Refinance Home Loan Singapore 2023: Best Rates & Rewards
Refinancing is the process of switching your current mortgage loan to another bank, which can be done in order to get a better rate that works in your favour. Compare the lowest refinance home loan rates below and enjoy maximum savings with us.
If you are planning to refinance your HDB loan or bank home loan, you can leave the research to our dedicated mortgage specialists at DollarBack Mortgage. With a curated selection of bank refinance home loan rates available at your fingertips, you can get access to the right package tailored to your needs
What Is Housing Loan Refinancing?
When you refinance a mortgage home loan, it involves switching from your current home loan in Singapore to another bank’s home loan. The primary reasons for refinancing are usually to secure lower mortgage interest rates, enabling you to save on interest expenses, or to access a higher loan amount through cash-out refinancing. It’s important to note that refinancing differs from repricing, which involves negotiating for a better interest rate with the same bank. Refinancing involves moving from one bank to another and may involve legal fees.
Benefits Of Refinancing Mortgage Loan
Refinancing your mortgage loan offers several potential benefits that can enhance your financial situation. Let’s explore some of these advantages:
By refinancing your home loan in Singapore, you can secure a lower interest rate, which in turn reduces your monthly instalments. It is crucial to take advantage of the refinancing window, which typically starts four months before your existing home loan renewal. If you choose not to refinance and stick with your current home loan, remember that mortgage interest rates tend to rise over time, leading to higher monthly instalments.
If you own a private property in Singapore such as a condo, cash-out refinancing allows you to utilise your property as collateral to obtain a home equity loan. Generally, you can receive a cash amount equivalent to up to 60% or 75% of your property’s value (after deducting the remaining loan amount and any CPF used for the property) when you refinance your mortgage loan. This cash can be used for consolidating debt or investment purposes. However, it’s advisable not to exhaust the maximum cash-out allowed to account for potential changes in your property’s valuation.
Another reason why homeowners opt for refinancing is to secure better interest rates. This can be achieved by switching from a fixed interest rate to a floating interest rate, or vice versa. Fixed rate packages lock in an interest rate for a specific period, usually ranging from 1 to 5 years. Although the interest rate is slightly higher, it offers stability. On the other hand, floating rate packages fluctuate based on factors such as Singapore Overnight Rate Average (SORA), the benchmark interest rate for lending between banks.
Why Should You Apply for home loan Refinancing With Us?
Enjoy up to $6,300 in Cash Rewards
Enjoy cash rewards when you refinance a home loan with Dollarback Mortgage. Our cash rewards, up to $3,300 + up to $3,000 in bank provided cash rewards. This enables you to maximise your interest savings while having zero upfront refinancing fees.
Find out more about our attractive rewards.
Lowest Interest Rates Everytime
If you’re choosing to refinance in the coming months, rest assured our advisory will provide a consultative approach to allow homeowners access to interest rates not openly advertised to the public and a guided end to end approach for refinancing your home loan. With clear comparisons across 16 banks in Singapore and detailed breakdowns, you will maximise your savings with your new refinance home loan package.
When To Refinance Home Loan
More often than not, homeowners usually think of refinancing to save money on their monthly payments with better long-term rates. This can be the case for those who want to switch from a floating rate bank loan to a fixed rate bank loan – depending on which is more beneficial in the long haul.
On the other hand, you may also choose to refinance your housing loan to adjust the length of your loan tenure to fit your financial situation. To help you out, our consultants streamline the procedure of selecting the best refinance housing loan, making it easy to switch banks at the right time.
Timing is crucial when it comes to refinancing your home loan and here are some points you should consider:
Lock-in Period Ending
Refinancing your home loan should be a strategic move. Banks typically require a two or three-month notice before you can refinance and switch to another bank. Hence, it is vital to be aware of when your lock-in period will end. Plan ahead and initiate the refinancing process at least four months before the new interest rate cycle begins.
Extend Loan Tenure
Some homeowners opt to refinance to improve their cash flow by extending their loan tenure. Whether you have a HDB or private property such as a condo, you can extend your loan tenure for a maximum of 35 years or until you reach the age of 75. The number of years you’ve served on your current loan will be deducted from your extended maximum loan tenure.
The Refinance Housing Loan Process
To help you navigate the refinancing process smoothly, let's explore the steps involved, including the legal and negotiation aspects.
FREQUENTLY ASKED QUESTIONS ABOUT
REFINANCing HOME LOAN
Ideally, 4 months before the end of your lock-in period. Before that, you can start keeping an eye on the latest fixed and floating housing loan rates that are consistently updated on our website. In fact, once you reach out to us, you’ll always be the first to know beforehand if there’s a better bank home loan package launching in 3 days’ time.
While you can enjoy better deals through refinancing – which means to change your current home loan to an entirely different bank – repricing can offer the same benefits but within the same bank. And at times, your loan can be switched for free under repricing. To understand which works better for your situation, you may wish to discuss with a professional before deciding.
Yes, definitely! It would make sense to prepay your bank mortgage loan early if you have just the right amount to pay it off. However, there are certain situations where it may not be the best choice. To learn in detail, we provide more insights in our blog. Alternatively, wait for the right time to refinance your home loan and enjoy more attractive perks with DollarBack Mortgage in the process.
Your credit score plays a crucial role in determining your eligibility for a home loan. Banks view it as an indicator of your reliability as a borrower. To increase your chances of loan approval, it’s ideal to have a high credit rating. In general, a credit score of no worse than BB is required. Having a good credit score not only improves your chances of approval but may also lead to a higher loan amount and preferential interest rates.
For most loans in Singapore, including home loans, there are minimum income requirements. Single borrowers typically need to have a minimum annual income of $30,000, while if there’s a co-borrower, the minimum required income is $36,000 per annum.
Additionally, HDB loans have specific maximum income ceilings. The combined monthly income for families cannot exceed $14,000, $21,000 for extended families, and $7,000 for singles.
The loan-to-value (LTV) ratio is a significant factor in determining your eligibility for a refinance home loan. As you pay down your loan and the value of your home increases over time, the LTV ratio decreases. A lower LTV ratio improves your chances of refinancing your home loan.
Self-employed individuals or those without a regular income can still be eligible for a refinance home loan. However, they must demonstrate their ability to service monthly instalments. Each bank has specific criterias for assessing the eligibility of self-employed borrowers.
Typically, the approval process for refinancing takes around 3 to 5 working days. Once the letter of offer is signed with the bank, the conveyancing law firm initiates a notice period of 2 to 3 months.
When you refinance a home loan, there are typically two costs involved:
Legal fees payable directly to the law firm.
Valuation fee payable directly to the bank.
Banks usually provide full legal subsidies and, in some cases, partially subsidise the valuation fee if your remaining loan amount is $300,000 and above for HDB properties, or $400,000 and above for private properties. These subsidies make the total cost of refinancing minimal and in certain situations, more affordable than repricing.
Yes, it is possible but it would be a slightly more complex process. It’s advisable to consult with a mortgage specialist who can assess your specific situation and provide guidance accordingly.
What factors should I consider when choosing between a fixed interest rate and a floating interest rate for a refinance home loan?
Determining whether a fixed rate or floating rate is superior is a challenging task. It is essential to consider how interest rates are expected to evolve in the next two to five years and assess the impact on your overall expenses. Ultimately, your decision should be based on your risk tolerance and financial circumstances.
Certain homeowners may prioritise the convenience of financial planning and peace of mind, even if it means paying a premium for a fixed rate. Conversely, financially savvy individuals might prefer to monitor interest rate fluctuations and potentially benefit from long-term savings associated with a floating rate.
Early repayment or prepayment penalties can take different forms, but the most prevalent ones include:
Partial or full redemption of the home loan through a lump sum cash or CPF repayment.
Selling the property within the lock-in period.
Mortgage clawback penalty for any subsidies received.
If you have previously been bankrupt, there is usually a waiting period of five to seven years after receiving your official letter of discharge before you can apply for a home loan. Each bank has its own eligibility criteria regarding income requirements, age limitations, and loan-to-value ratio, which will also be considered.
The valuation of your property directly affects the loan amount you can obtain. If the valuation of your property decreases during the refinancing process, the loan quantum may decrease. This means that the maximum amount you can borrow from the bank will be reduced accordingly.
For HDB properties, refinancing fees can be avoided if your outstanding mortgage is more than $250,000. Many banks in Singapore provide full subsidies for all refinancing fees related to HDB properties.
For private properties, most banks offer cash subsidies to offset the refinancing fees, provided your remaining home loan is more than $450,000. It’s important to note that whenever a bank provides subsidies or cash rewards, a clawback period of 3 years applies. This means that if you switch banks or pay off the loan within 3 years, you may need to repay the subsidies or rewards in full, without proration. However, there are specific situations where you may be able to avoid the clawback penalty, but these circumstances are rare and require careful consideration.
Tips For Refinancing Your Housing Loan
Look for Refinancing Options in the Fourth Year or Beyond
It's advisable to consider refinancing options once you reach the fourth year of your existing home loan. Many mortgage loan packages tend to increase their interest rates starting from the fourth year. For instance, a typical SORA rate package may have a lower bank spread for the first three years, but it increases from the fourth year onward. Being aware of this pattern allows you to explore better interest rates and potentially save on your loan.
Consider Whether the Refinancing Costs Are Justifiable
Refinancing a home loan often incurs legal costs, ranging from $1,500 to $2,000, in addition to potential fees such as property valuation. To determine whether refinancing is worthwhile, it's crucial to calculate the potential savings against these costs to refinance a home loan. For example, comparing monthly repayments between the existing loan and the refinanced loan can help assess the feasibility of the cost-saving benefits. Consider factors such as the duration you plan to stay in the property and your financial goals before deciding if the refinancing costs are justifiable.
Keep Your Debts Low if You Want to Refinance
When applying for refinancing, lenders will reassess your financial situation, including your Total Debt Servicing Ratio (TDSR) and loan-to-value ratio. It's important to note that qualifying for a loan again during refinancing is not automatic, even if you were eligible initially. To enhance your chances of approval, make sure to pay down debts and maintain a healthy credit score. Start paying down outstanding debts a few months before attempting to refinance.
Check for Free Repricing Options Before You Refinance
Before your refinance, check if your current housing loan package offers free repricing options. Repricing allows you to switch to a different loan package within the same bank, while refinancing involves changing banks. If you can reprice your loan for free at a competitive rate, the cost savings can be more significant compared to refinancing.
Pay Attention to the Long-Term Rates, Not the Teaser Rates, of the New Package
When assessing loan packages, it's essential to focus on the long-term rates rather than the initially low teaser rates. While some loan packages may have attractive introductory rates, they could significantly increase after the initial years. Prioritise evaluating the final rates, especially if you have a long loan tenure. However, if you plan to sell the property before the interest rate hike occurs, the teaser rates may still be advantageous.
Don't Refinance If You're in a Lock-In
If your home loan has a lock-in clause, breaking the lock-in to refinance can result in a penalty of around 1.5% of the remaining loan amount, in addition to the usual refinancing costs. Unless the loan rate becomes excessively high and surpasses the lock-in penalty, it's generally more prudent to wait until the lock-in period is over or consider repricing with your existing bank.
Get a Home Loan Specialist to Help with the Paperwork and Loan Comparison
Engaging a home loan specialist is an invaluable resource during the refinancing process, and their assistance is typically provided at no cost to you. These specialists can offer expert advice on whether it’s the right time to refinance and provide guidance on minimising costs. Take advantage of Dollarback Mortgage’s expertise to navigate the complexities of refinancing and make informed decisions.