For many Singaporeans, our mortgages are the single largest financial cost we will shoulder at any point in our lives.
Many of us are aware that by refinancing every now and then to a different home loan with either a lower interest rate, a different payment schedule, less fees, or more advantageous terms and conditions, we can reduce how much we pay, or reduce the load on our household monthly expenditures.
Yet, at the same time, there are many myths and negative misconceptions about refinancing that have discouraged many homeowners from making this move. In this guide, we look at some of these myths, and clear the air – time for some myth-busting!
Want to save more on your existing mortgage? Compare the best home loan rates in town or check out PropertyGuru Finance for more personalised advice and recommendations:
Myth #1: Refinancing is Expensive
Here’s our TLDR answer to this: yes, refinancing may involve some upfront costs, but:
- The savings you can get from a good, well-calculated refinancing will typically significantly exceed the cost–and that’s what matters!
- These costs are often subsidised anyway by the banks.
Refinancing isn’t free per se–your new home loan package comes with various costs, such as legal fees, valuation fees, as well as any applicable fees and charges, depending on your existing contract. The upfront costs may be anywhere around $3,000 to $4,000 and as a result, a common misconception is that refinancing is very expensive.
To be clear, we agree that $3,000 to $4,000 is no small sum. However, with refinancing, the long-term savings often exceed those costs, making it an attractive strategy for many homeowners.
Refinancing may be right, or not, depending on your financial situation, market situation, and also the terms and conditions of your current mortgage. There is no one-size-fits-all approach. There have been people who made a loss because they did not refinance wisely, just as there are many, many more who have gained from it.
This is why it’s important to shop carefully, and work out your expected savings from your target mortgages for refinancing, taking into account the expected costs, to ascertain if refinancing is right for you. If you need help with finding and comparing home loans, or with the maths of whether or not refinancing to any particular mortgage will result in a net saving for you, you can speak to our Home Finance Advisors at PropertyGuru Finance for a free personalised consultation that will give you clarity and help you save time and money.
Myth #2: Refinancing is Complicated
As with all things finance-related, many Singaporeans are daunted by all the numbers and legal jargon that every mortgage package comes with. Because many of us cannot fully understand the implications of what we read in the terms and conditions, we have the impression that refinancing is complicated and best avoided for fear of getting something wrong and worse, making unexpected losses.
While this was true in the old days, the Internet–and PropertyGuru!–have made property financing and refinancing easier, with free access to so much information about home loans, as well as easy-to-understand property guides on every aspect of property investment and ownership, including financing. While these resources don’t turn your home loan into kindergarten maths, it will at least no longer be rocket science.
With thousands of dollars in savings at stake, taking some time to read and find out more could result in great benefits for your long-term finances and cashflow! If you are still not confident about what you’ve read, don’t ask your friends and family–ask seasoned professionals like our one-stop Home Finance Advisors, who can advise, clarify and assist you in understanding the terms and conditions of your current and next mortgage when you explore refinancing.
Myth #3: Refinancing is Troublesome
Another common myth about refinancing is that it is very troublesome, or “leceh”, as we say. We have images of tons of paperwork, sheaves of documents to read and sign, and many steps and departments to deal with in order to get a new mortgage. This isn’t entirely untrue–refinancing does involve many processes and many parties, because it involves the movement of large sums of money, which need to be well documented.
Thankfully, there is an easy way to ease this process – reach out to our Home Finance Advisors! While you will inevitably need to complete the paperwork and sign off on documents, we can help guide and simplify the application process. When it comes to the legal work, the lawyers will manage it for you as well.
Myth #4: You can only Refinance if you have a Bank Loan
This is the most popular myth to date. You cannot refinance if you have a HDB loan–in fact, refinancing from HDB loans can actually come with even larger savings to you than refinancing from a bank loan, as bank mortgage rates are currently significantly lower than HDB’s.
If you bought a BTO several years back as a young couple, chances are you took up a HDB Concessionary Loan. The standard interest rate tied to that is currently at 2.6%.
However, if you decide to swap out of your HDB loan you can make savings of up to 0.9% (the current average bank interest rate is around 1.5%) allowing you to save a lot more in the long run.
Refinancing Is A Tool, Not An Obstacle
Coupled with careful planning and calculation, refinancing has the potential to bring big savings to your finances. As we’ve shown, it can seem like a daunting undertaking, but the reality is actually less complicated than you might have heard.
With the resources and support available for every homeowner today, the refinancing journey has become straighter and smoother, and PropertyGuru Finance is ready to help make it even more hassle-free for you.
Disclaimer: Information provided on this website is general in nature and does not constitute financial advice.
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