Asked on 22 Oct 2019
I have about 22 more years of repayment and an outstanding amount of about 190k. I have calculated that I will probably save around $55/month but there will be legal fees incurred which will take around 5 years to breakeven from the amount I saved if I switch to Bank Housing Loan.
If the rates make sense, then yes.
I had a friend who took a housing loan quite fresh out of school, at higher interest as her credit score is affected by the short length of her employment. I advised her to refinance about five years into servicing the loan even with legal fees, due to the lower rates. She also paid back a lump sum to lower the loan amount, and the remaining sum was at less than half the interest she started with.
Suggest you can approach banks directly to seek direct advice. Look before you leap, including the small fonts and all.
When you switch over to a bank loan for your HDB, there are some banks that do waive off the legal fees for you. Do watch for that when you’re shopping around for a mortgage loan. There are mortgage brokers that you can work with.
If you don’t know any, I can recommend the one that I always work with you.
Disclaimer: I’m not getting any referral fee from the broker. If there’s any, it will be given back to you.
Some gentle reminders:
1) Once you jump out of HDB loan, you cannot jump back.
2) If you’re on a bank loan, do take note of the lock-in period (usually 2 years) so you know when you can do refinancing to ensure you’re always getting the best loan rate available for you.
Well noted that there is some consideration for jumping ship from an HDB Loan to Bank Housing Loan due to lower interest rates. Let us take a look at some factors that may affect your decision:
The interest rate for HDB Loan is fixed at 2.6% (based on today's policies) while it varies for Bank Loan (fixed only for a few years during your lock-in period, if any).
No early repayment penalty for HDB Loan, so one can pay back any amount any time without financial repercussions. Usually 1.5% (varies) early repayment penalty on the remaining loan amount.
More lenient with late payments for HDB Loan as compared to Bank Loan.
Bank Loans cannot be refinanced once you breach the lower threshold for your remaining loan. For some banks, it may be as little as $250,000 to less than $500,000. This means that you may be stuck with a higher interest rate for the rest of the loan quantum.
Once you switch out from an HDB Loan to a Bank Loan, the reverse is not possible.