A guide to refinance your loans in Singapore 2022

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What is the meaning of refinancing? It involves financing something, usually a house or car or expensive items, with another new loan, usually at lower interest rates, so that an individual can save money in the long run. throughout the term of the loan. Refinancing could therefore be an excellent option and an opportunity for borrowers who wish to save thousands of dollars. With interest rates rising amid the global economic situation, now may be the time to switch to a new loan for its best terms and rates.

Difference Between Refinancing and Repricing

But first, let’s unpack the difference between refinancing and repricing. These 2 words sound almost identical, but they are not exactly the same.

If you want to refinance your loan, you can switch to a loan with any other bank or approved lender. However, for repricing, you can only switch to another loan from the same bank. This means that if you were to refinance your loan, you would be able to choose from any set of loans in Singapore, allowing you to choose the loan with the lowest possible interest rate.

However, refinancing comes with higher costs and hassles than repricing. Since repricing means that you choose another loan with different terms and rates within the same bank, the speed of your application can be very fast, and some banks allow their borrowers to reprice even during the period of blocking of the loan, with repricing fees. from $500 to $800, which can sometimes be waived.

On the other hand, refinancing would be slightly more cumbersome and expensive as you may have to pay up to $2,500 in fees and refinance fees, potentially incurring a 1.5% penalty if you refinance during your lock-in period, take a few months before eligibility criteria can be checked and paperwork has been taken care of.

However, that does not mean that refinancing is the worst of the two. Indeed, refinancing is suitable for those who are not afraid to do their own research to choose the best loan with the lowest interest rates, so that they can save more money during their term. Therefore, repricing would be more suitable for those who prefer a seamless, no-frills process.

Can I refinance any loan?

You might be wondering – can I refinance a loan I have? For the most part, that’s a yes. Most types of loans, especially home loans, auto loans, and personal loans, which are also the most common loans customers choose to take out and refinance, have refinance programs.

Attic

Another method of refinancing to potentially benefit from lower interest rates and therefore savings would also be debt consolidation. A debt consolidation plan (DCP) is a type of debt refinancing program that consolidates all of a customer’s unsecured loans and credit cards across all banks with 1 bank, allowing the customer to make repayments on all of its loans and credit facilities at once, usually with a lower overall interest rate. This allows borrowers to refinance major purchases, such as homes, cars, and other big-ticket items.

HSBC and Citi at night

However, it is important to note that the Debt Consolidation Plan (DCP) excludes refinancing options for home improvement loans, education loans, medical loans, and certain other credit facilities.

Why refinance?

Refinancing has its pros and cons, but the big question is whether you should refinance my existing loan or just stick with your current loan. Below, we go over some of the reasons why you should consider refinancing.

1. Reduced interest rates

Stock charts on laptop

You may have taken out your loan a long time ago, especially if it was your home. Over the period of time, say a few months or even years, interest rates may have dropped drastically, which means that almost any loan in the market today would offer lower interest rates. to those of your existing package.

If interest rates have dropped since the time you originally financed your home, car, or other loans, it may be a good idea to do some research and find out what current market interest rates are, just in case. they would have gone down, to your advantage. When you refinance your loan into one with lower interest rates, you may also be able to fight rising inflation by paying off your long-term loans at lower interest rates.

In general, refinancing could go a long way in helping you get cheaper loans at lower rates and save money in the long run.

2. Reduce your monthly payments

empty wallet

Unfortunately, some may refinance their loans not because they want to, but because they need to. In the event of a financial crisis or emergency, such as a loss or decrease in your income, you may not be able to pay your monthly payments.

In such a scenario, you should find another way to lower your monthly payments so that you can keep paying off your mortgage or loan. If you are able to find another loan that offers lower and more affordable interest rates, that would be the best case scenario. However, if there are no other loans at lower rates, you may need to consider refinancing into another loan with a longer term and repayment period. With a longer repayment term, the amounts you would have to pay each month would be reduced.

Since your term is extended, your total interest payments are more likely to be higher than before. However, it is a method to ensure that you are able to pay your monthly payments.

3. Pay off your debt faster

Home cooking

When you successfully repay a loan on a large item, the feeling of accomplishment and peace of mind is unparalleled, since you are no longer in debt. Refinancing your loan to another with a shorter term could be a solution for you. Loans with shorter terms tend to have lower total interest payments, which can save you a lot of money in the long run. However, it is also essential to understand that this translates into higher monthly payments.

For borrowers who can afford it, short-term loans are generally more profitable, making them prime choices for refinancing.

Does refinancing help fight rising mortgage rates?

With today’s rising interest rates, many home loans are becoming more and more expensive. Is it a good time to refinance to combat rising mortgage rates?

Home loans are experiencing a spike in interest rates with banks like DBS, OCBC and UOB all revising their home loan rates upwards. Most of their fixed home loan packages now have much higher rates than before, while the floating home loan packages retain similar terms. However, with the volatile global economic conditions, it is very likely that the floating rates for SORA-linked home loans would also increase significantly. If you are currently on mortgage, should you refinance in fixed or floating mortgage so as not to be a victim of the impact of this sharp increase?

A strategy would be “semi-fixed” strategy, where borrowers seek fixed home loan packages in order to obtain and ensure stability and security amid market volatility and uncertainty. This helps borrowers who want more stable and predictable monthly payments. Using this strategy, you can refinance one fixed home loan into another fixed home loan, which means you’ll still enjoy predictable repayments and your monthly payments won’t be subject to a floating rate, which could increase significantly at any time. given the current economic climate of perpetually rising interest rates.

It is important to assess your existing home loan. If you are currently still in the lock-in period or already benefiting from low interest rates, now would not be the best time to refinance. However, if you’re on a floating home loan and want more security in this volatile market environment, you might want to consider refinancing a fixed home loan now, before rising interest rates spike even higher.

Our top picks

To help you make a better decision, we’ve compiled all the current mortgage rates for those looking to refinance their home loans in Singapore. Whether you want to refinance your home loan or car loan, we have some of the best choices below for you to browse and decide for yourself if you want to refinance to save yourself some money.

Best Fixed Rate Home Loan

Fixed DBS

DBS
DBS
Consider this if
you are looking to refinance with one of the best real estate lenders in SG

The DBS Fixed Home Loan has one of the lowest fixed rates for potential borrowers and homeowners on the market, with 2.75% interest in the first year and a 2-year lock-in period. Assuming a loan of S$500,000 with a term of 25 years, this translates to a monthly installment of S$2,307, one of the lowest in Singapore. If you’re looking to refinance your existing home loan into one with the cheapest fixed rates and want some security and stability, this is a home loan worth considering for you.

The cheapest car loan for new cars

OCBC car loan

OCBC - Automotive Refinance Loan
OCBC - Automotive Refinance Loan
Consider this if
you want the cheapest auto loan for new cars in Singapore

OCBC Car Loan is the cheapest new car loan in Singapore, with an interest rate of 2.28% per annum. This makes it an ideal choice if you want to refinance your existing car loan at the cheapest possible price in the market. It also offers flexibility, with terms ranging from 1 to 7 years, so you can make the best choice based on your needs.

Conclusion

Refinancing can be one of the best ways to ensure you save the most money possible by taking out a loan with a lower interest rate. Borrowers, especially for home loans, typically choose to refinance when the economic climate is experiencing significant changes, causing interest rates to rise and fall rapidly. All in all, refinancing has immense potential to help you enjoy great savings, while jumpstarting your financial opportunities.

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