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Repricing and refinancing might sound similar, but in fact, they are vastly different. Yet, both aim to achieve the ultimate goal of lowering the monthly repayment amount and the interest rate charged on the loan amount. Repricing refers to the act of changing your home loan package to another one that is provided by the same bank. Refinancing, on the other hand, refers to the act of changing your home loan package to another package that is provided by a different bank from the current one. Before jumping right into either option, be sure to take into consideration the several factors and effects of each option.
For repricing within the same bank, the current bank normally imposes an admin fee between $500 to $1,000. The downside for repricing is that you can only choose the 1-2 packages being offered by your current bank. Thus, this may limit your choices. For refinancing, there would be more costs like legal and valuation fees which may amount to $2K to $3K. Though the costs of refinancing may seem to be higher, the good news is that most banks are offering fee subsidy which you may offset greatly your refinancing costs. And in some cases, legal fees for refinancing can be paid from your CPFOA account and the bank in return reimburse the subsidy to you in the form of cash! Through refinancing, you will also have more than 100 loan packages across 16 banks to compare and choose from, making sure that you will get the best home loan deal!
Repricing occurs within the same bank; thus, it will only take around 1 month for the new loan package to take effect. Additionally, this option will be more hassle-free and will allow you to enjoy a lower interest rate earlier. Refinancing will usually take 3 months to come into effect as the new bank will need some time to process the paperwork. Therefore, if you are considering this option, do work with a competent mortgage broker to plan ahead as this will require more processing time.
The low interest rate within the first 3 years might be tempting, but always be sure to check the rates from the 4th year onwards. Here’s an example to illustrate, with you on the 4th year into your current loan package. Current loan package’s interest rate (4th year): 1M SIBOR + 0.75% New loan package’s interest rate (1st to 3rd year): 1M SIBOR + 0.65% New loan package’s interest rate (4th year): 1M SIBOR + 1.25% As seen from above, it would be wiser to stick with the current loan package as the new package will not help you to decrease the monthly repayment amount after the 4th year.
If your outstanding loan amount is less than $80,000 (Subject to approval), it will be unlikely for banks to offer any refinancing packages to you.
A competent mortgage broker can advise you on the things that banks look out for before you apply refinancing with any banks. For example, to clear off certain bank debts bringing your Total debt servicing ratio (TDSR) to a healthy level etc
Home loan will probably be one’s biggest monthly expenditure, thus it is important to think ahead and select the best home loan package that will allow you to lower the monthly repayment amount. Contact Mortgage Consultancy now to get the smartest financial bank loan advice specifically for your home. We are able to provide more than 100 loan packages from 16 banks for you to compare and choose from! Feel free to contact us at +65 8556 5271 so that we will be able to help you make an informed decision, suited to your needs.