SINGAPORE, Dec 13, 2023 – (ACN Newswire) – With interest rates constantly changing, homeowners in Singapore should consider refinancing their home loans to lower their monthly mortgage payments. But what exactly does refinancing your home loan involve? In simple terms,mortgage refinancing involves replacing your existing home loan with a new loan from another bank. Keep reading to find out how to refinance your home loan in Singapore.
How Does Refinancing a Mortgage Work?
When you apply for mortgage refinancing with a new bank, they will review your income, credit score, and assets to determine if you meet the refinancing requirements. If you’re deemed eligible, your application will be approved, and the new bank will pay off the existing mortgage with your previous lender. You will then start servicing your loan with the new lender under the terms of the new loan agreement.
When should you refinance your home loan?
You might want to consider refinancing your home loan if you are currently paying a higher interest rate on your existing loan than the current market rate. By switching to a loan with a lower interest rate, you could potentially lower your monthly mortgage payments. Refinancing could also be an option if you want to change your loan tenure or tap into your home’s equity.
However, there are important factors to consider before deciding to refinance your home loan:
Lock-in period: Many home loans come with a lock-in period, during which the borrower is contractually obligated to adhere to the loan agreement in exchange for a specific interest rate or promotional period. If you want to refinance or pay off your loan in full during the lock-in period, you may incur hefty penalties. Therefore, it’s always wise to check if your existing home loan is still within the lock-in period.
Early redemption charges: You could be responsible for early redemption penalties if you pay off your existing home loan before the final repayment date.
Legal and valuation fees: If you want to refinance your home loan, you may need to reimburse your lender for subsidies and rebates provided at the start of your existing loan, such as legal and valuation fees.
Total Debt Servicing Ratio (TDSR): The TDSR refers to the percentage of a borrower’s monthly income used to repay monthly debt obligations, including any new loans applied for. Under the TDSR regulations, your total monthly debt obligations cannot exceed 55% of your monthly income.
Mortgage Servicing Ratio (MSR): The MSR refers to the percentage of a borrower’s monthly income used to repay all mortgage loans, including any new loans. Under the MSR regulations, your monthly mortgage payments cannot exceed 30% of your monthly income. (This is applicable to the financing of HDB properties.)
Conclusion
Refinancing your home loan could be a viable solution if you want to reduce your monthly mortgage payments or change your loan tenure. » …Read More