• Otterwise

When's The Best Time To Refinance Your Home Loan?

Since early this year, there have been reports of how there has been a drastic decrease in the interest rates for the savings account from almost all of Singapore's banks.


In fact, apart from the savings accounts, most of the interest rates for home loans have dropped too! Many Singaporeans have taken the opportunity to get a new home loan or refinance their home loan in order to save on some cost.


That said, you shouldn't just jump on the bandwagon and refinance since everyone is doing it. Refinancing is a big decision and you should carefully consider before you decide to go ahead with the application.


In this article, we talked about 3 factors that you should consider before proceeding with the refinancing process. Let's take a look at the following:



1. There is a better package available



These packages change time to time.


Even if you managed to land a good home loan package, it won’t stay a good deal forever. So once you can refinance (usually after 3 years), make sure you search for a loan package that’s at least 0.5% less than your current rate. Remember, the lower your interest, the lower your repayments.



2. Savings exceeds or meets your cost in a year



Do your own calculation.


Before you refinance, calculate if your savings is more than the cost within a year. Take for example, your legal fees for refinancing are $3,000 and refinancing saves you $200 a month.


Divide the cost by the savings ($3,000 / $200) to see how many months you need to pay before you “break even.”


In this case it’s 15 months, so it’s wiser to find a better deal.



3. Time to change your loan's tenure



Review by yourself as needed.


If you are someone who’s more worried about the cost of monthly payments than the overall cost of your loan, refinancing can help. So if your loan’s tenure is 25 years, you can refinance it to 30 years, which will decrease your monthly repayments, but increase your overall cost.



We hope you have a clearer idea now on refinancing!


Should you wish to go ahead with the application, you can always use our Mortgage Calculator to compare the different loan packages offered by the banks at a glance!


Find out more about our Mortgage Calculator here!

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