Refinancing Home Loan

Refinancing Home Loan

Is refinancing your home loan with a lower home loan rate the best home loan refinancing deal?

Refinancing is an act where property owners change from one home loan package to another. The intentions of refinancing home loan are to save money by reducing interest rates, to restructuring the loan by including cash term loan or overdraft facilities and to move to another home loan structure.

Factors to consider when refinancing home loan:

Flexibility: Consider if refinancing home loan means that you are locked into a new term longer than you intend to keep the home loan. This is because there is a lock-in penalty if you quit the refinancing home loan deal prematurely. The penalty is often a percentage of the home loan amount and may include legal subsidy, valuation, fire insurance or cash rebates.

Certainty: If your refinancing home loan comes with variable home loan rates, would you be able to live with a variable package with volatility and uncertainty? Home loan rates linked to the Singapore Interbank Offered Rate or the Swap Offer Rate are some products offered by most banks with variable interest rates.

Make sure you refinance your home loan with at least the same or better home loan interest rates. It may be hard to refinance your home loan if you have a poor home loan repayment record.

There is advantage of staying with your existing home loan lender. If you are currently in a lock-in period, it may be better to stay with your current bank and re-negotiate refinance home loan rates as changing to another bank may be costly.

Re-pricing your home loan rate with your current lender may have disadvantage. The rate offered by re-priced home loan packages is usually lower than your existing rate but still higher than current market rates offered to new customers.

Refinancing your home loan with the same bank is cost money as banks would charge something like $500 to $800 to cover costs like the mortgage stamp fee. Occasionally banks may offer a legal subsidy to new customers who are refinancing. So as long as the refinancing results in net savings, the client will consider doing so.

Remember that once you sign on the dotted line in refinancing home loan deal, there is no turning back, unless you can afford to pay the refinancing home loan penalty.

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