Which Is Better? Refinancing Or Repricing Your Home Loan? Find Out Here
Repricing home loan and refinance house loan are two of the most important things homeowners in Singapore must know. Unfortunately, there’s still a lot of confusion about what these are.
As the interest rates of loans are expected to increase this year and in the next years to come due to the US Federal Reserve hike, Singaporeans should be prepared. The Monetary Authority of Singapore even warned households about the skyrocketing mortgage debt that is set to be affected by these hikes.
After your home loan lock-in period has passed, or you’re unsatisfied with your current interest rate, you must shield yourself from overspending on your loan through repricing home loan or refinance housing loan.
If you’re still confused about what these two options are and how they can help you, this guide is for you. We will let you in on the details involved between refinancing and repricing your loan, as well as its advantages.
Here at OMY, you will discover the following:
What Is Repricing Home Loan?
When you are repricing your home loan, it means you switch from your current loan package to another one within the same bank. For example, if you’re currently taking out a DBS home loan, you can go for DBS home loan repricing. By doing this, you can enjoy savings since your loan will be more tailored to fit your needs better.
This is usually the go-to move of Singaporeans after their risk profile decreases. This will make their current lender more flexible to cater to improved loan conditions.
Keep in mind that when it comes to repricing home loans, doesn’t include closing down your loan account. It simply involves changing the terms and conditions of the loan.
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What Is Refinance Housing Loan?
On the other hand, refinancing your mortgage housing loan entails switching your current loan to another bank.
Before you can do this, you must close your loan account with your current bank, and then set up a new loan account in another bank. Many banks allow this, especially for Singaporeans whose financial standing has improved and who can qualify for a loan with low interest. For instance, when you got your loan and your credit score was low, but you were able to increase it, you may be able to qualify for loan refinancing.
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Unsurprisingly, this way to fund your home is more stressful and tedious, but the savings you can get from it may make it worthwhile. Most people in Singapore who opt for this choice get a great deal on their mortgage housing loan.
Who Is Eligible For Refinancing Or Repricing Home Loan?
HDB homeowners and EC and private property homeowners can do both options. But to avoid unnecessary fees and charges, it is recommended to do this after your lock-in period ends since the penalty fees can put a damper on your savings.
Repricing Home Loan Vs. Refinance Housing Loan: What Makes The Two Different?
While repricing home loan and refinancing your housing loan are different things, both are geared toward helping Singaporeans decrease their monthly payments and interest rates.
However, just like other types of loans, it is recommended to look at the whole picture, especially the total amount that is payable during the entire loan term. Don’t simply decide based on the first advertised interest rates you saw. Here’s the difference between repricing home loan and refinance housing loan.
||Repricing Home Loan
||Refinance Home Loan
||S$500 to S$1,000
||S$2,000 to S$3,000
||Around 1 month before it takes effect Less tedious
||2-3 months before it takes effect More tedious
When it comes to repricing your home loan, prepare to pay an admin fee between S$500 to S$1,000. Meanwhile, if you refinance housing loan, you need to cover more legal costs since you’re establishing a new relationship with a bank, and they will value your property again. Prepare to pay between S$2,000 to S$3,000.
Whether you go for repricing home loan and refinance housing loan when you’re still within your lock-in period, you also need to pay the penalty. This can be around 1.5% of your outstanding loan amount. That said, there are banks that allow you to do repricing within your lock-in period.
Subsidies by your current bank are also uncommon so you can take advantage of that. However, assess if there’s a clawback clause that will require you to pay back the subsidy.
When you go for repricing home loan, prepare to have limited choices within the same bank. However, the same cannot be said for refinance housing loan. Because you can explore a wide range of options from different lenders, you may find one with a lower annual percentage rate or APR.
When it comes to application, repricing home loan is the clear winner because it only requires minimal effort from you. After all, you already submitted all your details to your bank. Changes can take effect in just a month on or out of your lock-in date.
Meanwhile, refinance housing loan takes more time, usually two to three months. This is because you still have to pass the refinancing eligibility criteria. For this, banks will look at your credit score, and examine other paperwork.
Pros Of Repricing Home Loan And Refinance Housing Loan
Still not sure whether or not you should take these options? Take a look at the benefits of Repricing Home Loan and Refinance Housing Loan below.
As the world recovers from the impact of COVID-19 and faces increased inflation, people are desperate to save more money, with most individuals sacrificing luxuries just to stay on their budget. This is why repricing home loan and refinance housing loan are amazing, because the money you save from them can be used for your groceries, for travel, or to pay off your other loans.
Improved Interest Rates
When taking any type of loan, you should always focus on the interest rates since this is the major cost of taking out the loan.
Accurately calculating it will help you assess whether or not you can afford it. When it comes to repricing home loan and refinance home loan, both these options have a lower APR.
Your monthly loan payments take up a huge chunk of your paycheck. This is exactly why you must do your best to lower it and get the best deal.
Because of the lower interest rates, the monthly payment will also decrease significantly. Therefore, your monthly budget will improve.
If you simply want to decrease your monthly payments, looking for a loan with a low interest rate is the best thing to do. However, you must also be careful when it comes to the loan limit. For example, you may end up paying a lower monthly amount, but the extended payment period may mean you’ll pay more money in the long run.
Repricing Home Loan Vs. Refinance Housing Loan: Tips To Remember
No matter which of the two options you choose, make sure to keep these tips in mind.
When it comes to your mortgage housing loan, your goal should be to save money in the most convenient way possible.
Assess if you are comfortable with mortgage housing loan options with fixed rates that are less volatile, or if you’re okay with floating rates that are based on SIBOR or SOR. Although these are volatile, they are also more transparent. There are also mortgage housing loan packages that are based on the board rate of banks.
Think About Your Age
Did you know that how much you can borrow is actually dependent on your age? This is called Loan to Value Limit. Therefore, your age will impact your choice of repricing home loan or refinance housing loan.
You must take out a loan that you can repay within your active employment age. If you’re still young, you may not face any issues when choosing a longer loan tenure. However, it’s still better to pay your loan faster. Not only will this help you save when it comes to interest rates, but it will also help increase your chances of getting approved for other loans.
Assess The Loan Tenure
The loan tenure is another factor you should consider. Generally, prepare to pay a higher monthly instalment if you have a shorter tenure. However, this can help you enjoy lower interest rates. Meanwhile, a longer loan tenure equates to a lower monthly instalment but higher interest.
Consider The Offer
If there’s one thing about banks in Singapore, it’s that they are not shy about offering clients perks to remain competitive. You must consider these offers and take them.
For instance, there may be banks that charge lower interest rates or waive the fees that come with repricing your loan. There are also banks that waive the legal and valuation fees that come with refinancing your loan. All these will help you save more.
Frequently Asked Questions
Here are some questions you may still have about repricing home loan and refinance housing loan.
Can repricing fee be waived?
As stated above, there are banks that fully waive this fee, or at least provide a discount. You can inform the bank that a competitor is offering to offset the fees to make you switch. This will motivate them to offer you a good deal.
What is interest repricing?
This refers to periods when the interest-rate sensitive assets, as well as liabilities, can be adjusted.
Is refinancing a loan a good thing?
Absolutely. It can lower your current interest rate by 2%.
Is refinancing at a lower rate a good idea?
Yes. This will help you save more money by building equity. It can also enable you to pay off your loan faster, as well as lower your interest rate.
Which of the Two Options Should You Go For?
Still confused about which of the two options you should take? Examine this table below to help you arrive at the best decision.
|Repricing Home Loan
||Refinance Housing Loan
|If you love getting the most out of your savings
If you don’t mind looking for the best deal
If tons of paperwork don’t bother, you
|If you don’t want to deal with tons of paperwork
If you’re already satisfied with your bank
If you’re okay with not getting the lowest interest rates in the market, although you can still save money
A Word from OMY
Your home loan is one of the biggest financial commitments you will ever make in your life. This is why you must make an effort to enjoy more savings. Now, you may already have an idea of whether or not you should go for repricing home loans or refinance housing loans. Use the points above to guide you to make an informed decision.
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