You can consider reducing your monthly repayments by taking advantage of the lower interest rates that have fallen substantially over the last few months. Make use of online mortgage calculators to help determine whether it makes financial sense to switch home loan packages.
According to Paul, the three-month SIBOR (Singapore Interbank Offered Rate, or the rate at which banks lend each other) has dropped from over 2 per cent to just above 0.5 per cent.
“This presents an opportunity for mortgage holders to explore refinancing their housing loans to gain favourable interest rates and reduce their monthly mortgage repayments,” he says. “Refinancing is something that all homeowners need to be aware of and explore once they are eligible to do so. It is prudent to re-evaluate periodically to ensure the mortgage is serving your needs optimally.”
Rhonda agrees that refinancing is an important practice that helps you to save on interest, but she warns that when doing so, there are legal and valuation costs which may add up in the thousands.
“New banks will usually subsidise the majority of these costs, depending on the size of the loan,” she says, “but you still need to ascertain the total savings for two to three years with this switch, compared to the current rate or repricing with the same bank.”
- Be frank with your lender
There’s no need to be intimidated by these figures, reassures Paul, as refinancing decisions have to be made with a cost-benefit analysis. At times, it may still make sense to refinance even when there are costs upfront. However, if you still find the monthly mortgage commitments challenging, approach the lender directly and have a candid conversation.
“It is important to be upfront about your financial circumstances,” says Paul. “In most cases, banks will work closely with borrowers to help them through this challenging period. No matter what you do, it beats doing nothing about your mortgage debt as your credit score will be affected and may lower your chances of getting a loan in the future.”
