When it comes to housing loans, many people don’t refinance. A substantial number are unaware they have the option of shifting 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 order of magnitude of housing loans and the tenure that the housing loan is amortised over, the interest we are speaking about here can well stretch from 1000’s 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 decidedly a good indication for you to research refinancing when your current interest rate is higher than available housing 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 ordinarily be better than your current 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 mortgage lender will charge you a penalty fee, commonly a percentage of your outstanding loan amount, if you were to fully repay your housing loan. Almost all loans also come with a clawback period where the lender will claim back “freebies”, such as legal subsidies, 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 loan amount, the larger your savings for the same decrease 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 represents mainly of legal fees, do not vary much with loan quantum. The difference between your existing and refinancing interest rates, therefore, has to be bigger for a comparatively smaller home loan as fixed cost eats into a more significant portion of your interest rate savings.

Perceived Interest Rate Movements

Your view on how interest rates is moving can be a factor when considering whether you should refinance. If you are currently 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, changing to fixed rates may be a good choice.

Individual 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 volatility in other areas. Give some thought to taking up a fixed rate package. Maybe you want cash to invest in different place. Consider increasing your loan quantum. Or your monthly income has increased and you want to minimise interest loan payments. Contemplate reducing your loan tenure.

If looking through this article is giving your a headache or you simply want to save yourself the trouble, contact us for a non-obligatory mortgage consultation. Our professional advisors not only frees up your time but also do not charge any fees to help you get the best deal. Refinancing does not have to be a boring procedure.

Find out more about a premier Housing Loan advisory firm, providing Housing Loans with free mortgage broking.

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There are two types of housing loan packages in Singapore: fixed rates or floating (variable) rates.

Singapore fixed rate packages are usually offered for up to 3 years, but there are some lenders that go up to 5 years fixed rates or even 10 years. This is opposite from many Western countries where rates can be fixed throughout the loan tenure.

On the other hand, floating rates are classified into published rates or board rates. Like Singapore Interbank Offered Rate (SIBOR) or Singapore Swap Offer Rate (SOR), published rates are normally rates that are published daily. Meanwhile, board rates are defined by the respective bank or financial institution. Most lenders tie their board rates to certain financial bech marks such as the SIBOR but the exact factors are often obscure and variations in board rates tend to be variable.

In general, there are no restrictions on emigrants acquiring housing loans in Singapore but do pay attention of the following.

Loan to Value

In Singapore, the maximum loan to value (LTV) is 90% of the purchase price or valuation, whichever is smaller. Some loaners do not give maximum LTV to emigrants, thus, housing loan packages for 90% financing are restricted. Loan approval for 90% funding is also tighter than for LTV 80% and below.

Income Proof

To get commnedation for a housing loan your latest income tax assessment or a letter of appointment from your local employer is necessary. Some local lenders do not accept tax assessments from other countries.

Landed Property

The approval from Singapore Land Authority is mandatory before emigrants can purchase restricted properties such as vacant land or landed properties such as bungalows, semi-detached, and terrace houses.

In-principle Approval

Try to apply for an in-principle approval before going with a purchase, since loan applications are more complex for emigrants. Think of hiring a respected and professional housing loan consultant. This may help you save time and money with your loan approval.

Find out more about a premier Housing Loan advisory firm, providing Housing Loans with free mortgage broking.

Once you decide to take up a home loan, the immediate matter that tempests your mind is selecting between fixed and floating rate of interest. It is easy to get dumbfounded at this point if you are not financially trained.

Normally, when news media splashes reports on banks increasing housing loan interest rates in and their affect on Monthly Installments, you may take for granted that it is better to opt for fixed housing loan rates. In fact, your banker may also advise you to go for the same.

Now ideally as it should be, we assume that once you choose fixed rate plan for yourself the rate of interest will continue unaltered for the entire period you have fixed the interest rate for irrespective of any incidental increase in the same. But actually this is not always the case.

Here we demystify the nature of fixed interest rate housing loan transaction for you so that you can make an knowledgeable conclusion over the subject.

* Check the small print of a loan. The bank has the right to serve you 30 or 60-days notice that it intends to increase its rates.

* The bank’s first-year rates are binding on the bank only for that short period of 1 or 2 months. The 2nd-year home loan rates are not binding at all. Neither are the bank’s 3rd-year loan rates.

* Force Majeure Clause

So, while you read your housing loan agreement papers, you can spot clauses like this:

“Provided further that from time to time, the bank may in its sole discretion alter the rate of interest suitably and prospectively on account of change in the internal policies or if unforeseen or extraordinary changes in the money market conditions take place during the period of the agreement.”

This is called Force Majeure Clause that enables the bank to undertake appropriate alterations in the interest rates on home loans they approve to their borrowers.

So remember to look at refinancing every couple of years so that you do not pay too much. If you select a good home loan company you can save a lot of money over the life of your mortgage and in most cases the consulting cost is free.

Find out more about a premier Housing Loan advisory firm, providing Housing Loans with free mortgage broking.

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