how to choose fixed vs floating

Reprice Or Refinance Home Loan?

As interest rate begins to creep up this year, many homeowners are receiving notifications from banks this year on a higher revised monthly repayment, sometimes more than once within six months.  That is when some people realized the importance of not being locked into any loan which then allows them to refinance out for better rates elsewhere if need be, or even partially paying down the home loan using one’s CPF (especially when floating rate goes near to 2.50% where it no longer make sense to leverage).

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Apart from interest rates, home loan packages in Singapore today can come with all sorts of interesting features which many may not be aware of.  Homeowners should therefore take heed and not simply reprice and sign on the dotted line with their existing banks without even checking what else is available in the market.  Remember when repricing, most likely you would need to lock yourself in for another 2 years with the same bank, essentially denying yourself the chance to try out new mortgage features, and new products and services from a new bank who may be hungrier for your business.

Without going into too much details, let us me just list 12 of these new mortgage features:

  1. Full flexibility to reduce the loan anytime during the lock-in
  2. Ability to sell the property without a penalty during lock-in when an offer too good comes up
  3. Free conversion should the bank revises up its loan peg during the lock-in
  4. Free conversion at end of the lock-in period
  5. Interest-offset account where you can offset up to 70% of the outstanding loan
  6. Qualify for high-yielding deposit account via a home loan
  7. Becoming a preferred customer of an international bank via a home loan
  8. Having the best of both worlds by combining fixed and floating rate in the same loan
  9. Legal subsidy to help defray the high costs for de-coupling of property titles
  10. Cash out on a term loan without incurring much admin fees (compared to doing it via repricing)
  11. Cash out to get a higher term loan without being restricted by CPF usage in the property
  12. Refinance at no costs through MortgageWise (compared to repricing where banks might still charge)

 

I marvel when I read recently advice given by another mortgage broker that for those looking to sell their property, it is best they reprice instead of refinancing now.  This is no longer true when there are more than a few banks offering fixed rate home loans now that come with waiver of penalty due to sale during the lock-in period.  Yes, there is still the legal fee clawback if one redeems in full the mortgage within three years but the $2,000 clawback is easily covered by the savings in interest alone in the first year of a 3-year fixed rate term.  Not to mention if the current bank charges an admin fee for repricing or imposes a fresh 2-year lock-in which means redemption penalty!  In fact, the best option for those who are selling is to refinance out if the current bank does not offer a package with waiver of penalty due to sale.

As you can see from the list above, your current bank definitely will not be able to offer you all of the features above.  You will first need to understand what these features are, and ask yourself what is important to you besides interest rate per se, which can appear low today but many have realized that they do not last.  It will be too much details for me to elaborate on all the features and benefits above in this article.  It is better that you speak to our team of very experienced mortgage consultants operating since 2014 who collectively have helped thousands to refinance successfully and to enjoy not just the lowest interest rate but benefits unknown to them before they start working with a professional mortgage consultant.

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And one of those benefits unknown to most, allow me, is the last one on the list – refinancing out to another bank through MortgageWise now comes with zero “out-of-pocket” costs for min loan of $500,000 (other terms apply), compared to repricing where some repricing banks still charge a small fee.  It is zero cost because we are giving away $250 Tangs voucher to help offset valuation costs up to $450 for most properties.  And this is not one of those “up to” gimmicks where you qualify only if your loan is above $2m.  As long as your outstanding residential home loan to refinance is above $500,000, you will receive $250 Tangs voucher from us.  Period.  MortgageWise has now given the market a genuine no cost option to refinance to the bank who offers the best deal in terms of lowest interest rate and best loan features.

Refinancing may seem daunting to some at first with the need to submit documentations to the new bank for approval.  Most of our clients are quite pleasantly surprised to discover that with the advent of technology these days, all that you need is just 20 min and a SingPass to access 3 government websites and retrieve 5 sets of documents and you are done!  We will show you step-by-step.  And when we also show, by way of our interest simulation model, that the average interest savings based on a $700,000 home loan could add up to $3,000 over a period of 2 years, is it not worth that 20min of your time?  Why make your bank richer when you could use that sum on a nice vacation at the end of the year?

Interest rate is still expected to rise further with Fed projecting two more rate hikes before the year is over, and with one coming in just the next few weeks (September FOMC).  Banks have been moving up both fixed and floating rates over the months.  Take decisive action now and lock down the lowest rate so you can rest easy!

 

Since 2014, MortgageWise.sg has provided thought leadership in the mortgage planning space in Singapore, taking deep dives into the latest developments in the industry, providing useful mortgage tips, and making sense of rate movements.  We seek to build trust with clients over the longer term instead of doing product-peddling for quick one-time deals.  That’s why we always present “whole-of-market” perspective including home loan packages that some banks do not pay us.  Read our clients’ testimonials.

 

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