Refinancing Your Home

20.12.2009 | Author: Andrew Gan | Posted in Business

Even though refinancing a mortgage can save you 1000’s of dollars you will be surprised that not that many individuals in reality take the time to do it. If you considered the time it requires and calculate the cost saving benefits and compare 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 simple it is to refinance your mortgage today.

Current Mortgage Interest Rate

It is definitely a good indication for you to explore refinancing when your current interest rate is higher than available home 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 housing loan, there may be a lock-in period where your mortgage lender will charge you a penalisation fee, ordinarily a percentage of your outstanding loan amount, if you were to fully repay your loan. Almost all home 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 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 example, 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 current and refinancing interest rates, therefore, has to be bigger for a relatively smaller housing loan as fixed cost eats into a more fundamental part 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, converting to fixed rates may be a positive choice.

Individual Financial Assessment

If there is a change in your financial state, you may want to vary your package details via refinancing. For example, you are beginning your own business organization and do not want volatility in other areas. Give some consideration to taking up a fixed rate package. Maybe you want cash to invest in different property. 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 interview. 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 irksome procedure.

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

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