As a homeowner, you may be familiar with how refinancing your home loan can keep your mortgage rates down. If you are struggling to keep up with increasing monthly payments or fluctuating mortgage rates, however, your lender may even recommend you refinance your home loan. But whilst it may seem like a relatively straightforward process, there can be a great deal to learn. Continue reading to familiarise yourself with a number of tips to refinance your home loan in Singapore.
- Begin your search at the earliest convenience
When it comes to refinancing a home loan, the percentage added to the benchmark rate, or the bank’s spread, tends to remain relatively unchanged for the first three years before spiking around the fourth year and beyond. As a result, it may benefit you to begin your search at the earliest convenience. If you are really prepared, you should make a note of when this is likely to happen and remain on the lookout for a better rate before it does. This can end up saving you a considerable amount of time and money in the process.
- Keep your debts low
Throughout the process of refinancing a home loan, your finances will be subject to a number of checks at the hands of your bank on a regular basis. This includes finding out whether or not you meet the total debt servicing ratio and ensuring your loan quantum continues to meet the loan-to-value ratio as your property value fluctuates over time, just to name a few. For example, you should never assume that because you qualified for a home loan the first time, the exact same story will play out a second time around. It is not an automatic process. You must continue to ensure your credit score is healthy and your debts are low. If you suffer from major debt, such as an overdraft, unpaid credit card loan, or car finance payments, you must put plans in place to pay if off in the months leading up to the date you intend to refinance your home loan.
- Consider whether you can afford refinancing costs
If you are considering refinancing a HDB or private property home loan, you should also consider whether you can afford the various costs involved. This can differ from lender to lender but tends to range from $3,500 to $3,000. You may also be required to pay a number of additional costs with the bank you are switching to usually asking for an updated valuation of your property. If this is the case, it can cost up to $500 on top of existing fees. To determine whether or not the savings from refinancing a home loan will justify the costs, you must carry out a number of calculations ahead of time. This can allow you to weigh up the pros and cons and make an informed decision.
- Focus on long-term rates as opposed to teaser rates
With Singapore mortgage rates more often than not skyrocketing in the fourth year, it may benefit you to focus on long-term rates as opposed to teaser rates during the process of shopping around for a better mortgage rate. For example, if your current home loan has a larger fourth year and thereafter rate of +0.9%, this could be much higher than the first couple of years of a number of different home loans currently available to you on the market. If those rates skyrocket even further in the fourth year and thereafter, however, you may be unable to find a home loan with a better rate than your current package. If you have a considerable amount of time before this is likely to happen, you should continue to focus on the long-term rates during your search. The only exception to this rule is if you decide to sell your property before the jump in interest rate occurs.
- Enlist the help of a home loan specialist
Even as an experienced homeowner, the process of refinancing a home loan can be a stressful and time-consuming one. By enlisting the help of a home loan specialist, you can benefit from expert advice and guidance and ensure that paperwork and loan comparison has been completed to a high standard. With most steps in the home loan refinancing process involving upfront costs or hidden fees of some kind, a home loan specialist can be a great way to streamline the entire process at no extra cost.
If you are considering refinancing a home loan in Singapore, there are a number of tips and tricks you must familiarise yourself with beforehand. This includes beginning your search at the earliest convenience, keeping your debts low, considering whether you can afford refinancing costs, focusing on long-term rates as opposed to teaser rates, and enlisting the help of a specialist.