Refinancing your Home Loan
Every 2 years, I look into the issue of refinancing your home loan. With property prices on the rise and interest rates going up, locking yourself into a good home loan package is of upmost importance. Who wants to pay more … and with a substantial loan amount, interest payments and monthly instalments are always expensive.
Previously, we were at the mercy of the banks in Singapore when it comes to shopping for home loans, but with the internet, essential housing loan information is always a click away. One can just search for websites which offers the most current information about housing loans and do their shopping in the comfort of their homes. Yes! Refinancing your housing loan is getting as simple as online shopping.
With everything now available online, things are so much easier. Previously, one needs to physically walk down to the banks to find the best package. Now, I can shop even when I am commuting on my way to work. Using Money Smart., one does not need to be a computer geek to navigate around the website. Built for normal everyday consumers like myself, it can help users with housing loans, credit cards and insurance issues.
As I don’t really like to engage with pesky loan officers who tend to push their financial packages due to sales targets, online shopping happens at a more casual pace. After specifying that I am looking for a refinancing package and other essential information such as the length of my loan and the current interest rate I am paying, the Money Smart website gives me a comparison table.
From the table, I can sit back and compare the various housing loan packages available to me. I like the fact that all my research can be done on a non-commitment basis and I don’t need to say “No” or “Yes” to everyone. As housing loans are a big financial commitments, the “cooling off” period to do my research is definitely much appreciated.
If the details and information sounds confusing or if one requires additional information, one also has the luxury to specify that one requires assistance and a loan officer will get back to the user.
No fuss and minimum “leg work” one does not need to physically go down to the banks.
Tips for housing loans?
Personally, here are some crucial questions that I had to ask myself before making my decisions on my housing loan:
- What is the interest rate offered?
- Do I want a floating or fixed rate?
- What is the Lock In Period?
Naturally, every person looks at risks differently and the fixed or floating(variable) rate takes into account your risk appetite. Therefore, floating interest rates will be lower than fixed rates, as fixed rates are “locked in” for a period of time. On average, the fixed rates are locked in for 2 years.
Which type of housing interest rate do you prefer?
It depends on your risk appetite. For someone like myself, who does not watch the financial market, my preference is for a fixed rate package. Especially during this period, where the US is expected to increase interest rates, I would rather save myself from the heart attack of watching interest rates and monthly repayments rise, than take on a package which fluctuates with market conditions.
Should I go for SIBOR or FHR (Fixed Deposit Home Rate)?
The SIBOR indicates the general interest rate in Singapore, comparing the rates of at least 12 banks and it is regulated by the MAS. It is expressed in 1m, 3m and 6m SIBOR. If it is a 1m SIBOR rate, it just means that the rate is revised every month. Therefore if it is 6m SIBOR, the rate is revised every 6 months, and the interest rate will be higher than the 1m SIBOR (As the 6m SIBOR factors in the higher risk).
Another common rate offered is the The FHR (Fixed Deposit Home Rates). This rate is pegged to the Banks fixed deposit rate.
The FHR is currently preferred more among consumers as the SIBOR rate is more volatile. With the current economic situation with the US and China, consumers like myself tend to want to avoid volatility.
Concluding thoughts
For myself, as I am too into financial markets on a daily basis, I have taken a more conservative route and opted for the fixed FHR rate. With a lock-in period of 2 years, this lessens my need to watch the markets and I will only need to re-evaluate my situation after my lock-in period of 2 years.
If one needs more help with making your decision, do contact Money Smart.