By: Zeng Han Jun, CPCG, Singapore
There are many factors that the bank will take into consideration when assessing your application for a refinance. Sometimes, your application is rejected, even when you feel that your credit and finance profile are pretty good. If that is so, what is the reason that is preventing them from accepting your application?
One of my clients, Mr. AAA, has excellent credit profile and is financially strong – which was why I rated him as AAA. He requested for my assistance in refinancing out of his present home loan to a better rated home loan product. Very soon, it was made known that his property refinancing application was rejected and I had to bring the bad new to him.
What exactly happened?
There are numerous people who are looking to refinance now, mainly because of the low interest rate that is being registered right now. However, banks and lending institutions are extremely selective of their housing loan applications right now. In times of an economic slowdown, some properties’ valuation has dropped significantly faster than those from other areas. Mr. AAA’s house, which sadly belonged to the former category, was bought last year with a 90% home loan, has suffered from a significant drop in the valuation. If he were to refinance right now, he will have to top up the difference! Of course, to some privileged few, this difference of money might not make any difference to them at all. However, to the majority of most Singaporean, this is not a very wise move to execute at all.
During a refinance, the banks do not just look purely at your credit and finance. There are some other factors that they take into consideration and they might played a part in the rejection of your application.
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