Refinancing or repricing your home loan package is popular in Singapore for one key reason – both can help you to enjoy significant interest savings. But when it comes to home loans, refinancing and repricing a mortgage loan are two very different things.
In a nutshell, home loan refinancing requires you to switch banks to secure a better interest rate deal with a different bank. On the other hand, home loan repricing involves finding a better deal with the same bank or your existing loan provider.
Both options can enable you to secure a better interest rate and ultimately save money, but which is best?
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What is Repricing?
Home loan repricing involves switching your mortgage package with the same bank. This is best for borrowers who want to achieve savings with minimum hassle or shopping around.
Pros
- Minimum hassle involved
- Relatively straightforward process
- No complex legal or valuation fees involved
Cons
- Savings are lower than with refinancing
- You might not get the best deal available
- You could still have to pay up to $1,000 without waivers
What is Refinancing?
Home loan refinancing refers to approaching a different bank in search of a better interest rate and cost savings in other areas. This option is most suitable for borrowers with a cost savings top priority.
Pros
- Maximum cost and interest savings available
- You can compare the market to get the best possible deal
- Subsidies or waivers might be available to help with fees
Cons
- Refinancing is more expensive than repricing
- Shopping around can take time
- The credit approval period takes longer than with repricing
Refinancing Vs Repricing Your Home Loan Package: Key Differences?
There are several important differences to note between the two, as illustrated in this table:
| Repricing Your Home Loan | Refinancing Your Home Loan | |
|---|---|---|
| Who do I approach? | Your existing bank or existing loan provider | A new bank or new loan provider offering a new home loan package |
| How long do loan applications take? |
|
|
| What administrative fees are involved? | Repricing fees can usually be waived | Legal and valuation fees apply; total fees are dependent on your outstanding loan amount |
| What is the overall cost? | $1,000 maximum without waivers, subsidies, or fees | Approx. $2,500 without waivers, subsidies, or fees |
Costs of Refinancing Versus Repricing a Bank Loan
If you want to refinance or reprice your home loan, how much will that set you back exactly? Generally, refinancing is a usually more expensive. The table outlines how the decision to reprice or refinance could affect you financially:
| Repricing Your Home Loan | Refinancing Your Home Loan | |
|---|---|---|
| Legal fees | N/A | Legal fees range from $1,800 to $2,500 |
| Valuation fees | N/A | Valuation fees range from $200 to $450 |
| Early repayment penalty when breaking lock in period | N/A | 1.5% of outstanding loan amount |
| Admin fee for fixed conversions | $800 fixed rates fee | N/A |
Factors to Consider when Choosing Refinancing/Repricing Home Loan Packages
There’s a lot to think about when deciding whether to refinance or reprice your mortgage loan. Repricing and refinancing both have their pros and cons and understanding and comparing these will help you to determine which is the best option for you. Be sure to consider:
1. Refinancing and Repricing Fees
Refinancing typically incurs more expenditure in terms of legal and valuation fees, which might not be a good fit for those looking to save money up front. That said, high admin fees are common with repricing. Familiarize yourself with the fee structures of both options and look out for penalty waivers that could save you some extra cash.
2. Home Loan Refinancing vs Repricing Eligibility
It’s important to check with your desired bank to ensure you’re eligible before refinancing. If you have a current home loan account with a set lock in period, you might have to pay a 1.5% early repayment penalty if you break that lock in period early, meaning it could be better to hang on for longer.
3. Interest Rates
If you decide to reprice your home loan with your existing bank, interest rates aren’t usually so flexible. Conversely, fixed deposit rates, board rate and superior total interest savings could be available if you refinance. Always consider your monthly payment affordability and shop around for the deals that make the most financial sense.
4. Your Age
As a borrower, the total loan to value or “LTV” limit you can borrow from a new bank will vary depending on your age. If you’re borrowing with someone else as part of a joint mortgage loan, your bank may use an average age for its calculations.
5. Promotional Home Loan Offers
Every mortgage loan product advertised by a bank will usually have its own unique features. Look out for partial repayment or admin fee waivers that could help you enjoy cost savings when refinancing.
Frequently Asked Questions (FAQs) About Repricing and Refinancing
1. Who Can Refinance or Reprice Your Home Loan?
Private property owners, HDB homeowners and executive condominium owners can all refinance or reprice their mortgage loan. Despite this, expensive repricing fees, legal fees and other costs mean it’s sensible to only reprice or refinance if your current bank loan has exceeded its lock in period.
2. When Should I Reprice My Home Loan Package?
Repricing is recommended for homeowners who do not have much time for researching other banks and drawing up comparisons but wish to enjoy hassle-free interest savings. Sticking with your current bank will always be the easiest option and most banks tend to offer a relatively straightforward repricing process.
3. When Should I Refinance My Home Loan Package?
Due to the costs and fees involved, it’s advisable to refinance your home loan only when significant cost savings are available over the course of your new loan tenure, such as if favorable interest rates are advertised. You should try to ensure you are not tied into any lock in periods elsewhere before refinancing. Most Singaporeans will consider refinancing if their private property loan is above $500,000 or their HDB loan is above $300,000.
4. Are Fixed Rate or Floating Rate Home Loans Best?
Home owners, private properties owners and investment property owners have a lot of options when it comes to new home loan package deals. When Singapore’s interest rates are low, fixed rate deals can help you enjoy predictable, stable low monthly repayment costs. Conversely, floating rates follow the market and are therefore best in a falling interest rate environment.
5. Why Do People Refinance Their Mortgage Loan?
Refinancing with new banks is popular among home owners who wish to switch their home loan package to a more attractive deal offering better rates and lower monthly mortgage payments. It’s common for Singaporeans to shop around for a new loan product when they’re dealing with a shorter loan tenure or approaching the end of a lock in period, too.
Home Loan Refinancing vs Repricing – Which is Right for You?
If you’re struggling with a shorter loan tenure, both options offer you the chance to save cash by switching to a new loan deal – whether that be with your current bank or a new provider. When deciding which is right for you, don’t forget that:
- It’s a sensible idea to reprice your home loan if you’re short for time and looking for straightforward savings.
- Refinancing is a better option if you have spare cash available for fees and greater long-term cost savings are available.
- Always compare the market widely to see what different banks offer before applying for a new home loan account.
- Lock in periods can result in substantial early repayment fees if you break them early.
Loan Advisor can help you find the perfect new loan for your borrowing needs. Use our services to find a loan tenure that suits you and compare personal loans, home loans and other home loan packages from financial institutions in Singapore.
