Home loans are one of the biggest commitments that an individual can take. It is a heavy financial obligation that can carry on for several years. To save money, it is important for you to be aware of ways to lighten up your payments and give yourself more financial freedom.
Current mortgage rates in Singapore are constantly changing as banks vigorously compete to deliver the best loan offers for their clients. This is why refinancing is a popular cost-saving trend in home loans. Refinancing is one way to ease off the load of your home loan by quitting your existing loan package for a new and better package from another bank. Should you refinance or not?
Here are some reasons why refinancing can work for you.
#1 Save money with lower interest rates
Singapore’s home loan market is always changing. Given this, you should be aware that your current mortgage interest rates may not anymore the best there is. Always be on the lookout for new home loan packages offering a much lower interest rate. Doing this will cut down your monthly payments and significantly save you money especially in the long run.
Review your home loan interest rate. Normally, low interest rates are given for the first 2 or 3 years, and an interest hike follows after this duration. Before your interest spikes up, consider your refinancing options. Experts suggest a 0.5% difference between the interest rates your old and new home loans.
#2 Be at ease with a new mortgage term
Refinancing also gives you the chance to pay your mortgage debt in less time. To clear up your debt sooner, you can get a 20-year mortgage to replace your current 30-year loan. This new loan can also save you on incurred interest rates. However, shortening your mortgage term means that your monthly payments will rise so make sure that you are financially stable to handle your debt obligations, especially in the long run.
On the other hand, if you suddenly can’t pay up your current monthly fees because you are faced with a financial emergency, then you can also refinance to a new mortgage package with a longer payment duration. This will save you financially by lowering your monthly loan instalments.
#3 Pay less by shifting to a new loan type
You initially got yourself a mortgage with variable rates, meaning your interest rate may start up small but can spike up anytime. These are loan packages that are usually tied with SIBOR (Singapore Interbank Offered Rate). When SIBOR rates grow, then your interest rates follow. This is why when SIBOR is forecasted to rise in the near future, homeowners would choose to refinance to a fixed rate loan package to avoid payment surges. This means that for a certain term (usually 2 or 3 years) you will have a fixed interest rate, regardless of SIBOR fluctuations; unlike debtors in flexible rates who can experience interest rate changes every month or every 3 months.
Conclusion
Refinancing can be a life-saver. But before your seal a deal, consult a financial agency first and make sure that you can really achieve the loan benefits that you expect. There are many other things to consider like current mortgage refinance rates, which banks give the best offer, and how much will you really save. To answer all these, contact your mortgage experts today.
Mortgage & Property 