Typically, two options exist for anyone whose home loan lock-in period expires. The first is to stay with your existing lender and negotiate for a better rate, or ‘repricing’ as it is also known. The second is to switch to another financial institution and enjoy its new home loan package, or ‘refinancing.’ Most individuals falsely believe they will receive a preferential package from their existing lender if they stay with them. Well, although their existing lender may offer them a reasonable interest rate, the extent of savings might not be as great as what one can get should one try refinancing instead.
For example, if the last applied interest rate for your home loan package was 2.5% and you opt to reprice, your existing lender may offer you a repriced interest rate of 2.1%. However, in this competitive market and to attract new customers, other banks or institutions may provide an even lower interest rate than the repriced rate.
Therefore, in such situations, homeowners can potentially achieve higher savings from refinancing. Thus, what are the factors to note when considering refinancing? Factors to Consider when Refinancing Firstly, it is always good to Look at Current Market Mortgage Interest Rates as a basis for comparison. If you find that the interest rates available for home loan packages on the market are lower than your current interest rate, it is time to explore refinancing.
As such, you should watch all the banks as they may offer numerous interest rates for different packages.
For this reason, some people may engage the services of mortgage brokers to learn more about the most suitable home loan package for their needs.
Secondly, Note the Loan’s Lock-in Period. The lock-in period of your home loan is also a crucial factor in refinancing. This refers to the period the borrower is bonded to the lender at the promotional guaranteed interest rate on the outstanding home loan. You can be charged a penalty fee should you fully repay your outstanding loan before the expiry of the lock-in. Hence, checking your loan’s lock-in period before committing to a lock-in home loan package is advisable.
Lastly, the Loan Quantum is an essential aspect that people should consider. As interest rates are subject to change, a larger home loan may eventually earn you more savings when the interest rate decreases.
On the other hand, a smaller home loan may lead to higher losses when the interest rate increases. The total amount = Interest + Principal formula should be considered to prevent repaying mortgage lenders too much interest. Thus, always consider which home loan is the most suitable and cost-saving for you before embarking on one.
Conclusion There may be other factors to consider in a mortgage refinance. However, remember to consider and get your facts on those three factors mentioned above, as they are fundamental to note!
For further details, you may check with our mortgage consultants by calling +65 8300 2255 or visiting our website at www.loanonline.sg.
