In 2022, the Federal Reserve implemented a series of interest rate hikes throughout the year, with more expected throughout 2023. It is projected that the US Federal Funds Rate could reach 5.25% to 5.50% this year.
So, what does this mean for people in Singapore? Homeowners can expect to pay more interest on their mortgages in 2023. In fact, those with floating-rate home loans may already be feeling the pressure.
But don’t worry, this is where home loan refinancing comes in handy. If you’ve been searching on Google for “what is mortgage refinancing,” you might be unsure where to start or what to expect during the refinancing process.
Perhaps you’re wondering if refinancing your home loan is worth the time and effort. We’re here to help! Learn everything you need to know about mortgage refinancing with this step-by-step checklist.
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Before starting the home loan refinancing process, check when your lock-in period ends
Most home loans have a lock-in period. In other words, once you accept a home loan, your mortgage rate is “locked in,” and you cannot switch to a more favorable rate without incurring a prepayment penalty. Generally, this prepayment penalty is 1.5%.
Therefore, if you want to refinance your home loan without incurring extra fees, you should ensure you do so after the lock-in period. If you are still within the lock-in period, note the expiry date and only consider refinancing after it ends to avoid penalty fees.
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Calculate and ensure home loan refinancing can save you money
If your goal is to reduce your total spending on your mortgage, then refinancing your home loan in Singapore is only worthwhile if you can secure a lower interest rate. You need to do the math first to ensure you save more money over the entire loan period.
For example, you can adjust the term of your home loan by extending the loan tenure. While this will lower your monthly payments in the short term and improve your cash flow, it may lead to you paying more interest over the life of the loan.
Unsure if refinancing is the right decision? Use Anjia SG’s loan refinancing calculator to estimate how much you can save by refinancing your home loan in Singapore.
Unsure if refinancing is the right decision? Contact our mortgage advisors!
Be mindful of the costs of home loan refinancing
Home loan refinancing incurs some fees, such as legal fees and valuation fees, which are expected to be between $1,650 and $2,250.
These fees are sometimes subsidized by your refinancing bank. However, if your bank does not cover these refinancing costs, you will need to pay them upfront. So, before you commit to refinancing, make sure you can afford it.
Please read the terms and conditions carefully
Like any other financial product, home loans certainly come with their own fine print.
For example, your current home loan might have a 3-year clawback period, which stipulates that if you refinance within this period, you will have to repay any subsidies the bank previously gave you. This clawback period is separate from the interest rate lock-in period, so even if you are no longer in the lock-in period, the clawback clause may still be in effect, so please check carefully.
Also, pay attention to the outstanding loan amount. You might not know that if you purchased a property under construction, 15% of the loan amount is withheld for the developer until the property’s Certificate of Statutory Completion (CSC) is issued. If you decide to refinance before the bank has paid the full amount to the developer, you will need to pay a fee on the undisbursed loan amount. Additionally, there is a cancellation fee of 0.75% to 1.5% on the undisbursed loan.
Therefore, in addition to the fees highlighted in the fine print, be sure to double-check if you qualify for any cash rebates or valuation subsidies.
Research and compare multiple home loan refinancing options
Home loan refinancing packages vary, so as the saying goes, it pays to shop around. Make sure you get the package that best suits your needs.
Generally, the refinancing process can take up to five months. Therefore, you can start looking for new mortgage packages on the market four to six months before your lock-in period ends.
This gives you more time to find and confirm the “best” home loan package. Once you’ve made your decision, you can schedule your home loan refinancing to seamlessly transition to a more favorable mortgage package right after your lock-in period expires.
You can consult Anjia SG’s mortgage experts to compare the most competitive mortgage packages from major banks in Singapore (based on the lowest interest rates offered in the first year).
Prepare the necessary documents for home loan refinancing
Today, the entire refinancing process is digital. When you apply for a mortgage online, a list of required documents will appear when you click “apply.”
Here is a detailed checklist of the documents required for your refinancing application, along with how to retrieve them:
Here are some other things to keep in mind.
HDB Information (for HDB flat owners only)
To refinance your HDB flat, you will need information about your flat and your current financial situation. HDB information includes details such as when you purchased the flat, the price, and the occupiers. Financial information includes details about your mortgage account balance, whether it’s from the Housing & Development Board or another financial institution.
To obtain this information, follow these steps:
- Log in to MyHDBPage via SingPass
- Select “My Flat” from the menu
- Choose “Purchased Flat”
- Click on “Financial Info” and “Flat Details” and download the documents
Property Tax Information from IRAS
When you refinance your home loan, financial institutions will want to know if the property is owner-occupied to determine eligibility for Total Debt Servicing Ratio (TDSR) exemption. If the property is owner-occupied, the TDSR requirements are less strict. This is why you need to download information from the IRAS MyTax website as one of the documents to submit to the financial institution.
Follow these steps to download the “My Property Tax” page:
- Log in to the IRAS MyTax portal
- Select the “Property” tab
- Click on “View Property Dashboard”
- View and download your property details
Latest Notice of Assessment (NOA)
To provide you with a home loan, financial institutions need to assess your financial ability to repay the loan. They use your income to measure your repayment capacity. Therefore, you need to submit your latest Notice of Assessment (NOA) when applying for refinancing. The NOA includes your annual income for the last financial year and the amount of tax you are liable for.
Follow these steps to download your NOA from IRAS:
- Log in to the IRAS MyTax portal
- Select the “Notices” tab, then “Individuals”
- Download the latest “Notice of Assessment (Income Tax)”
Past 12 Months’ CPF Contribution History
In addition to your IRAS NOA, you will also need to provide your CPF contribution statement for the past 12 months.
Follow these steps to download your 12-month CPF contribution history:
- Log in to your CPF account via SingPass
- Under “Section B,” select “Contribution History”
- Select “12 months” as the contribution period
- View and download the CPF contribution statement
Refinance your home loan with Anjia SG
If you’re refinancing your mortgage for the first time, or just need some help, contact our friendly and experienced mortgage experts at Anjia SG.
In addition to providing you with honest, impartial advice and tailored recommendations, we can also guide you through the home loan application process for free!
For further enquiries, please get in touch:
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