Guide to Kickstarting Your Mortgage Refinancing or Repricing Journey: 3 Things to Look out for

2022 has been a nervy year for property seekers and owners due to the gloomy economic outlook, rising inflation rates, and increasing borrowing costs. Due to the series of aggressive interest rate hikes introduced by the Federal Reserve in the past year, we’ve moved from a near-zero to a high-interest rate environment.

Interest rates for mortgages in Singapore are closely linked to the interest rates in the United States. When interest rates are high, the interbank rates tend to move in tandem, resulting in higher mortgage interest rates. So, if you’re a homeowner, you’ve probably noticed how your monthly mortgage payments have steadily crept up in the past year and a half.

While interest rate hikes are expected to moderate, economists are forecasting another interest rate hike by the US Federal Reserve in May 2023.

If you’re feeling the pinch (like I am!), you can consider refinancing or repricing your home loan to secure a more competitive loan package to save some cash and better manage cash flow.

The thought of refinancing or repricing one’s mortgage loan can be daunting, especially if you’re unfamiliar with it. So, if your lock-in period is nearing the end and if you’re looking improve your mortgage health, here is a guide to get you started on your journey!

Why Should You Refinance or Reprice Your Home Loan?

By refinancing or repricing your home loan, you can adjust your monthly mortgage payments and better manage your cash flow. Doing so actively also helps you ensure your spending is on track with achieving your financial goals, whatever they may be.

For example, if you are on a floating-rate home loan, you can switch to a fixed-rate home loan if you prefer knowing how much to budget for your monthly mortgage expenses. Aside from looking for a more competitive mortgage interest rate, those on floating home loans could also switch to a different reference rate (i.e. from SIBOR to SORA), to reduce their monthly payments.

Do you know that you can also adjust the tenure of your home loan to achieve your financial goals? Taking on a longer loan tenure means paying less monthly, which can help improve your cash flow. On the other hand, a shorter loan tenure translates to you forking out more monthly but paying less interest over the duration of your loan.

What are the Differences Between Mortgage Refinancing and Repricing?

But what are refinancing and repricing, and more importantly, what’s the difference between them?

In layman, refinancing means switching your current home loan for a new one with a different bank, while repricing refers to changing your mortgage loan within the same bank. However, that is just scratching the surface.

By refinancing your home loan, you are switching to a different bank and opening yourself to a wide variety of loan packages available in the market. Meanwhile, home loan choices are limited should you reprice your home loan with the same bank (you can only look at the packages offered in one bank). 

Please note that you’re required to pay legal and valuation fees for refinancing that may cost between $1,650 to $2,250. Meanwhile, there is also a fee for repricing that costs around $500 to $800. However, you may be able to have these fees subsidised or waived, depending on your loan amount and the discretion of the bank you’re engaging with. Be sure to check in with your bank or a mortgage expert if you qualify! 

Meanwhile, here are some of the pros and cons of mortgage refinancing and repricing.

	Pros	Cons
Refinancing	Wide range of rates and loan packages across all banksBetter odds of finding the best loan package that fits your financial needs	Expect to pay about $1,650 to $2,250 for legal and valuation fees (possibility for fees to be waived/subsidised)
Repricing	Less paperwork as bank already has your information	Expect to pay around $500 to $800 (possibility for fees to be waived/subsidised)Limited choices within the same bankMay not get the best loan package as you’re limited to the offerings from the same bank

Refinancing vs repricing: Which is for you?

Ultimately, your decision will be determined by your preference. Refinancing is for you if you prefer hunting for the best deals available on the market and want to browse packages from all banks. On the other hand, repricing may be a better option if you’ve established a strong relationship with your current bank and would like to maintain that.

When choosing a home loan package, going for one with the lowest interest rate may not always be the most suitable option. While low promotional rates may appear enticing, it would be imprudent only to consider the costs for the first year.

It’s also essential to calculate the total costs over the entire package duration. The rates may spike significantly after the promotional period, and there may be additional fees. Also, consider the lock-in length of the package before deciding.

Fortunately, PropertyGuru Finance has useful tools to help you in your refinancing journey. Use PropertyGuru Finance’s SmartRefi tool during your hunt to track and compare your existing mortgage against the available packages on the market in less than two minutes! SmartRefi gives you a detailed breakdown of your potential costs and savings and advises if you should refinance now or later, whichever makes more financial sense. Check out their Mortgage Affordability Calculator to estimate what you can comfortably spend on your home.

Get Help from Mortgage Experts

When it comes to achieving your financial goals, making informed decisions to pick the best home financing moves for you is crucial for success. However, that may be a challenge if you’re new to the scene. Additionally, you may find yourself in situations where you have questions or need help finding a package that meets your needs. Here’s where you may want to consider contacting a mortgage expert for advice. 

PropertyGuru Finance’s Mortgage Experts can offer you guidance across your entire refinancing journey, from reviewing your mortgage health to helping you pick the best home loan package to achieve your financial needs. 

Get unbiased, tailored home financing advice by reaching out to one of their friendly Mortgage Experts here.