Interest Rate Analysis
We Advice On:
Utilising a well-rounded approach, our mortgage consultants recommend which interest rate package types are best suited for your current and future home loan requirements.
We follow a general guideline in our advisory process:
• Purpose of property (investment, own stay)
• Debt obligations currently and expected
• Proportion of fixed vs variable monthly expenditure
• Future income expectations
• Anticipation of increases or decreases in property portfolio
Refinancing does not always have to happen only once your lock in period is over. It needs to happen if a savings opportunity arises.
Our breakeven analysis covers the following:
• Analysis of current penalties and fees with existing bank
• Monthly interest savings through refinancing
• Time taken to reach breakeven point
• Total interest savings through reduction of tenure
• Comparison of step up, step down or straight-line interest rate packages
Our mortgage consultants also use an 8 Step Guideline to Advice on the Best Refinancing Options for you.
DollarBack Mortgage Consultants advice on the two most important variables of any floating package – The Spread and The Reference Rate. The spread is effectively the “profit” which the bank makes and the reference rate is the cost to the bank in giving out a home loan.
For simplistic sake, let us consider the two floating interest rate packages below:
Bank A: 24MTH FDR + 0.50% (Spread) = 2.00%
Bank B: 8MTH FDR (Reference rate) + 1.50% = 2.00%
The 2 different packages have got the same total interest rate of 2% but both use different spreads and reference rates.
The general rule of thumb when comparing two different packages with the same total interest rate as shown above is to analyse the spread. A higher spread, would mean a low reference rate now and a higher probability of increases to the reference rate in future. Although this concept is over simplified, it serves as starting point when analysing interest rate packages.
*More often than not, in an increasing interest rate environment, the bank will leave the spread unchanged and make changes only to the reference rate.