See the latest Sibor and Sor rate for your housing loan.
If your home loan is pegged to Sibor/Sor, it is a good time to refinance to a fixed rate as the rates are increasing fast.
The three-month Singapore interbank offered rate (SIBOR) has spiked to an unprecedented rate, well past 0.9 per cent this week – last happened in 2008.
SIBOR – the rate that is indicative of the cost of funds – has a huge impact on local real estate and loans market. Most housing loans are dependent on the three-month SIBOR.
What does it mean to home owners like you?
In plain language, a spike in the three-month SIBOR could mean homeowners paying more on their monthly housing loan payment. For instance, if your current housing loan is S$500,000 with 20 years remaining, the interest rate could increase to 2 per cent or $2,770.
With this development, a possible option that homeowners may consider is refinancing. Unfortunately, for homeowners tied down on a loan’s lock-in period, the increase in SIBOR means higher monthly payments.
1) Completed Mortgage Loan Application Form for all applicants
2) Photocopy of NRIC or Passport (front and back) for all applicants
3) Income Documents for all applicants:
Self-Employed – Latest 2 year Notice of Assessment
Salaried – Computerised pay slips (latest 3 months) or Latest 1 year Notice of Assessment
4) CPF property statement (if using CPF)
– showing “Total principal amount used and accrued interest used”
5) Outstanding mortgage loan statement from existing bank.
6) HDB statement showing no HDB existing HDB loan
Step 1: Go to http://www.hdb.gov.sg
Step 2: Click on My HDBPage
Step 3: Click on Login via Singpass (key in NRIC and singpass)
Step4: Click on ‘My Flat’
Step 5: Click on ‘Flat details’ found on the left panel
If you do not own a HDB flat, the following MSG will appear ‘ You do not own an existing HDB flat. (SxxxxxxxA, enquirer’s NRIC number)
Click on Print to printout copy.
Talk to our qualified mortgage brokers for your needs now!
Lock in period
Look into your Letter of Offer (LO), the part that state lock in period. If you are under lock in, there will be a penalty if do a home loan refinancing (usually the penalty is 1.5% of the outstanding loan amount). Thus, it is important to know when the lock in period is ending. Important thing to note – if the lock in period is 2 years, the 2 years lock in starts from the date of 1st disbursement of the home loan and not the date of the LO signed. This is a very common mistake assuming the 2 years lock in starts from the date of the LO which is not true.
Clawback clause is commonly found in all LO. When the loan is taken up with Bank A, Bank A will pay for your legal subsidy, valuation fee and fire insurance. These subsidies come with a 36 months clawback. Should you leave the bank within 36 months, Bank A will claw back those subsidies.
Generally for all LO, you will need to serve 3 months written notice to the bank should you decided to leave the bank. Else, there will be a 3 months in-lieu penalty impose by the bank. 3 months interest in-lieu is the potential interest the bank will earn for the next 3 months if you loan is still with them. I personally feel that it not make sense to pay and not to serve the notice. This clause will be important to client who wants to sell their house. Always negotiate with the new buyer that the transaction can only take place 3 months later as you need to serve a 3 months notice to your existing bank.
Repricing date (for Sibor/SOR package)
This clause is only found in home loan package that is pegged to Sibor or SOR. For home loan Singapore packages that is pegged to Sibor/SOR, usually there is only a specific date every month or every 3 months for client to leave the bank. If this part is overlooked, there will be additional penalty involved should you leave the bank.
Alan’s package with Bank A is pegged to Sibor and repricing date is on the 1st March, 1st June, 1st September and 1st December.
Alan decided to refinance to a fixed rate with Bank B on the 17th June. He needs to serve Bank A 3 months written notice before he can leave for Bank B. However, due to contract with Bank A, he can only leave on the repricing date – 1st March, 1st June, 1st September and 1st December.
Therefore, the refinancing could only be completed on 1st December (5 months and 2 weeks later) as he just missed the repricing date on the 1st September.
If the refinance is done on the 17th May instead of 17th June, he would be in time to serve 3 months written notice to Bank A and could leave for Bank B on the next repricing date – 1st September.
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.
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.
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.