The answer is – as early as one can start to move his or her loan to another bank without incurring any lock-in penalty or legal fee clawback.

There is no standard as each bank’s Letter of Offer (LO) is different and unique. However we have noticed most of the banks with the exception of a small group offer a 6-month Availability Period which is the period allowed to draw down on the loan after signing on the dotted line. If the loan is still not disbursed after this Availability Period it will be treated as cancelled and attracts cancellation fee of usually 1.5% of the loan. Now if it takes generally 1-2 weeks for the Credit Department of the bank to approve an application after requesting for additional documents (if need be), and if we further delay the time to sign the LO to say 2 weeks, we can then safely assume that one should start this process of shopping for best rates as early as 7 months before the expiry of one’s lock-in period on his existing loan. See our illustration below where one can start to apply in March for a loan lock-in expiry on 28 Sep. However remember not all banks out there offer 6 months Availability Period, sometimes this can be just 3-4 months.

There is however a small tradeoff for locking down your lower rates early – you do start your 1^st year three months after signing of the LO regardless whether or not you have drawn down on the new loan. That means should you go for say a 3-year fixed rate home loan, by the time you actually transfer the loan over near the end of the 6-month Availability Period, your fixed rate period would have started for about 3 months and you will enjoy the fixed rate for the 33 months instead of the full 36 months. To illustrate this in the same example above, the new 3-year fixed rate would have commenced on 30 Jun even though the loan was actually cut-over on last day of the Availability Period of 30 Sep just after the lock-in expiry date of 28 Sep of one’s existing mortgage.

This 3 month “loss” in terms of fixed period is still in our opinion a small tradeoff that is worthwhile for being able to lock down fixed rates early when the general interest rate cycle is on an uptrend like what we are experiencing at the moment.

At MortgageWise.sg, we seek to be your home loan Singapore solutions partner and take pride in being able to give truly independent advice sometimes asking clients to re-price and stay with their existing bank if it doesn’t make sense for them to move. We may not get to do business with you the first time round, but we will try again. We strive to be your first choice mortgage partner when you buy Singapore condo. Meanwhile do sign up for our newsletter on our website and stay tuned to this blog as we bring you purposeful and proprietary news summary & insights.