First, what is repricing?  It simply means you renegotiate the interest and package terms with your current bank and recontract with them, hence you “re-price”.

On the other hand, refinancing involves you taking your home loan in Singapore from one bank to another.  Doing so requires slightly more time and effort but the potential interest savings over the long run can be significant as many of our clients have discovered. It pays to stay ahead of the curve and take active steps to position your mortgage according to movements in the interest rate cycle. Furthermore, in the age of digital banking and advent of mortgage comparison sites, the time and effort required to refinance has been greatly reduced.

Beyond interest savings, what are some other considerations you should look at before you decide whether to reprice or refinance your home loan?  There are eight questions you need to ask yourself:

1. How early should I start my review?

Unknown to most, you can ink a new home loan contract with another lender as early as six months before your lock-in expires.  This can work extremely well for you in periods of interest rate escalation where you get to lock down a lower fixed rate mortgage early.

However, in normal situations, the usual timeframe to review your loan is about three to four months before the expiry as you will need to give a two months’ redemption notice to your existing bank. Also, most repricing banks may not want to quote you if you call them too early.

2. Should I use a mortgage broker?

The services of a professional mortgage broker have become prevalent ion recent years and it goes beyond just rate comparison. Tapping into a trusted broker’s network and resource can get you access to the most reliable team of bankers, law firms, financial advisor, etc., leading to a hassle-free and seamless transaction.

More importantly now, as the brokerage industry evolves, there are different levels of advisory you could choose from. Any mediocre broker can offer you the most basic service of comparing between packages to save you that 0.1 to 0.2 per cent in interest. An above average broker will go beyond that and provide you with advisory that’s based on macro factors and interest rate cycle.

An exceptional broker will beat all that and show you how to stop paying interests to the bank completely — become Mortgage-Free in 6 Years! At MortgageWise.sg, we are proud that to bring that knowledge to you starting from 2024 which betters even A.I.

The best part is the service comes free to homeowners as banks pay brokers a small referral fee as part of the product distribution costs, which does not affect your interest rate. Feel free to validate this. This is because the banks pay distribution costs be it in the form of referral fees to third-party brokers, or as commissions for their staff when you approach the banks’ mortgage specialists directly.

3. Will I be buying or selling a property soon?

Even before you delve into rates, think about whether you will be selling the property in the next two to three years.  There’s no point saving 0.2 per cent in interest but end up paying a 1.50% redemption penalty (on the outstanding loan amount) when you sell within the ubiquitous 2 year lock-in period!  The usual events that trigger the need to sell revolves mostly around family needs: to move closer to new school, new work place, or to be near aging parents, and so on.

Even if you are not selling, what about the need to buy a second or even a third investment property in which case there may be a need to decouple an existing property holding.  The best time to decouple will be during a mortgage review when the lock-in ends (decoupling involves a part-sale of property which attracts the same lock-in penalty).

An exceptional broker will beat all that and show you how to stop paying interests to the bank completely — become Mortgage-Free in 6 Years!

4. Will I need to borrow more or pay down in the next five years?

People have changing and evolving needs at different stages in their lives.  There are times when you want a debt-free lifestyle nearing retirement, and there are times when you need capital to exploit opportunities during your most productive years.  Is there any need for an injection of funds in the next five years?

For private property owners, home equity loan (or what is known commonly as term loan in the industry) is the cheapest leverage you will ever find as it is secured against your property.  There’s also much lower risk of a “margin call” or high penalties to pay unlike business loans, revolving lines of credit, personal loans, etc.

The best time to gear up for a home equity loan term loan will be during refinancing when you get the lowest interest package on both the housing loan and the term loan.  At the same time, the lock-in expiry for both portions of the loan will be close (usually within a month) which facilitates your mortgage review later.

Perhaps the biggest difference lies in the cost involved. Cashing out on a fresh term loan during refinancing will just cost an extra few hundred dollars in legal fees which the new bank will help to defray with legal subsidy or cash rebate. In fact, when you work with us on your mortgage, through strategic tie-ups with our law firm partners, we do it with no incremental legal fees. Contrast that with taking up a term loan with your existing bank which will cost at least $1,200-1,500 in legal fees plus another $500 estimated for condo valuation, and with no subsidy from the bank.

5. What’s the current outlook for interest rate?

We come to the most common question now after tackling the less obvious – should you go for fixed rate or floating rate home loans?  

Forecasting the direction of interest rate is hard business and not every mortgage broker is willing to stick their neck out on that. Much less if you speak to bankers who are sales-oriented and target-driven who will give you views that support the package they are pitching to you.

However, it is imperative to understand where are we now in the interest rate cycle before you sign on any dotted line. Find out more about our track record in giving interest rate forecast.

6. How can I right-size my loan balance and tenure to save more?

Mortgage amortisation essentially comprises four components: principal loan, tenure, monthly instalment and interest rate.

Most people look at only interest rate during a mortgage review, ignoring other ways of saving on interest costs by either paying down a portion of the principal loan, or reducing the loan tenure to the extent the monthly instalment remains affordable and is commensurate with higher income over time.

7. How do I see my job situation?

Do you see any headwinds in the industry you are in where there may be disruptions to your income?  Or the need to move to another position, job or even location for greater prospects, growth & development, or sometimes for personal reasons.  In a fast-changing and uncertain world, it will be wise to plan ahead.

It may become harder to refinance a home loan when income situation changes, especially mortgages for an investment property which you may be ask to pay down 3% of the loan as part of DRP (debt reduction plan) if you fail to meet the TDSR requirement.  A floating rate mortgage with a reasonably-low thereafter spread (the mark-up above SORA) might be a better option in such a situation.  This is because fixed rate mortgages always revert to a higher spread when the fixed term ends.

8. Lastly, what’s the costs involved and are there any advantages that I should be made aware of other than interest rate? 

Repricing attracts just a small admin fee (or conversion fee) as there’s no need to pay lawyers to redo the mortgage documents. Nowadays with intense price competition, banks would mostly waive this fee.

On the other hand, refinancing involves a change of the mortgagee bank with new contracts to be signed and caveats to be lodged.  A new valuation report is also needed.  However, it may still turn out to be the better “lower-cost” option as the new lender typically offers a legal subsidy or cash rebate to defray all these costs almost entirely, sometimes with excess.

Cost must also be weighed against the benefits.  Banks offer different features on the mortgage product which can be of immense value depending on one’s need in the near term.  You may opt for home loan packages that offer a full waiver of penalty on sale of property during the lock-in period, or one that offers an interest-offset mortgage account.  Some may also allow you to do a hybrid loan where part of the loan is on a floating rate package with the rest pegged to a fixed rate to hedge against any upside risk.  Yet, there are those that offer you a high-yielding savings account when you move your home loan over.  The most well-known being Multiplier account with DBS home loan.

Perhaps one of the most pertinent and meaningful feature in interest cycle-turning years of 2023 to 2024 is the provision of a free conversion 12 months into a 2-year commitment period. That has proven to “save the day” for clients whom worked with us last year in 2023 and who are more than glad they could save almost 100 basis point (1 per cent) in interest just barely a year later.

However, it is imperative to understand where are we now in the interest rate cycle before you sign on any dotted line. Find out more about our track record in giving interest rate forecast.

Need more personalised advice?  Not only do we help clients navigate through the myriad of Singapore mortgage rates quick and fuss-free and get you the best home loan Singapore, we show you how to become Mortgage-Free in 6 Years! So, be it for residential or commercial property loan, work with us today and you’ll also be helping to support our social cause!

Stay tuned for rate alerts on our Telegram channel SG Mortgage Rates.

Disclaimer: MortgageWise Pte Ltd is not in the business of providing financial advice nor are we licensed or regulated by MAS under the Financial Advisory Act (FAA) in Singapore. All information presented are opinions and any representations given, whether by way of example, illustration or otherwise, are purely portfolio allocation advice and not recommendations or inducements to buy, sell or hold any particular investment product or class of investment product.  All opinions are generic in nature and are not tailored to the particular circumstances of any reader.  Seek advice from a qualified financial advisor before making any investment decision.

Though every effort has been made to ensure the accuracy of the information and figures presented, we make no representations or warranties with respect to the accuracy or completeness of the contents in this blog and specifically disclaim any implied warranties or fitness for a particular purpose.  We shall not be held responsible for any financial loss or any other damages suffered whatsoever, directly or indirectly, if you choose to follow any of the advice or recommendations given in this blog.d shall not be constituted as financial advice.  We cannot be held responsible in any way for any financial losses arising from your mortgage decisions should you choose to rely on any of our viewpoints and opinions.