Are you looking to buy a house in Singapore or refinance an existing mortgage? This guide will give you the information you need to navigate the complicated world of home loans and refinancing.
Eligibility to Refinance
Check your eligibility before beginning the process of refinancing your mortgage. The majority of house loan packages include lock-in durations of two to three years. If you decide to move your loan somewhere else while the lock-in term is still in effect, there will be a penalty fee associated with it. Typically, this penalty fee ranges from 1.5 percent to 2 percent of the total amount of the outstanding loan.
HDB home loans do not have these limitations, it is important to note.
Interest Review Dates
For packages tied to SIBOR or SORA, interest review dates typically apply. The banks base the loan rate on a reference rate, such as SIBOR or SORA, and these rates are updated every month or every three months. Because of this, the banks try to prevent you from paying off the loan before the scheduled reset date. Therefore, it’s critical to ascertain whether there is a limited window of time during which you can act. If not, you can be required to pay yet another fee, which is normally another 1.5 percent of the total amount of the outstanding loan. Additionally, this date begins on the day your loan is disbursed and continues every month, quarter, or year, depending on the reference rate of your package. To sum up, we should only execute on the next available redemption.
The next item to look into is the date that your increased rates will go into effect because you want to refinance three months beforehand. The tempting interest rate you agreed to at the outset might soon change, and it might change very substantially. It’s time to take stock and get going. The best time to switch is three months before the higher rates take effect because all banks demand a three-month notice period before allowing you to relocate your loan to another creditor.
Before you bid your loan package a final farewell, make sure you have reaped all of its benefits. To win your business, for instance, the majority of bundles would have included sweeteners. These are the legal and valuation subsidies that your current financier has offered. If this partnership isn’t at least three years old, they aren’t free. What have you got to lose? between $2,000 to $5,000.
Total Debt Servicing Ratio (TDSR)
Last but not least, it’s time to assess how your finances have changed since you took out your last mortgage. The TDSR is calculated taking into account any new auto loans or credit card agreements you may have signed. The secret to TDSR is to divide your gross monthly income by the sum of all your monthly debt payments.
Where to Find the Best Rates for Refinancing for Your Home Loan?
After determining our eligibility, we can proceed to the following stage, which is locating the best refinancing rates.
Why do we seek out the best prices rather than the lowest? Because of this new period, we are now intelligent and knowledgeable enough to understand that the lowest option isn’t always the best. So, let’s maintain the current pace and pay attention. It’s time to select your steak and get it the way you like it right now because “best” is one man’s meat but another man’s poison.
Besides giving you the knowledge you require to act as a wise consumer and make an informed decision. The diligent approach or the smart way are just two of the many options for how to acquire the knowledge you require.
For instance, the diligent way – taking time off to visit all 16 banks in Singapore, repeating your requirements 16 times, reviewing the multiple packages provided by each bank, scrutinizing the fine print to ensure there are no hidden fees, and the list goes on.
Or, you can go the smart way – contact a mortgage broker, tell them what you need, and let them do the heavy lifting for you. Mortgage brokers have access to multiple banks’ home loan packages, which means they can help you compare rates and packages from different banks in Singapore. Moreover, brokers are usually up-to-date on the latest promotions, and they may even be able to secure better deals for you.
What are the Fees Involved in Refinancing?
Understanding the costs involved is essential before choosing to refinance your mortgage. When you refinance your mortgage, you pay off your current loan and obtain a new loan from a different bank or financial organization. The costs connected with refinancing may consist of:
- Prepayment penalty – If you are refinancing during the lock-in period, you may be charged a prepayment penalty. This penalty is usually a percentage of your outstanding loan amount.
- Valuation fee – This is a fee that you pay to have your property valued. The valuation fee is usually borne by the borrower and can range from a few hundred dollars to a few thousand dollars.
- Legal fees – Refinancing your home loan requires legal work to be done, including the preparation of legal documents and the registration of the new loan. Legal fees can range from a few hundred dollars to a few thousand dollars.
- Processing fee – This is a fee charged by the new bank for processing your new loan application. The processing fee can range from a few hundred dollars to a few thousand dollars.
- Disbursement fee – This is a fee charged by the new bank for disbursing your new loan amount. The disbursement fee can range from a few hundred dollars to a few thousand dollars.
It’s important to factor in these fees when considering refinancing your home loan. A mortgage broker can help you understand the fees involved and make an informed decision.
Saving money on your monthly mortgage payments can be achieved by refinancing your home loan. However, it’s crucial to comprehend the associated costs and take your eligibility for a refinance into account. You may locate the best rates and packages for your requirements by completing your research and dealing with a mortgage broker. Before choosing, keep in mind to compare interest rates, lock-in durations, and other terms and circumstances. Refinancing your mortgage can be a difficult process, but with the correct advice and assistance, it can go smoothly and without any problems.