Things to ponder about when considering refinancing

1) Determine your main goal

Do you want to refinance because you would like to save money each month? Would you like to get some cash out? Are you in a floating loan that is adjusting and you would like to get into a fixed mortgage?

Once you know the reason for refinancing, you should ask your mortgage specialist whether or not it would be beneficial for you to refinance at this time or whether it may be more beneficial to wait.

2) Take into consideration how long you will live in your current home.

If you plan on moving out of your existing home within the next one years, it may not be beneficial for you to refinance. Make sure you let your mortgage specialist know your future plans. When selling your house, check the housing transaction market and the overall market condition. Does the market seem flat? Has the economy been cooling, causing housing transactions to decrease and housing prices to fall? If it is, then it may not be beneficial for you to sell your house at all. Even if you decide to sell, the transaction may take one year or more to take place. In that case, you should consider refinancing instead.

3) Can you consolidate your Debt with a Loan Refinance?

Refinacing your mortgage can allow you to take cash out of the equity which you have built in your private residential home. You can pay off your higher interest debts and pay all of your debts at a lower interest rate. This will allow you to save money on a monthly basis and achieve your financial security. This only applies to private residential owners, not HDB flat owners.

4) How much is your current outstanding housing loan balance?

If your housing loan is substantial, refinancing will be a good choice as you will save more interest by doing so. What is substantial? Normally for private residential, $250,000 and for HDB$150,000. For example:

Lets say your loan is $300,000 and interest rate is 5%.

By refinancing to a housing loan with 2% interest, you will save 3% interest.

This will work out to be $9000 per year.

If your loan is only $50,000 and you still refinance. The savings works out to be $1500 per year. After paying for stamp fee and legal fee, you may not save anything at all.


For what reasons would it make sense for me to refinance my mortgage?

1) If you are able to get a lower interest rate

If you are able to get a lower rate that what you currently have, you can save tens of thousands of dollars over the life of your loan. Also, most lenders don't charge as many fees to refinance a mortgage as many lenders will subsidize your legal fee.

2) Change the term of your mortgage

Changing the term of your mortgage can help in several ways. First, if you were to refinance your current mortgage from 30 years to 15 years, you will accelerate the rate at which you pay towards principle each month meaning your house will be paid off quicker. Also, you will save an unbelievable amount of money in terms of interest because you would likely be taking 10 to 15 years off the life of your loan. Second, you can also refinance a 15 year mortgage to a 30 year mortgage. It seems like it might not make sense to do this, but if you have an immediate need to free up monthly cash-flow and you don't want to take out a term loan, this can work out to your benefit. When you take a 15 year loan and refinance it to 30 years you will have the same balance only the payments can be hundreds of dollars less than the 15 year loan. The only draw back to this is you will pay more in interest over the live of the loan.

3) You need a large amount of cash now - works for private residential

When you do a term loan plus refinance you are leveraging the equity in your home in order to receive a lump sum of cash at closing. Many individuals and families use this type of loan if they want to renovate their home, or they have kids that are attending university soon.

4) You know when you will be moving.

If you know that you will be moving in 2 to 3 years, you might want to consider refinancing to a 2 or 3 year fixed to floating interest rate mortgage.These loans have a fixed rate for the first 2 or 3 years of the loan, after which it will start to float. This will enable you to benefit from the lower rate, but you won't ever have to worry about the risk of a rate adjustment because you will be selling the home before the fixed-rate period ends.

What you should look for in a mortgage bank?

1) Is the company reputable

There are over 14 mortgage banks in Singapore. It is important that you choose a reputable one. Do not go for one that entice you with a teaser rate and when you sign the contract. Up goes your rate. Read the fine prints carefully.

2) Integrity of their bank officers

Many companies in this industry will do what ever they can to get away with charging you as much as they possibly can. Some of the ways they do this is not disclosing all the third party fees involved in a loan such as title insurance, appraisals and etc. It is important that you ask the loan officer you're speaking with about third party fees. If you don't they may not tell you and give you a good faith estimate that sounds fair, but at closing you'll find out that you have to pay a couple of thousand dollars more in fees you were unaware of. A good loan officer at a reputable bank should have no problem disclosing all fees that pertain to your loan and should also make sure you understand what the fees are for.

3) Integrity of Housing Agents and some mortgage brokers

Both housing agent and mortgage brokers can help you refinance. Often housing agents will work with one or two banks and refer you to the bank officer. A mortgage broker will work with all the banks in Singapore and will consult you before refinancing. The bank will pay them after closing. However, one thing to watch out for. Some lawyers team up with mortgage brokers and housing agents to charge you at a higher fee, resulting in higher closing cost. A good mortgage broker will help you to negotiate a lower legal fee, not higher.

Divorce and Refinancing

If you are divorced, refinancing your home can make things easier in regards to what happens to mortgage payments when the home is given to one of the parties. If you refinance the house, you can have your ex-spouse's name removed from the deed. Whoever gets the home will now be the sole owner and will be solely responsible for the payment. If you don't have one of the names taken off the deed, the person who is responsible for making the payments might fall behind and will effect the credit of the person's whose name is still on the deed even if they don't have the house.

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