Mortgage refinancing can bring you quite a lot of benefits, especially if the current mortgage no longer works for you. It can also mean a major difference in your finances on a long-term basis, and you should really consider it when the lock-in period of your loan ends. Most banks in Singapore will give you a penalty if you repay within 2 years for floating-rate loans and 3 years for fixed-rate loans.
Before making a decision, you will need to know a few things, such as the outstanding loan, the current interest rate, the tenure, the end of the callback period, and current monthly repayments. After that, you may use a mortgage broker or research the market yourself, talking to banks about your current status and the options they can offer you, or get on the Internet and find out for yourself.
The next step is to decide what type of loan you want to get.
The Singapore Interbank Offered Rate (SIBOR) and the Swap Offer Rate (SOR) are daily reference rates set by the Association of Banks in Singapore. SIBOR reflects the rates at which banks pertaining to Asian time zones borrow unsecured funds from other banks in the region. SOR is the cost of borrowing SGD synthetically, by borrowing USD for the same tenor and swapping it out in return for the SGD. Since SOR is tied to the foreign interest rates and exchange rates, it is much more volatile and riskier than SIBOR. In contrast, the latter is much more stable.
Fixed rates are traditionally more stable than floating ones, as loan packages based on these will use a pre-determined interest rate for a given period of time after which the rate becomes variable and the package essentially turns into a floating rate package. With floating rates, the interest rate will follow the trend of the benchmark rates. Since in Singapore the daily references are SIBOR or SOR, floating rates follow their movements.
To lower monthly repayment: after the lock-in period the interest rate is bound to rise, and so in order to lower your monthly repayment you can refinance to a bank with a better package.
To lower the interest rate: if you choose a bank with a more appealing interest rate, you will reduce your monthly payments by quite a bit.
To pay off your mortgage faster: The ugliest part about mortgages is that they are a burden that you’ll carry for decades. Paying them off faster is incredibly appealing, and if you feel more confident about your ability to make bigger payments, you can refinance your mortgage to minimize the duration of the loan.
To cash out on your home equity: this particular feature is not applicable to HDB flats, and is recommended if you need funds for education costs, renovations, business startups, etc; in these cases, you might consider home equity Loans singapore. However, this means you will have to get a new mortgage and use cash to service the home equity loan, as CPF is not allowed in this case.