When Should You Refinance Home Loan in Singapore?
Refinance home loan in Singapore by attempting to get a lower interest rate compared to the original loan. Ideally, a refinance makes your monthly payment lower or the term of your loan shorter. More of your payment goes towards the principal rather than the interest. A loan refinances also locks in the interest rate as opposed to going with much higher pay board rate. Discover these essential tips to refinance your home loan in Singapore as you investigate whether this is a good option for you.
Do you know about the recent changes in TDSR on refinancing home loan and how can you use it to your advantage?
Just because the original property loan Singapore is with a particular bank, that doesn’t mean the refinance home loan Singapore must come from the same bank. It pays to shop around for the best possible interest rate. Early in 2016, banks expected four interest rate hikes from the U.S. Federal Reserve’s key interest rate. When the financial climate changed and experts predicted just one interest rate hike for 2016, financial institutions got into a price war and lowered rates to match.
As an example of the savings you can enjoy, some banks in May of 2015 offered $800,000 loans at an effective interest rate of 1.6 percent over 25 years. The monthly payment came to $3,238. In April 2016, several banks altered rates to as low as 1.23 percent, which works out to a monthly payment of $3,118. That amount may not seem like much at first, but when you draw out the loan over 25 years (300 months), the overall amount you pay for a property lowers from $971,400 down to $935,400. You save $36,000 in this example.
Improve Your Financial Standing
Improve your financial standing before you formally refinance your home loan in Singapore. Knowing what monetary conditions you must meet can help you prepare your finances before meeting with the bank. Your TDSR Singapore must be less than 60 percent to get any home loan, so paying down some debt before formally applying for a refinance home loan in Singapore is a good idea. There are exceptions to the TDSR rule for refinancing, but only if you are an investor who can pay off any portion of the debt above 60 percent within a three-year period while meeting your bank’s credit conditions.
Find ways to improve your overall loan-to-value ratio. If you have a home in both you and your spouse’s name, consider taking one of those names off the loan so when one person applies for the refinance the loan-to-value margins are more favourable. If you don’t have any home loans in your name, banks are more likely to lend money during a refinance home loan in Singapore. De-coupling in this way should be done only with the advice of a professional to avoid painful mistakes.
Financial planning is imperative to refinance home loan Singapore. Do you make more money now than when you got your first home loan? Do you expect to make more money in the future? Are you committed to a potential mortgage? Plan out several financial scenarios in advance to get a rough estimate of what you can and cannot afford.
Know What to Expect
Banks charge fees for originating loans. Expect to pay a fee if you switch banks to refinance your home loan in Singapore, and you need to pay those costs before the loan closes. Staying with the bank you already have can lower your costs since your financial institution already knows the strength of your finances before you apply for the loan. You might not need to hire a lawyer, and the fees for the refinance might be smaller.
However, staying your current bank might not be the best option. If another bank offers a more attractive interest rate and loan package than your current, then a better option is to move to another bank even though the up-front fees are higher. It’s all in the math of what banks offer to you.
Lock-in periods are one key to finding a better refinance home loan in Singapore. Try to lock in rates four to seven months ahead of a potential interest rate hike. Because banks tie their interest rates the U.S. financial markets, an interest rate increase over the short term is unlikely. However, you should try to get cheaper rates now before the markets move higher. By the time you receive a letter from your bank showing a rate increase on an adjustable-rate property loan, it is too late to lock in a lower rate with your bank.
Interest rates by the bank based on the Singapore Interbank Offered Rate. When this rate fluctuates, expect possible interest rates to go up or down as well. If you read news about the Sibor changing, it might alter the way you approach your potential refinance.
Timing and finances are the two primary keys to refinance a home loan in Singapore. Know your financial standing and gauge the best time to apply for a refinance to get the best possible deal.
Seek Expert Advice
Market forces change property prices and interest rates. A real estate professional can guide you towards a successful refinance that saves you money every month and over the entire term of the loan. Real estate professionals also work harder, so your money and assets go further. Dylan Tan knows his way around the real estate market, and he understands better ways to refinance your home loan. He has solutions to your dilemmas of what to do about refinancing.
Again, the key here is timing. Talk to Dylan several months before you formally propose a refinance through a bank. He can give you quick updates to TDSR rules and how you can take advantage of them. He can research the lowest rates, put you in touch with great banks willing to lend you money and suggest strategies ahead of your move to refinance your existing property loan.