Home Loan Refinancing in Singapore: How to Get the Best Deal with Minimum Effort

In Singapore, one of the most expensive things we own is probably our property (unless we’re rich enough to also own a yacht, a million-dollar sports car or a gigantic diamond ring – if this is you, let’s be friends). This also means that very often, our biggest source of debt is our home loan, or mortgage.

A mortgage tends to be a long-term financial commitment. We’re looking at a good 20 to 30 years of recurring monthly instalments that range from the hundreds to thousands. If there’s not enough in your CPF Ordinary Account to support these payments, that means there’ll be some cash outlay which could really eat into our savings.

The solution? Some try to cut down their spending by forgoing ‘atas’ meals or a holiday overseas. There is, however, a better option to lower your mortgage payments without tightening your belt: refinancing your home loan to one with a lower interest rate!

The truth is, not a lot of homeowners know about the benefits of home loan refinancing can bring. In PropertyGuru’s Singapore Consumer Sentiment Study H1 2022, we found that more education around home loan refinancing is needed to bridge knowledge gaps.

Half of the Singaporeans surveyed said that their unfamiliarity with the required paperwork was a hurdle when securing a home loan. Other concerns revolved around the inability to afford a downpayment and job/income stability.

In addition, 39% of Singaporeans surveyed were not aware that refinancing their housing loan was even an option. About 47% of this group were millennials, and one-third were middle-aged and older Singaporeans.

For those who didn’t refinance their home loan, this inertia came from varying reasons, such as finding it unwise to refinance their mortgage during their lock-in period, perceptions that a lot of effort was required, and needing to cough up thousands of dollars upfront when refinancing.

In this article, we’ll go through these reasons and clear up any misconceptions about Singapore’s refinance home loan so you can save more money in 2022!

Before we dive in, let’s do a quick recap on what refinancing is. Singapore refinance home loan is when you replace your existing home loan package with that of another bank (or an HDB loan with one from a bank). To avoid any penalty fees and/or subsidy clawbacks, this is usually done after the lock-in period of your current home loan ends.

Refinancing is different from repricing. The latter involves staying with your current bank but signing a different loan arrangement. Still, the end goal for both is the same: to get a more competitive home loan and save money.

When you refinance your home loan, there’ll be some costs involved, of course. These include legal and valuation fees (about $2,000 to $3,000), administrative fees and so on, depending on the bank. For these upfront costs, the bank could offer some form of subsidy or cashback.

Now, let’s take a closer look at the pain points homeowners have when refinancing their home loans and what prevents them from doing so. We’ll also suggest some solutions to these hurdles.

The first thing anyone would do when looking for a home loan package is to Google "DBS refinance" or "OCBC home loan refinance". Then, of course, you would compare rates from other banks, since many well-known banks and financial services in Singapore provide appealing home loan packages. This might also include poring through the terms and conditions, looking for hidden costs and so on. You’ll have to trawl through various websites to get the required information, sometimes even without knowing where to look and how to begin.

Nevertheless, if you’re unfamiliar with Singapore’s refinance home loan procedure, the process may seem opaque. Even for the most organised of us, this process can be really tedious and tiring. And who knows, while you’re comparing the interest rates, they change midway!

For those focusing on their career, raising their little ones or managing other responsibilities, spending their free time comparing home loan packages takes the backseat. More often than not, the easiest route when managing your home loan is to stick with your existing one, even though it may not be as competitive.

Solution: Use online tools to compare home loan packages across all major banks.

Finding a home loan package most suitable for your needs is kinda like looking for the right partner on dating apps; it takes time, effort, and a lot of thought.

Using online mortgage comparison search tools, you are able to cross-compare rates across banks and select the financial institution which has a package most in line with your financial needs.

Earlier on, we mentioned that one pain point we identified in our Singapore Consumer Sentiment Study H1 2022 is the unfamiliarity with the paperwork required when refinancing. Just makes you reminisce about the time you got your HDB flat and had multiple appointments to sign so many papers that you probably lost count.

Good news: the entire process of home loan refinancing in Singapore is now digital. No need to hunt down a printer or go down to the bank and wait in line for hours. Documents you’ll need include your NRIC, latest outstanding loan statement, latest CPF property withdrawal statement, latest notice of assessment from IRAS (up to 2 years), 12 months of CPF statement history and latest three months’ payslips.

Those refinancing an HDB flat will need to prepare their HDB flat information and HDB financial information, and you could need more documents if you just changed jobs, are earning rental income, or refinancing from another bank.

Solution: There are mortgage brokers you can hire to take care of all the paperwork. These professionals deal with mortgaging and loan financing and acts as an intermediary between borrowers and lenders.

Aside from aiding you with paperwork, they can identify the best available deal for you, usually at no cost to the borrower.

Identifying the right time to refinance housing loans involves various factors. On top of monitoring the market to see what’s the best deal out there, you need to understand the terms and conditions of your existing loan (you don’t want to be ‘surprised’ by the pre-payment penalty amount) and the new loan package you’re planning to refinance your housing loan to.

Also, you’ll need to take your refinance housing loan goals into consideration and your financial situation too. This includes your Total Debt Servicing Ratio (TDSR), Loan-to-Value (LTV) limit, credit score and consistent income.

Additionally, you need to consider the refinancing fees to see if it’s worth refinancing and know the exact refinancing costs involved. If you’re unsure about all of these factors, you might not know how to ‘calculate’ the best time.

Solution: Instead of spending the better part of your evenings doing not-so-quick maths, why not outsource this job to a mortgage broker?

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