Refinancing Home Loan

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Refinance Your Home Loan To Enjoy Great Savings

Refinancing home loan means taking a new home loan to pay off your current mortgage. It is an opportunity to replace your existing home loan with a new one that may be a better fit for you.

Why People Choose To Refinance Their Home Loan?

With property appreciation, you would like to unlock cash value from your property to expand your business, do some investments, have a home makeover, go on a luxury vacation, or pay for your child’s education, etc.

You would like to lower your monthly repayments. You can consider extending the loan tenure and your monthly repayment would go down. However, you will end up paying more in interest over the duration of the loan.

You would like to pay off your mortgage faster. You can shorten your repayment schedule by reducing your home loan tenure. You may end up paying higher monthly instalments. However, you could save a significant amount of money, and you will own your home faster and be free of mortgage debt sooner.

Interest rates are keep changing. Your current interest rate may no longer competitive compared to three years back. When you reduce the interest rates on your existing home loan, you also reduce the interest component and increase the principal component of your monthly instalments.

You are considering to switch from a variable (floating-rate) home loan to a fixed home loan or vice versa.

Cost Considerations For Refinancing Home Loan

Depending on the terms and conditions of your existing home mortgage, you should consider the following:

  • Redemption costs: If your home loan is still within its lock-in period, you may have to pay back the subsidy or incur prepayment penalties when you refinance your home loan with another bank.
  • Conveyance fee: To complete your refinance, you will need to hire a lawyer to complete the refinance.
  • Valuation fee: When you refinance your home loan, the bank will hire a valuer to value your property.

In some cases, the banks may offer a subsidy to help offset the cost. It usually makes financial sense to refinance if you can get an interest rate that is lower than the rate you are currently paying.

When Should You Refinance?

You may wish to consider the following issues to determine whether it is now the right time to refinance your home loan:

  • What is the remaining loan tenure on the existing home loan?
  • When is the existing home loan lock-in period end?
  • How long do you plan to reside in this property?
  • How long do you hold this property as an investment?
  • How much lower will be the monthly instalments if you refinance your home loan?
  • Are there any upfront payments for refinancing?
  • What is the current value of the property?
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