Have you ever seriously contemplated making a shift to another bank with the hope of getting friendlier interest rates compared to what you currently pay? Well, the question remains whether refinancing would be the best option to remedy your situation. Does opting to refinance satisfy your search for a better deal? Does it help you save money in the long run? Is the cost of refinancing really worth it? Here are the costs you are likely to encounter when you opt for refinancing in Singapore. For our case, we will focus on home loans to show you why you should strongly consider refinancing. Business people from other countries who are interested in local refinancing should look into the available options to get business visa to Singapore.
Loans Still Within the Lock-in Period
If your loan has over six months remaining prior to the termination of the repayment period, then the cost of refinancing would include a redemption fee of about 1.5 percent of the remaining value of the loan. It is wise not to wait until the lock-in period ends for you to refinance your loan. This, however, requires a three-month notice to your current bank.
Cancellation Fees for Loans Not Fully Disbursed
When you prematurely cancel your contract before your bank disburses the loan amount in full for your new development project, you may be subjected to some fees. A cancellation fee is applied in case a delay in the certificate of statutory completion or the temporary occupation permit lures you into terminating your contract. The fee is often between 0.75 percent and 1.5 percent of the amount yet to be remitted to your account. The fee is, however, only applicable while acquiring a new development but doesn’t apply for a completed property.
Legal Expenses for Loans of Different Values
A Housing Development Board loan of less than $300000 leads to some legal expenses due to the paperwork involved while it is being refinanced. The value is often roughly 1800 U.S. dollars. On the other hand, the loan on private property attracts a refinancing cost of $3000. In the cases of refinancing, you may, however, receive a bank subsidy for the legal expenses. The available subsidies are $1800 and $2000 for a loan of more than $300000 for an HDB loan or $500000 for a private property loan, respectively.
Subsidies From Your Current Bank
If you were offered a subsidy by your bank, then consider it a temporary guarantee if you choose to refinance. Failure to meet the bank’s 3-year clawback period causes a repayment of the subsidy in full as clawback fees.
Valuation Fees
When refinancing, the bank’s evaluation of the current value of your property results in valuation fees. This valuation fee is somewhere in the range of between $250 and $1000 or more based on the property valuation.
Can Refinancing Lower Your Monthly Payments?
For an HDB loan of above $500000, refinancing a 2.6 percent interest rate loan that has 20 years remaining would be a great deal. With the new bank refinancing at a 1.5 percent interest rate and considering that your new bank offers a subsidy on the legal expenses, the resultant effect is that you will take a very short time to start enjoying your savings.
However, refinancing an outstanding HDB loan of $200000 over the same period and the same interest rate would not guarantee saving anything. Rather, you might have to wait for close to two years to see any savings.