A "low interest" loan shouldn't mean you have very little interest in paying it back!

    Is mortgage refinance really required?

    Your home may be your biggest investment. Most of us opt for a mortgage loan while buying our homes. If you are tired of paying your high-interest mortgage loan or planning to switch to a different loan scheme, you will need to evaluate the following facts before considering a mortgage refinance.

    Reasons that may require a mortgage refinance

    • Existing bank charges higher interest rates
    • Attractive interest rates and promotional benefits are available from other banks
    • You would like to increase your monthly savings
    • Loan pre-closure
    • Reducing loan tenure/extending loan tenure

    Opting for mortgage refinance at the right time

    You may be tempted to opt for a mortgage refinancing scheme from a different bank. However, you will need to consider the following factors before doing so:

    • Whether your existing home loan has a lock-in period
    • Penalties involved
    • Legal fees involved
    • Would you qualify for a mortgage refinance?

    If your answer is yes to the above-listed points, mortgage refinancing may not be a feasible option for you. Please note that every bank will have its own clauses and conditions associated with the mortgage loan. Depending on the loan amount and tenure, banks may levy charges or penalties when you try to close your existing mortgage loan. In certain scenarios, the penalties or charges will total a huge sum that makes the home refinancing option not worth it.

    Firstly, you will need to compare and analyse whether you really need to opt for a mortgage refinance. If your answer is yes, you will need to compare the interest rates, benefits, promotional offers that are available from all banks. You will also need to check whether the penalties, fees, and costs involved in mortgage refinancing is lower than your existing package.

    Another option is to consider renegotiating your loan package with your existing financial institution. For instance, if your mortgage loan interest rates are higher, you can check with your bank whether they have any new schemes that offer lower rates. You can switch to a different loan package within the same bank. By doing so, you can avoid paying additional fees and penalties that are involved in the process of mortgage refinancing.

    Should you consider refinancing?

    In the end, if you are repaying a loan at higher interest rates, refinancing your mortgage loan is a good option as this will help you save money through interest payments in the long run. Even if you choose to stick to your existing home loan package, you can still try repricing as this will help you switch to a different loan package within the same financial institution to enjoy better rates.

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