There are particular times that it’s a good idea to consider refinancing your home, whether you’ve been considering it or not. When market rates are ideal or there are offers by banks looking to attract new customers with low interest rates with lock-in periods, you could save a bundle if you act at the right time. On the other hand, there are also times when it’s an ill advised idea to refinance, if only because you potentially could be missing out on benefits and better market rates that pop up after the fact.
Here are four events to watch for that make refinancing your home a great idea:
1. Necessity.
This is the first and most obvious reason for refinancing a home loan. While there are plenty of benefits to be had, especially as market rates become more competitive, sometimes you struggle with your mortgage payments. Maybe you lost your job or some other unexpected event has befallen you. Either way, refinancing can save you a lot of money. Your first step should be to log onto Property Guru to refinance a home loan and explore what kind of packages are out there, and what you can afford. Most likely you’ll find something quickly that matches your budget and needs, since there are a lot of different plans being offered right now.
2. The Rates are Right.
The difference between re-pricing and refinancing according to Money Smart is:
- Re-pricing: You’re staying with your current lender but switching to a different package
- Refinancing: You’re switching banks completely
There are different perks and drawbacks to both of these options. You’ll need to make sure you’re not already in a lock-in period for your current mortgage, and also that the options available meet your needs. The two different types of interest rates known as floating or fixed make a huge difference in how much you’ll pay in interest over the life of the loan, but also impact the different benefits you’ll receive (or not) from market fluctuations. Basically, a floating interest rate means it’s variable, and goes up and down with the state of the Singaporean real estate market. It’s at the whims of the SIBOR. A fixed rate, which you’ll usually pay a little more for, is when your interest rate is guaranteed to stay at a particular percentage. This provides more security, but you also miss out on lower rates when the market does well. Homeowners and real estate investors have different reasons for opting to go with these options, but if you’re ready to refinance, it’s an important aspect to consider.
3. The Time is Right.
Even if you’re happy with your bank and can afford your mortgage, experts advise that you should review your mortgage for potential refinancing every three years. The real estate market is Singapore is one of the most heavily scrutinized sectors, particularly because of the boom that’s happened in the past decade. It suffered some in the past few years, but is slowly recovering, which means you should strike while the iron is hot. Given that the real estate market does fluctuate so wildly, you need to keep tabs on what’s potentially out there. Keep on top of what your current interest rates are, versus what they could be.
4. You’re Starting A Family.
Inevitably, most homeowners will think about starting a family at some point. If you originally purchased property that’s large enough to accommodate an expansion of your family, then you’re in a good position to refinance since you’ve already put down roots. If you’re looking for security, going with a fixed rate may be in your best interests. On top of that, if you’re looking to have children, you’ll need as much money as you can get. Saving funds from lower interest rates will help you support new additions to your family, and give you a way to plan for the future, especially if you’re looking at a fixed rate. You’ll have a much better idea of exactly what to expect down the road, even if the SIBOR fluctuates wildly.
You should always be looking to save money, even if it takes a little work and trouble to find the best package out there. As a homeowner, your property is collateral and an important part of your financial portfolio. In many people’s cases, it’s the one thing they actually own, and you’ll want to protect your investment. Whether you’re living in the residence that you’ve purchased, or you’re renting it out as a source of income, the real estate sector is closely scrutinized and extremely competitive. This is especially true in Singapore, as new regulations have been passed in 2015 and the SIBOR continues to recover in 2016. It’s a good time to refinance, if only because you can find some extremely attractive packages. Sit down with your financial advisor today to get a handle on what your current mortgage terms are, and see if there’s something better out there you might be missing.
