Refinancing case studies
Refinance home loan is the process of transferring your outstanding loan from Bank A to Bank B. After the refinance process, you need to service your monthly installments to Bank B instead of Bank A.
Case 1 – Client is paying 3% interest and is not aware of the current market’s mortgage rate
Mr Tan was paying 3% interest for his Singapore housing loan of $500,000 with Bank A. The loan tenure was 30 years and his monthly mortgage instalment was $2108.
After assessing his needs, MortgageSENSE assisted him to refinance his loan with Bank B and his new mortgage loan’s rate was fixed at 2% for 2 years. His mortgage loan tenure remains at 30 years and his new instalment is $1848. His instalment was reduced by $260 monthly! Indicative savings for the next 2 years = $9869!
Alternatively, Mr Tan can consider the following option.
If he is comfortable with the monthly instalment of $2108 which he has been paying to Bank A, we can restructure the mortgage loan tenure to 25 years. His new monthly instalment will become $2119 (additional $11 monthly). He can repay his home loan 5 years earlier!
Total indicative interest paid to Bank A at 3% interest rate throughout for loan tenure of 30 years = $258,887
Total indicative interest paid to Bank B at 2% interest rate throughout for loan tenure of 30 years = $165,315 (Savings of $93,572)
Total indicative interest paid to Bank B at 2% interest rate throughout for loan tenure of 25 years = $135,781 (Savings of $123,106)
Maximise your Savings! – The longer the mortgage loan tenure, the more interest paid to the bank. So before you take up a mortgage loan, work your finances backwards: You have to work out a sum of money that you are comfortable in paying monthly (taking into consideration all other expenses and investments) and find out what is the minimum loan tenure for your property with the sum of money you are comfortable with. It is not always the best choice to stretch your mortgage loan to the maximum tenure. You can use of our mortgagecalculator to get an indicative monthly installment so that you can better plan your finances.
Case 2 – Client needs equity loan (cash out) but was charged legal fees
Jonathan was paying 2.18% interest for his mortgage loan of $800,000 with Bank A. His property appreciated from $1.1m to $1.4m after 3 years. He needs to travel overseas on a business trip for 6 months and he would like to take an term loan (cashout) from Bank A to have some cash on hand for his family.
He approached his existing bank and was told he would need to pay for the legal and valuation fees for the additional equity loan.
After assessing Jonathan’s situation, MortgageSENSE assisted him to refinance his loan with Bank B. Bank B’s mortgage rate was 1.88%. His instalment is reduced by $120 monthly. On top of that, Bank B was able to subsidise his legal and valuation fees (about $3000) and grant him the additional equity loan of $200,000 he needed. Total indicative saving for the next 2 years = $7724!
The savings is even more as he used part of the $200,000 equity loan to pay off his car loan which was charging at 2.6%.
Maximise your Savings! – Equity loan (cash out) is considered as a healthy loan as the interest rate is one of the lowest among all loans. It is charged at the same interest rate as mortgage loan. You can take equity loan to repay your existing car loan, personal loan etc. Take note that it is possible to take different loan tenure for your equity loan. Eg. You can have a mortgage loan of 35 years and the equity loan tenure is only 5 years.
Case 3 – Client’s existing mortgage loan under lock in period
Ms Sim was paying 3.5% interest for her $900,000 mortgage loan with Bank A. She wants to refinance her mortgage loan but it is still within the lock-in penalty period. The penalty is 1.5% of her mortgage’s outstanding loan amount. Ms Sim approached MortgageSENSE for advice.
We, mortgage brokers in Singapore, speak to banks and financial institutions on your behalf. After speaking to the right bank on her mortgage situation, we managed to get Bank B to absorb the penalty amount of 1.5% for her.
Ms Sim interest rate reduces from 3.5% to 2.5%. She did not pay the 1.5% for the termination of contract with Bank A as it’s absorbed by Bank B. On top of that, she enjoys an indicative savings of $17,817 for the next 2 years!
Maximise your Savings! – It is possible to get banks to absorb your penalty if you speak to the right bank.