Refinancing Your Home

Even though refinancing a mortgage can save you 1000's of dollars you will be startled that not that many individuals in reality take the time to do it. If you considered the time it takes and calculate the cost saving benefits and equate that to how much you get paid per hour it could be like not going to work for several weeks. Consider the following aspects so that you can see how easy it is to refinance your loan today.

Current Interest Rate

It is definitely a good indication for you to research refinancing when your current interest rate is higher than available mortgage packages on the market. A first step to take is to go back to your current bank 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 penalisation fee, usually a percentage of your outstanding loan value, 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 expenses, that they "gave" you when you take up your housing loan (Note: lock-in period is separate from clawback period). It may not be worthwhile for you to refinance due to such costs.

Loan Quantum

The larger your mortgage amount, the larger your savings for the same reduction 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 relatively smaller housing loan as fixed cost eats into a more substantial share of your interest rate savings.

Perceived Interest Rate Movements

Your view on how interest rates is moving can be a factor when thinking whether you should refinance. If you are presently 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, converting to fixed rates may be a effective choice.

Personal Financial Appraisal

If there is a change in your financial state, you may want to vary your package details via refinancing. For example, you are starting your own business and do not want unpredictability 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 reduce interest loan payments. Consider reducing your loan tenure.

Consider calling us today if you are looking for refinancing in Singapore. We can save you a lot of money plus give you the latest advice all for free.

About the Author

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

by: Felicia Chew
Total views: 3 Word Count: 555 Date: Sat, 16 Jan 2010 Time: 5:12 AM 0 comments

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