In Singapore, Mortgage Rates are typically unfavourable after the Lock-in period for loans.
Which is why every 2 years or so, we’re faced with the question to reprice or to refinance or maybe even to sell.
Repricing is when you change rates without changing bank.
Repricing is usually necessary 2 years after you refinance.
Repricing does not require income assessment
Repricing is very straightforward
Refinancing is when you change rates and change bank.
Refinancing will usually save you more money because there are so many banks.
Refinancing allows us to do awesome things like…
Extending loan tenure, gearing up, decoupling, changing the structure of the loan for TDSR optimization, choose interest rates across the entire market.
Selling
High transaction price. 2% property value
High replacement cost. 3+% stamp duty
We might be wrong.
Here are our considerations for constraints and strategy
Constraints
Lock-ins
When you sign up for a loan package with the bank, they will usually have a breakage fee if you leave the bank before the Lock-in period ends. The breakage fee would typically be 1.5% of your outstanding loan amount.
Clawback Period
When refinancing from a previous bank, legal and valuation fees are often subsidized by the receiving bank. Subsidies are typically 2000 for legal fees and Valuation fees that can range from 250-500.
The Clawback period is typically 3 years. (This does not apply to new loans)
Because mortgage contracts are often 2 years long, it would be in your interst to reprice, before refinancing.
Quantum
The size of the remainding loan will largely determine how competitive interest rates in the broader markets will be. As a guide, you should not refinance if your quantum is lower than
200k for HDBs
400k for Private properties
Private properties however have the ability to take additional loan to make up for the lack of quantum. Look at Gearing up.
Strategy
It may be time for you to sell your property and due to the constraints that will come with a new loan, it might not make sense for you to refinance.
If your view is that your property is still looking to appreciate, gearing up or restructuring your loan may be a more strategic option. 5% transaction fees expensive, moving house is hell. Renovation costs and anxiety not factored into transaction price.
Our longer term clients often do a sanity check with me before executing on moves.
It’s expensive to not be educated in this field. I have experience, might save you a fortune.
Here, let’s get in touch.