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To Refinance Mortgage in 2024 or Wait For Lower Rates in 2025?

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As we approach 2024, homeowners find themselves at a crossroads, deliberating whether to refinance their mortgage now or hold out for potentially lower rates in 2025. This pivotal decision is clouded by the uncertainties of future economic conditions and the lingering effects of the Federal Reserve’s 2023 rate hikes.

Opting to refinance in 2024 could offer immediate financial relief and opportunities such as reduced monthly payments or debt consolidation. However, the prospect of waiting until 2025 tantalizes with the possibility of even lower interest rates, suggesting more significant long-term savings.

This blog will navigate the complexities of making this crucial decision, examining the merits and drawbacks of refinancing now versus later. Through a careful analysis of economic forecasts, personal financial goals, and market trends, we aim to provide homeowners with the insights needed to make an informed choice that best suits their financial future.

Who may benefit from refinancing their mortgage in 2024?

Although 2023 might not have been deemed the ideal year for home loan refinancing, it remained a beneficial decision for certain homeowners in Singapore. For example, individuals who secured or refinanced their home loan during the record-low interest rates of 2020 and 2021 likely saw little advantage in refinancing in 2023.

However, homeowners who purchased their property in 2018 and had not opted to refinance by 2023 could potentially have secured a more favourable rate through refinancing during this period.

However, could refinancing your home loan in 2024 be advantageous? Homeowners who took out mortgages during the peak rates of 2022 and early 2023 may benefit from refinancing in 2024, especially if the anticipated reductions in interest rates come to fruition.

Housing and mortgage industry experts believe interest rates might go down from the current highs in 2024 and further down in 2025. If your interest rates fall below what you pay now, it is an opportunity to consider refinancing.

Here are four types of homeowners who could benefit from refinancing their mortgage in 2024:

  • Homeowners who can get a lower interest rate

Since most homeowners would have already locked in lower interest rates from the historical lows in previous years, they would prefer to stick to those rates for a while. But if you are currently servicing a higher interest rate of 4% or more and have a good credit score, it may make sense to refinance even if the difference in rates is less than one per cent. Every dollar counts.

  • Homeowners with substantial loan amounts

For homeowners with substantial loan amounts, even a slight rate reduction could translate into significant savings, making refinancing appealing despite the associated costs.

It makes economic sense to refinance your home if you can lower your interest rate anywhere from 0.1% and onwards. For instance, a saving of 0.1% would result in a monthly interest saving of around $100 on a mortgage of $1 million, which translates into saving $1,200 per year.

  • Homeowners who want to pay off their loans sooner

If you can temporarily afford higher repayments and looking to wrap up your home loan sooner than anticipated, then refinancing may be for you. Refinancing to a shorter term may save you money and allow you to get free from paying the loan amount over the original lifespan of the loan.

If homeowners refinance their homes even if interest rates don’t fall in 2024, it might be out of necessity.

  • Homeowners looking to leverage their home equity

Some homeowners may consider cash-out refinancing. This option is particularly attractive for homeowners looking to leverage their home equity for consolidating high-interest debts or funding significant home improvements, potentially leading to overall lower interest expenses.

Should I choose a Fixed or Floating rate when refinancing in 2024?

One of the most important and frequently asked questions when refinancing a home loan is whether to choose a fixed or floating rate. To get a logical answer to this question, homeowners must understand how interest rates will perform during the next two to four years. Here are two rules governing your choice of interest-rate loan:

Choose a floating rate when interest rates are flat or declining (most likely in 2025)

Considering the recent economic activities, notably the US Fed’s decision to hike interest rates in 2023 as a measure against inflation, there’s an anticipation that 2024 may witness a phase of rate stabilization or even reductions. This potential shift in monetary policy can significantly influence your refinancing strategy, making a floating rate an attractive option under these expected conditions.

If the consensus is for stable or rate cuts in the H2 of 2024 and into 2025, a floating rate might offer lower costs over time.

Your choice between a fixed or floating rate when refinancing in 2024 should align with your financial objectives, risk tolerance, and market outlook.

While fixed rates offer stability and are preferable in rising rate environments, floating rates can provide savings in a declining or flat rate scenario. Stay informed about economic forecasts and consider your personal circumstances to make the best decision for your financial future.

Choose a fixed rate when interest rates are rising (previously from 2021 to 2023)

Always prefer a fixed rate over a floating rate in a rising interest rate environment (like during the period of 2022 and 2023)! As a borrower, you will want to choose a fixed rate that will not increase even if market rates rise significantly.

Is it worth refinancing my housing loan in 2024?

Determining whether refinancing your housing loan in 2024 is worth it involves evaluating several key factors against your personal and financial situation. Here’s what you should consider:

Interest rate environment: If the projections for decreasing interest rates in 2024 come true, you might find opportunities for substantial savings, especially if your current mortgage has a higher interest rate than what’s being offered.

Current mortgage rate vs. new rate: Compare your existing mortgage rate with the anticipated rates in 2024. A general rule of thumb is that refinancing is worth considering if you can reduce your interest rate by at least 0.02%.

Market and economic predictions: Singapore’s economy does not operate in a vacuum. Global economic trends, trade policies, inflation rates, and the Monetary Authority of Singapore’s (MAS) policy decisions can all influence interest rates differently than current predictions suggest.

Keep an eye on economic forecasts and market trends. While predictions suggest favourable conditions for refinancing in 2024, external factors like inflation rates and policy changes by financial authorities can influence interest rates.

Financial Goals and Cash Flow: Your personal financial situation and goals play a crucial role in the decision to refinance. Consider any changes in your financial situation, such as changes in income, employment status, or plans for the property.

These factors can affect the suitability and timing of refinancing. If refinancing now improves your cash flow, reduces your monthly payments, or helps you consolidate debt, the benefits might outweigh waiting for a potentially lower rate.

Refinancing can offer significant financial benefits, but it’s not a one-size-fits-all solution. It’s crucial to analyse your personal financial situation, future plans, and the current economic landscape. Consulting with a financial advisor or mortgage broker can provide personalized advice and help you make an informed decision.

Other key factors to consider while planning to refinance in 2024

Refinancing allows you to lower your monthly mortgage payments and reduce the overall cost of borrowing in the long run. But your decision to refinance should not be only based on how interest rates are trending. When considering refinancing your mortgage, you should also consider some other key factors:

Credit score

Always maintain a good credit score! Banks and financial institutions take your credit score into account when evaluating your home loan or refinance application. Lenders usually charge lower interest rates on your new mortgage if you have a high credit score.

If you don’t have a good credit score when refinancing your home loan, it is suggested to first plan and boost your credit rating over the next few months to make refinancing worthwhile in 2024.

Breakeven analysis

When contemplating refinancing in 2024, conducting a breakeven analysis stands as a pivotal consideration. This analysis involves determining the breakeven point—the duration required for the savings accrued from refinancing to surpass the costs of refinancing. If you plan to stay in your home beyond this point, refinancing could be financially beneficial.

Industry experts often recommend that a desirable breakeven point should fall within 36 months. Achieving this milestone within such a timeframe suggests that refinancing could be a financially prudent decision, offering tangible benefits relatively quickly while aligning with short-to-medium term financial planning and goals.

Do you have plans to sell & move to a new place?

It might not be smart to refinance your mortgage if you plan to sell the house or move into a new place in less than a year. This means, if you are planning to move in to a new home in 2025, then refinancing in 2024 may not be worth it.

Personal financial goals

When planning to refinance in 2024, aligning the decision with your personal financial goals is paramount. Whether your aim is to lower your monthly payments, consolidate high-interest debts, or unlock equity for significant expenditures, these objectives will shape the refinancing strategy that best suits your needs.

Tailoring the refinancing approach to meet these goals not only ensures that the move aligns with your financial roadmap but also maximizes the potential benefits, making it a critical factor in the decision-making process.

4 Reasons to consider refinancing in 2024 rather than waiting until 2025

1. Cost of Waiting

While waiting for the lower rate in 2025 might seem cost-effective, the cumulative interest paid during the wait could negate the savings from a slightly lower rate. Refinancing earlier, even at a slightly higher rate, could result in significant interest savings over the life of the loan.

2. Interest Rate Risk

Predictions are inherently uncertain. The forecasted decline in interest rates is based on current economic conditions and expectations, which can change due to unforeseen circumstances. If the economic situation improves faster than expected, rates might not fall as predicted or could even increase.

3. Refinancing Costs

The cost of refinancing (e.g., appraisal, legal fees, application fees) needs to be factored into your decision. If you refinance earlier, you can start saving on interest sooner, which can help offset these costs. Waiting until 2025 means you’ll continue paying interest at your current rate, which might be higher than necessary.

4. Market Conditions and Property Value

The value of your property in Singapore might change by 2025, affecting your loan-to-value ratio and potentially your eligibility for the best refinancing rates. If property values are higher currently, refinancing earlier could secure a better rate and terms.

How to get a lower refinancing rate in 2024?

Comparative shopping

Engage with multiple lenders to explore the best available rates and terms. This includes not just national banks but also local credit unions and online lenders.

Credit score improvement

A higher credit score can significantly improve eligibility for lower rates. Steps to enhance your credit score include paying down existing debt and ensuring timely bill payments.

Downpayment and loan terms

Consider the impact of a larger downpayment or different loan terms, such as a shorter loan tenure, on the interest rate and overall loan cost.

Final Thoughts

Deciding to refinance your mortgage in 2024 hinges on a mix of market conditions, personal financial situations, and long-term goals.

While the landscape has shifted from the ultra-low rates of 2020 and 2021, opportunities for refinancing exist, particularly for those who can secure a rate significantly lower than their current one or who have specific financial goals like debt consolidation or funding home improvements.

Our team of mortgage experts at Dollarback Mortgage can give unbiased, personalised advice based on your financial circumstances and help you decide whether refinancing is the right decision for you.

We help homeowners find the best refinancing home loan packages based on their needs and make confident property decisions to ensure long-term financial benefits.

Get the best home loan in Singapore across all major banks and compare mortgage rates with the highest rewards.

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