In the last few years, the interest rates for bank loans especially home loans have decreased significantly. So many homeowners in Singapore who have taken a bank loan to finance their home purchase can save a significant amount in interest payment if they refinance their loan and get a loan at a lower interest rate. A large number of homes in Singapore are constructed by the Housing Development Board (HDB) and homeowners who have taken a home loan would like to find out how to refinance from hdb loan to bank loan in Singapore. The property owners would like to find out the major considerations they should be aware of so that they get the best loan deal.
One of the main considerations while refinancing the bank loan, is the interest rate that is being charged. The interest rates will vary depending on whether interest is being charged on the loan is fixed or floating. Usually, the interest rate for floating-rate loans is lower than fixed interest loans for the first three years. The floating interest rate varies depending on the Singapore Overnight Rate Average (SORA). The mortgage consultant will usually list the best offers for interest rates from various banks. Additionally, there may be some refinance offers with attractive interest rates which are available for a limited time period.
Another factor that should be considered while refinancing the loan, is the time duration over which the loan will be repaid. Typically mortgage consultants will provide details of the interest rates for loans of different periods ranging from one year to six years. Borrowers should be aware that the interest rates charged will depend on loan duration to a large extent, for floating loan rates are better for the first three years, but the interest rates for fixed-rate loans are sometimes lower for loans of duration more than 3 years for some promos. There is a significant difference in the interest rates for major banks, hence these rates should be carefully compared.
To encourage residents to invest their money in homes, banks often offer subsidies to home buyers. The subsidy amount varies depending on the home value, bank and is as high as $2000. Additionally, the lender is offering rewards in the form of cashback to borrowers so that they have to repay a smaller amount after the cashback amount is considered. The cashback amount will vary depending on the loan amount, duration, interest rate, so it is advisable to also check the rewards before selecting a particular loan.
Though the refinance deals offered appear attractive, homeowners should check the terms and conditions, especially the penalties before taking a decision. Often the lender will charge a penalty if the homeowner sells his home before he repays the loan. In some cases, this penalty could be significant, so the borrower should consider his future plans before making a decision. In other cases, the borrower has to pay a penalty if he decides to prepay the loan.
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