One of the substantial financial commitments most people make in their entire lives is
buying a home. An HDB loan is the preferred financing option for a large number
of Singaporeans. Many of them may be first-time homeowners who are not aware of other
options. If not, HDB home finance allow to borrow up to 80% of the total amount, saving
money for the down payment may be another reason.
In any case, after a few years, you will find that you're paying more for your HDB loan and
wish you could choose a home loan refinance from a financial institution with a cheaper
interest rate.
You've come to the correct site if you're thinking about ways to refinance an HDB loan, and
this is how you're now feeling.
Changing an HDB loan to a bank loan
In Singapore, a typical method of refinancing an HDB loan is to move from the HDB loan to a
bank loan.
This is because bank loans, as opposed to HDB loans, frequently have greater flexibility and
cheaper interest rates. You might pay off your bank loan faster and save money on the
payments you make every month by making the transition. Bank loans also often have
cheaper interest rates.
When it comes to refinancing a house loan, it's crucial that you carefully weigh all the
variables, including the requirements, interest rate, terms of repayment, and fees and
penalties.
Reasons to Refinance Your Home Loan
You should consider refinancing your HDB loan for several reasons. Although there isn't a
clear-cut explanation for why you ought to, the following points can assist you in making a
decision:
Reduced Interest Rate
The interest rate for HDB loans is constant and has been 2.6% for more than a decade.
This rate is calculated by multiplying the CPF Ordinary Account Rate by +0.1.
The interest rate of HDB is higher than that of other banks. Interest rates at most banks are
less than 2%.
Yes, 1% may not seem like much at first, but over time, it can add up to a sizable sum in
interest that you could have avoided.
Your mortgage payment every month will go down if you convert from an HDB to a bank
mortgage with a lower interest rate. The additional money can be invested or used for other
purposes.
Refinancing Promotions and Incentives
Reputed banks like DBS offer incentives and promotions constantly to facilitate
homeowners' refinancing of HDB loans. For example, when you convert an HDB loan to a
bank loan, banks could offer to pay for the associated legal and valuation fees. Let's say
you pay $1,500 for legal fees and $300 for value. The bank might offer you a rebate of
$1,700, or perhaps the full amount if you refinance with them.
But there might be some restrictions on this
If, within the stated three-year no-refinance period, you decide to refinance your loan using
another bank, the bank may reclaim the subsidy.
The subsidy amount may be based on a proportion of the amount of the loan you wish to
refinance. As a result, occasionally, you could still need to cover some of those costs out of
cash.
More accommodating terms for repayment
You can pay off your bank loan more quickly and avoid paying as much interest if you
refinance it with more accommodating repayment conditions. To pay off the loan sooner,
you can, for instance, decrease the loan's term or make extra repayments.
Modification of the Financial Situation
Refinancing a mortgage with more manageable repayment terms may be sensible if your
financial situation changes, such as if your income goes down or your costs rise. This will
enable you to better manage your money.