Refinancing Mortgages in Singapore – How to Save on Your Monthly Instalments

Introduction

Mortgage refinancing is one of the most powerful tools homeowners in Singapore can use to reduce monthly payments, shorten loan tenure, or free up cash for other financial goals. Yet many property owners are unaware of how refinancing works, when to do it, or how much they could save by switching to a better package.

Refinancing involves replacing your existing mortgage with a new loan—usually from another bank—under new terms that are more favourable to you. With interest rates in constant flux and competition among lenders intensifying, there are frequent opportunities to secure better deals.

In this comprehensive guide, we’ll explore what refinancing is, how it works, when to consider it, the costs involved, and how mortgage loan brokers like https://mortgageloanbroker.sg/ can help you find the most competitive refinancing options in Singapore.

What is Mortgage Refinancing?

Mortgage refinancing is the process of taking a new home loan to replace your existing one. The new loan pays off the remaining balance of your current mortgage, and you start making repayments based on the new terms—often at a lower interest rate or with a different tenure.

This is different from repricing, which is when you switch to another loan package with the same bank.

Why Homeowners Refinance

There are several key reasons why Singapore homeowners consider refinancing their mortgage:

1. To Enjoy Lower Interest Rates

   • The most common reason. Over time, better deals become available, and refinancing helps you capitalise on them.

2. To Reduce Monthly Instalments

   • A lower interest rate or extended loan tenure can reduce your monthly financial burden.

3. To Shorten Loan Tenure

   • Refinancing can help you clear your loan faster with minimal interest paid over the long run.

4. To Switch Loan Type

   • Move from a floating-rate loan to a fixed-rate loan or vice versa, depending on your outlook on interest rates.

5. To Access Equity (Cash-Out Refinancing)

   • Unlock the value of your property and use it for renovation, business capital, or other needs.

When is the Best Time to Refinance?

Timing matters in refinancing. Consider refinancing under these circumstances:

• You are near or have completed your lock-in period
  Most bank loan packages have a lock-in period of 2 to 3 years. Refinancing during this period may incur penalty fees.

• Your current interest rate is significantly higher than market rates
  A difference of even 0.5% in interest rate can result in thousands in savings over the loan tenure.

• You want to change your financial strategy
  For example, switching to a fixed-rate package for stability or shortening your loan term to reduce total interest.

• You have improved your credit standing
  Better income or credit score can qualify you for more competitive packages.

Mortgage brokers like https://mortgageloanbroker.sg/ can help monitor the market and notify you when refinancing becomes favourable.

Example of Savings from Refinancing

Suppose you have:

• Outstanding loan: $600,000

• Interest rate: 3.2% p.a.

• Remaining tenure: 25 years

• Current monthly repayment: approx. $2,900

If you refinance to a new package at 2.0% p.a.:

• New monthly repayment: approx. $2,544

• Monthly savings: $356

• Total savings over remaining tenure: Over $100,000 (including reduced interest)

These numbers highlight how refinancing can significantly impact your long-term finances.

Key Considerations Before Refinancing

1. Remaining Lock-In Period

   • Refinancing before the lock-in period ends typically incurs a penalty (usually 1.5% of outstanding loan).

2. Legal Subsidies

   • Some banks offer legal subsidies (e.g., $2,000) when you refinance with them, offsetting switching costs.

3. Total Debt Servicing Ratio (TDSR)

   • You must pass the TDSR assessment (maximum 55% of your gross monthly income).

4. Loan Quantum and LTV Limits

   • LTV rules apply. You can refinance up to 75% of the property’s value (if it’s your only housing loan).

5. Age and Tenure

   • Your age affects the maximum loan tenure you can refinance into. Many banks limit tenure to 65–75 years of borrower age.

6. Other Fees

   • Include valuation fees, fire insurance, and legal costs (though often subsidised).

Refinancing vs Repricing – What’s the Difference?

Refinancing

• Switches you to another bank

• More competitive offers

• May have better perks and subsidies

• More paperwork and time needed

Repricing

• Done with your current bank

• Simpler and quicker process

• Often fewer savings compared to refinancing

• Limited to your current bank’s offerings

Both options are valid, and the best choice depends on your current mortgage package and goals. Mortgage brokers can compare both options for you.

The Refinancing Process

Here is a step-by-step breakdown of the refinancing journey in Singapore:

1. Evaluate Your Current Mortgage

   • Check your outstanding loan amount, interest rate, tenure, and lock-in status.

2. Assess Market Offers

   • Compare loan packages across banks. Consider interest rate, lock-in period, subsidies, and flexibility.

3. Engage a Mortgage Broker

   • Brokers like https://mortgageloanbroker.sg/ help you compare, apply, and process refinancing for free.

4. Submit Loan Application

   • Provide income documents, NRIC, CPF contributions, existing mortgage details.

5. Property Valuation and Legal Processing

   • Bank arranges for a valuation. Your lawyer handles redemption from old bank and creation of new loan agreement.

6. Disbursement and Start of New Loan

   • The new loan pays off the old loan. You begin repayments under the new loan terms.

The entire process takes about 4 to 6 weeks on average.

Documents Required for Refinancing

To ensure a smooth refinancing process, prepare the following documents:

• NRIC (front and back)

• Latest payslips (3 months) or Notice of Assessment (for self-employed)

• CPF contribution history (12 months)

• Loan statement from existing bank

• Option to Purchase or property title deed

• IRAS property tax statement

Your mortgage broker will guide you in compiling and submitting the necessary paperwork.

Costs Involved in Refinancing

While refinancing saves money long-term, you’ll incur some upfront or one-time costs:

• Legal fees: $1,800–$2,500 (often subsidised by new bank)

• Valuation fees: $200–$400

• Bank administrative fees: $200–$500

• Prepayment penalty (if applicable): 1.5% of outstanding loan

• Fire insurance and other mandatory costs

Some banks provide subsidies to offset legal and valuation costs, particularly for loan amounts above $500,000.

Working with a Mortgage Loan Broker

Refinancing can be confusing if you try to compare all the bank offers on your own. A mortgage broker:

• Compares interest rates and packages across banks

• Assesses your financial eligibility

• Highlights terms and hidden fees

• Negotiates on your behalf

• Handles paperwork and coordination with lawyers

• Offers these services at no cost to you

Engaging a broker like https://mortgageloanbroker.sg/ ensures that you not only secure a great deal but also save time and avoid costly mistakes.

Common Mistakes to Avoid

1. Refinancing Too Early (During Lock-In)

   • Check your contract. Refinancing too early can wipe out your savings due to penalties.

2. Ignoring Floating Rate Risks

   • Choosing a low introductory floating rate without understanding future increases can lead to surprises.

3. Not Reviewing TDSR Requirements

   • Ensure your total monthly debt (including car loans, credit cards, etc.) is within the 55% income cap.

4. Overextending Tenure

   • Lengthening your tenure may reduce monthly payments but increase total interest over time.

5. Going Directly to One Bank

   • Limits your options. Use a broker to access multiple packages and negotiate better deals.

Conclusion

Mortgage refinancing in Singapore is a smart financial strategy for homeowners looking to reduce interest costs, adjust repayment terms, or access property equity. With interest rates changing frequently and various bank offers in the market, there are real opportunities to save tens of thousands over the lifespan of your loan.

However, refinancing requires careful analysis of your financial situation, market conditions, and loan terms. That’s where a professional mortgage loan broker like https://mortgageloanbroker.sg/ can make a big difference. With expert advice and access to the latest bank packages, brokers can guide you through every step of the refinancing process—at no additional cost to you.

If you’ve held your current mortgage for over two years, or if your interest rate is above the current market average, now might be the right time to refinance. Take the first step today and explore your refinancing options—it could be one of the most financially rewarding decisions you make.