What is Re-Financing of Home Loan?
Re-financing of mortgage loan is the act of switching your home loan to a different bank which offers a more attractive interest rate.
Note that this is different from re-pricing of home loan, where the user stays with the current bank, albeit taking up a new loan package with the bank.
When do Home Owners Re-Finance?
Home owners usually re-finance their mortgage loan after their lock in period (for mine, it’s after 2 years) and claw back period. This is to avoid the penalty charges slapped onto them, which makes no sense since we are aiming to reduce our monthly repayments and overall cost.
How Soon to Start Application?
It is recommended to apply to refinance loan 4 to 6 months before the end of the lock-in period. This is to take into account the loan application processing period of 3 weeks and the 3 months notice to serve to the bank.
Factors to Consider
They include legal charges which can be between $300 and $500 and the valuation fees which is around $2000 to $3000 depending on property type.
Please do consider refinancing as it is highly likely that the interest rates (hence, monthly payments) will rise after the lock in period. With the rising interest rates environment that we are in, the banks’ refinance package will most likely be priced competitively.
Also, it is a good chance to change the tenure of the loan should you find that your circumstances has changed.
Places to compare loan packages include iCompare Loan, Mortgage Wise and Property Guru.