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Thread: Do not worry, you can always refinance later.

  1. #1
    Join Date
    Aug 2008
    Posts
    63

    Default Do not worry, you can always refinance later.

    By: Zeng Han Jun, CPCG, Singapore

    For most people, a home purchase can be the largest ticket item of their life. As such, it is important to be particular about it, especially now. Do not be tricked into taking up a home loan product because a mortgage banker said: Do not worry, you can always refinance later. The issue here is, when the home loan payment becomes unbearable for you, the market conditions may not be favorable to do a refinance at all.

    Why do I say that it is especially important now when choosing between different kinds of mortgage products? Look, the benchmark interest rates are very low now, with Sibor rate hitting below 0.8% for most of this period. Even though costs of doing business for the banks are higher now, the home loan products are still priced at a competitive rate. All these translate to better lending opportunities for the real estate investors. However, what is happening concurrently is that there are many new home loan packages that are underwritten in a substandard manner, which I feel can cause un necessary monetary pressure on real estate investors in the future.

    One big hint that you are on the verge of accepting this kind of package is when the person selling you this kind of product says: Do not worry, you can always refinance later. What if benchmark interest rates rose to a high of 7% when you decided to refinance? What if you lost your job when you decided to refinance? What if the bank suddenly recalls on your home loan forcing you to take un necessary actions?

    Buying a property is an investment, because such purchase affects you financially. Do not bank too much on refinancing later. Get it right the first time and things will be much easier along the way.


    This article from CPCG is currently being protected by Singapore and International Copyright Laws. However please feel free to republish this article, provided that you include working links to our website: http://www.cpcgonline.com and http://www.cpcgonline.blogspot.com. We appreciate your kind gesture. For any enquiries, please email us at [email protected].
    Mortgage Advisory and Brokering Services
    http://www.cpcgonline.com

  2. #2
    Join Date
    Oct 2006
    Posts
    12

    Default

    Hi,

    Need some advise. My current owner occupier home loan is with bank A. My Investment property is with bank B. I'm looking at refinancing the investment property since I'm out of the lock in period.

    Since Bank B is not offering me an exceptionally attractive refinancing rate to retain me as their existing customer, I'm wondering if there might be a better deal elsewhere.

    I take your advise about getting the refinancing right to tie me over the next few years of uncertainty.

    There is a good chance that my investment property will fall below valuation over the next couple of years. I want to have some assurance that I'm lock into a reasonable fixed rate and the bank will hopefully not ask me to top up the shortfall to meet valuation.

    Would refinancing my investment property with the same bank as my owner occupier home loan have any advantage since my owner occupier home loan has more equity margin?

    I would prefer to go to a bank which will give me a good repricing package in the future. I notice some banks don't seem to extend their promotional rates to existing customers when it comes to refinancing even when they are out of their lock in period.

    Based on your personal experience, which banks are known to be more accommodating and flexible when it comes to retaining existing customers seeking refinancing. Have they demonstrated to...

    - waive fees and willing to negotiate rates on case by case basis?
    - offer same promotional rates to existing refinancing customers as well whether for home owner or investment?
    - not calling for top up to makeup for shortfall in valuation?

  3. #3
    Join Date
    Aug 2008
    Posts
    63

    Default

    - waive fees and willing to negotiate rates on case by case basis?

    Banks do waive fees on a case by case basis. That is when your case is large enough. Very often they do not negotiate rates with customers, unless they have huge deposits with them.

    - offer same promotional rates to existing refinancing customers as well whether for home owner or investment?

    Very difficult. Analyze the system and you realize that the possibility of that scenario happening is minimal. A bank officer only earns when someone takes up new loan. Refinancing customers are existing customers, and therefore do not contribute to their pay at all. He or she will be doing work that does not pay off at all. Time is limited and they have to meet targets. They rather spend more time on new loans.

    Anyway, apart from the bank officer's point of view. Lets take a look from the bank's point of view. Why would they offer this new rate to you? Unless of course the new rate is high. If the new rate is low, the bank's interest earnings from you will decrease.


    - not calling for top up to makeup for shortfall in valuation?

    Impossible. I have handled numerous loan contracts from so many banks and I have never come across a bank that does not include this clause. No matter what rumors says, such clauses are existent in every contracts and all banks will ask you to top up, if they are not confident. Loan contracts are drafted by the bank's lawyers in their favor. Not yours. This is business. Unless of course they really publish in the newspaper stating that they will not do it for all loans, and therefore overriding all existing contracts.


    Quarter of a cent of my thoughts.
    Mortgage Advisory and Brokering Services
    http://www.cpcgonline.com

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