When it comes to mortgages, many people don’t refinance. A fundamental number are unaware they have the alternative of shifting their loan to another financier; others are simply indifferent. They stick with their very first lender and the “reward” for such loyalty tends to be higher interest rates. Due to the order of magnitude of mortgages and the tenure that the loan is amortized over, the interest we are talking about here can easy stretch from 1000’s to 100,000’s of dollars. Take a look at the following elements to see whether it’s time for you to consider refinancing.

Current Interest Rate

It is definitely a good indication for you to research refinancing when your current interest rate is higher than available housing loan packages on the market. A first step to take is to go back to your current banking company or financial institution and ask them to revise your package, otherwise known as repricing. If your lender comes back with an offer, it will ordinarily be better than your existing one. You can then compare this offer with offers from other lenders to see whether you should switch or stay put.

Lock-in and Clawback Periods

When you take up a mortgage, there may be a lock-in period where your mortgage lender will charge you a penalisation fee, normally a percentage of your outstanding loan value, if you were to fully repay your loan. Almost all housing loans also come with a clawback period where the lender will claim back “freebies”, such as legal subsidies, that they “gave” you when you take up your housing loan (Note: lock-in period is separate from clawback period). It may not be valuable for you to refinance due to such costs.

Loan Quantum

The larger your home loan amount, the larger your savings for the same decrease in interest rates. For example, 1% on a loan of S$100,000 is much less than 1% on a loan of S$500,000. However, fixed cost to refinancing, which represents mainly of legal fees, do not vary much with loan quantum. The difference between your current and refinancing interest rates, therefore, has to be bigger for a comparatively smaller home loan as fixed cost eats into a more fundamental part of your interest rate savings.

Perceived Interest Rate Movements

Your view on how interest rates is moving can be a factor when thinking whether you should refinance. If you are presently on a fixed rate package and think interest rates are dropping, you may want to refinance to a floating rate package. Conversely, if you are on floating rates and believe interest rates are rocketing, switching to fixed rates may be a positive choice.

Personal Financial Assessment

If there is a change in your financial state, you may want to vary your package particulars via refinancing. For instance, you are opening your own business organisation and do not want volatility in other areas. Give some consideration to taking up a fixed rate package. Maybe you want cash to invest in different place. Consider raising your loan quantum. Or your monthly income has increased and you want to reduce interest loan payments. Consider reducing your loan tenure.

If looking through this article is giving your a headache or you simply want to save yourself the trouble, contact us for a non-obligatory loan consultation. Our professional advisors not only frees up your time but also do not charge any fees to help you get the best deal. Refinancing does not have to be a tedious procedure.

Find out more about a premier Housing Loan advisory firm, providing Housing Loans with free mortgage broking.

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Refinancing packages, also called “refis,” can be difficult to get; it depends upon what you are looking for. If you’re experienced and you’ve done this before, you’ll probably have an easier time of it, but it’s ultimately based upon the health of your credit history. Of course, you’ll do the best if you have a good credit history, and you can get A-loan package deals if so, but you can still get pretty good interest rates (although somewhat higher) with less than perfect credit through package deals with B and C loans. It’ll take you some elbow grease to find the right refinance, and you should be able to take advantage of low interest rate deals right now because of the market. Even so, it can still be complicated as a process. There are some things you should think about when you’re looking to refinance so that you get the money you’re looking for.

You have several different options when it comes to refinancing. Do you want a home loan through the refinance for cash or home improvements? If that’s true, understand that it’s not as intimidating as it may seem. You can take a second mortgage on your house or take out equity when you refinance to fix up your house.

If you’re looking to do some home improvement, before you start, take a look around and see what you want to do. Is what you’re going to do going to make your home more valuable? How much is the remodel going to cost you — or the addition, or the energy efficiency improvement, and so on? Once you figure out what you want, find reputable contractors in your area and get quotes from them. You could also be looking at having to repair your home because it’s experienced some damage and your insurance company is going to foot the bill for it, such as if your roof has been damaged, and you want to be doing some home improvement while it’s being fixed. That’s a pretty big job to take on, so make sure everything is in order.

When it comes to home improvement loans, you are in effect borrowing money “from” your house to fix it up so that you can make your money back through your investment and show it to the bank as collateral for your mortgage. You can look at this loan from either a personal or business perspective, but either way, you get the job done that you need to and your house has undergone the improvements it needs. Either way, though, the work you do on your home should improve its value. That’s the key point. If your home’s value doesn’t increase, it may not have been worth taking out the loan, since those improvements didn’t actually “improve” your house over the long haul. Lenders take this into consideration, oftentimes, in context with current economic conditions and market trends before they will authorize a home improvement loan. It’s important to keep in mind, though, that if you take the loan out and the work is not done, in that you don’t use the money for its intended purpose, it’s less likely that you will get another refinance option in the future.

So before you start, look at what you want to do and then decide whether a home improvement loan is what you want. If you just want to fix up your house, for example, a home-equity line of credit may be a better option from a lender than a home improvement loan. In addition, if you’re just looking at home improvement, it’s not always necessary to refinance. A personal loan can also be used for many expenses that would be considered worthy, like paying off medical expenses, paying for an education, starting a family, and the like. You can get these types of personal loans at the bank and through many different types of lenders, so that this is another option you might want to think about.

It is best to state your intentions clearly when shopping around for the best home improvement loan or refi package deal so that you are up front with the lenders you inquire with and they can lead you to the right option for you. So, talk to a bank representative or loan officer to find the right solution and make sure you do your homework first so that you can find an interest rate that is lower and even compare rate quotes with other lenders to see if they will match your offer from another lender which creates some competition among lenders.

When you refinance, of course, home improvement loans are an option, and you can also take the money out of your home’s value or equity so that you can make improvements and repairs. You may also want an addition or to remodel your home so that its value is increased over the long haul. However, consider the investment you are going to make and make sure that this will increase your home’s value. During recessions, it’s often true that home values go down and/or interest rates go up, which can sometimes offset how much value the remodel or other work brings to your home. The same is also true if you live in a location that was “hot” in terms of real estate a few years ago but now is no longer. For this reason, your home improvement loan may not be approved because your home’s value may not increase after you’ve done the work. Therefore, only do the remodeling or other projects if you are sure it’s going to increase the value of your home in the end.

In sum, find the solution that you need and make steps towards getting refinancing and getting your home improvements started. Talk to a contractor, talk to a lender, talk to friends and family how have gotten a home improvement loan then simply going in an talking to a lender can reveal a variety of paths to your end goal and get you on the right path to your refinancing destination for your home.

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