranging from 1–5 years. Since it’s deemed to be more stable, the rate is slightly higher compared to a floating rate package. By the time the lock-in period ends, your fixed rate package will change to a floating rate. Do note that converting from a fixed rate to a floating rate is only ideal if the home loan package you’re switching to has a lower interest rate, and if you’re able to keep track of SIBOR on a regular basis.

In the case of a floating rate package, the interest rate fluctuates depending on where your loan package is linked – SIBOR or Fixed Deposit. These floating rate packages may or may not have a lock-in period. Sometimes, home buyers who are tied to a floating rate switch to a fixed rate package, so they can better plan and manage their finances. Their fixed monthly repayments give them a sense of security.

Lower Monthly Instalment

When refinancing your home loan, you should aim for a lower interest rate to lower your monthly repayments. Usually, the next cycle of repayments will have higher interest rates because the mortgage schedule is always on an upward trend. So if you’re unable to take advantage of the refinancing window, which is 4 months before your existing home loan renews, you’ll end up paying higher monthly installments.

Unlock Equity Through Cash-Out Refinancing

Exclusive to private properties, homebuyers in Singapore can use their private property as collateral to take out an equity loan. Usually, the cash out is capped at 60–75% of the property value less the remaining loan amount and CPF used for the same property. It is advisable to avoid taking the maximum cash out allowed and to give leeway for changes in property valuation.

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Know your current home loan

It’s good that you’re thinking about refinancing your home loan. To make the process easier, you should have the information about your current home loan ready. This includes the outstanding loan balance, monthly installments, loan tenure, fees & charges, interest rates, and prepayment penalties.

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Compare the best home loan for refinancing

We work with iCompareloan to give you an overview of the latest home loan packages available in the market. With just a few clicks, you’ll be able to compare the best interest rates from our financial partners.

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Get in touch with our Mortgage Specialist

Our partner- iCompareloan is more than happy to give you unbiased advice on refinancing home loans in Singapore. They’ll fill you in with all the details, such as other costs when switching to another home loan. The costs involved are legal fees, valuation fees, and a penalty fee of up to 1.5% of your current home loan if you refinance during your lock-in period. Banks even offer subsidies for the legal and valuation fees, especially when there’s a significant amount of money involved.

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Refinance your home loan

Start applying for your new home loan at least 4 months before your current home loan lock-in period ends. You need to buffer enough time for the processing and the 3-month notice requirement. The earlier you prepare, the better, so we can address issues that may arise in the process of refinancing.

There are attractive home finance packages available currently, and now is an opportune time to re-evaluate your current home loan. 

Talk to our Home Finance Advisor to get more tips on how to save on your mortgage. 

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Call us immediately to arrange for a non-obligatory discussion.

We provide complimentary advisory services to assist you in:

  • Accessing your current situation and proposing personalized home finance options

  • Discovering the latest property market trends and insights

  • Exploring and comparing mortgage packages

Footnote: Within the terms and conditions of the mortgage agreement, there is usually a clause which explains that the remaining of the principle which would be recalculated over the remaining tenure of the loan. Most banks allow their customers to hold the monthly installments constant.