Disclaimer: All information shared is solely for learning purpose and constitute to our personal opinion and may not be applicable to everyone.
Why do we look at refinancing now??
From the chart below, we can see that US interest rate has fallen to 0% and it is one of the lowest rate for the past 25 years! As such, we felt that this is one of the best opportunity in many years for us to take advantage of the low interest rate environment to reduce our interest cost.
Good NEWS for those whom are having private properties; you will be able to re-mortgage your properties for additional cash flow. With the unlocked funds and reduced cost; you would be able to channel them to meet your daily needs (especially in time of COVID-19 situation). Excess funds can then be used for investing or trading to generate more wealth.
SIBOR vs US FED Historical Rate Chart for past 25 years
Bank Loan Trend 2020
Types of Home Loan Packages offered by Banks
Fixed Rates Packages:
Currently banks are offering fixed rates for first 2 to 5 years, thereafter floating rate takes over. Banks are obligated to keep the fixed rates unchanged. Fixed rates are preferred by borrowers who prefer stability and certainty in monthly repayment.
Floating Rates Packages (pegged to):
SIBOR: Banks are offering 1 month SIBOR and 3 month SIBOR packages with competitive spread currently. Individual banks have no control over SIBOR. Expect your monthly installment to fluctuate on every review. These packages are preferred by some borrowers when interest rate is trending down. Currently offered by Citibank, HSBC, Stanchart, UOB, OCBC, Maybank, CIMB & BOC.
(Citibank, HSBC & Stanchart are also offering Interest offset account).
Mortgage Board Rates:
These rates are internal to individual banks. Banks justify the increase to their board rates when market rates like SIBOR increases. Frequency of adjustment is at banks' discretion. Currently offered by OCBC, UOB, Maybank, RHB and Hong Leong Finance.
SGD Fixed Deposit Board Rates:
These packages are often misunderstood as fixed rates packages. Frequency of adjustment is at individual banks' discretion, similar to Mortgage Board Rates. Fixed Deposit Board Rates can be referenced from banks' websites. Currently offered by DBS and HSBC.
Bank Loan Features
Lock-in/ Commitment Period:
Most loan packages comes with a lock-in period of 2 to 3 years. During the lock-in period, banks will charge a penalty fee if you make partial or full redemption of outstanding loan.
Legal Subsidy / Cash Rebates:
Banks may include legal subsidies / cash rebate in their loan packages, generally above SGD 500k. Not applicable for purchase of residential properties. All subsidies/ cash rebates are subject to 3-year claw-back period.
Penalty Waiver for Partial Prepayment:
There are some banks offering loan packages that allow penalty to be waived for partial prepayment up to a specified limit during lock-in period.
Penalty Waiver for Property Sale:
This is an added feature offered by some packages, to give flexibility to borrowers who may be selling their properties during lock-in period.
Bonus: We would like to share that we have partnered with industry experts to support readers with a one time free review on your loan/financial structure; Click here to leave your contact with us to find out more!