Probably one of the biggest financial decisions that you take in your life is buying a home. Moreover, if you do so through a home loan, paying for that loan is a long term financial obligation. The financial disorder sparked by the Coronavirus has halved the home loan growth rate this year, but there is still one upside for homeowners: low mortgage rates.
Refinancing in the midst of a pandemic can be an enticing option for homeowners to switch banks for lower interest rates. It can help increase your monthly cash flow and save you money in due course.
Under the current circumstances, refinancing your home loan may be due to a reduction in income, loss of a job, medical emergency, loan debt or mortgage problems. If you have a loan that’s too risky to continue to make payments on, you can refinance it into a better loan.
So, When Should You Refinance Bank Home Loans?
- Refinancing is when you move your home loan to a different bank to get a lower interest rate based on market conditions and your credit score. To find out if you are eligible to refinance, you need to meet the Total Debt Servicing Ratio (TDSR) requirements. Your credit value may have improved or deteriorated while you were locked into your initial bank home loan.
- Once you know you are eligible to refinance your bank home loan, you can shop for the best home loan packages through our Refinance Comparison Tool.
- In uncertain scenarios like this one, choose floating rates, as the interest rates are lower and more competitive. Fixed rates are a good option for when interest rates are rising.
- Consider refinancing current home loans when SIBOR and SOR rates (determine the interest rates on some home loans) undergo fluctuation. The Monetary Authority of Singapore (MAS) and The Association of Banks Singapore (ABS) monitor these SIBOR and SOR rates and make adjustments to inter-bank lending rates daily.
- Other variables such as property tax and management fees vis-a-vis your new monthly loan installment, old versus new loan tenure, personal income, and any other existing loans; need to be taken into consideration before refinancing an existing loan.
Use PropertyGuru’s home loan refinancing calculator to estimate how much you could save by refinancing.
Pros of Refinancing Mortgage:
Whether you lower the interest rate on your loan or extend the amount of time you’ll take to repay it, the outcome is often a healthier monthly cash flow and more money available in your budget for other essential monthly expenses.
Cons of Refinancing Mortgage:
Thus, refinancing your mortgage during uncertain times allows you the flexibility to secure more favourable interest rates or to replace an unsustainable home loan with the one you can live with, in the long run.
Either way, it’s important to be informed and weigh your savings and costs against the pitfalls to allow you to make a calculated decision, when the time is right for you.
At PropertyGuru Finance, we provide complimentary home loan reviews to ease the financial burden for a homeowner in their monthly repayments.
As Paul Wee, the Managing Director of PropertyGuru Finance, explains:
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Disclaimer: Information provided on this website is general in nature and does not constitute financial advice.
PropertyGuru will endeavour to update the website as needed. However, information can change without notice and we do not guarantee the accuracy of the information on the website, including information provided by third parties, at any particular time. Whilst every effort has been made to ensure that the information provided is accurate, individuals must not rely on this information to make a financial or investment decision. Before making any decision, we recommend you consult a financial planner or your bank to take into account your particular financial situation and individual needs. PropertyGuru does not give any warranty as to the accuracy, reliability or completeness of information which is contained on this website. Except insofar as any liability under statute cannot be excluded, PropertyGuru and its employees do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person.
This article is written by Manasi Hukku. Manasi likes to cover the intersection between research and relevance to help readers find a place they’ll love. She is a Medium columnist, mother of two and UX Conversation Designer.