Guide to refinancing and redemption
Refinancing/Repricing and Redemption
Refinancing means switching from your existing home loan to a new bank with lower interest rates - in short from one bank to another bank
Repricing, or conversion means continuing the loan with the same bank but at a better rate. (take note you do not need a lawyer to represent you for a repricing)
Redemption means you wish to fully pay up all the loan and discharge the mortgage.
You should keep in mind if there are any lock in penalties for your existing loan and compare the current interest rate vs the lowest interest rate on the market after the lock in period expires.
It's always a good idea to compare the repriced loan from your current bank with other refinancing packages to see if you should switch. You should compare:
- The updated repayment schedules for the various packages – check the interest payable.
- The advertised rates and effective interest rate (EIR) for the packages.
Your instalment amounts and interest rates will likely change if you change your loan package. Banks are required to provide you with a residential property fact sheet to explain the key features of the loan package. Take this opportunity to ask questions such as the penalty fees for early loan repayment, or bundled products, such as mortgagee interest policy, and compare with other loan packages to understand the differences.
Yes, you can refinance your HDB housing loan anytime. However, since banks have an LTV of up to 75%, depending on how much of your flat you've paid off, you may or may not need to top-up in cash/CPF
You do not have inform the bank yourself, all you need to do is to inform your law firm, and they will gather some data from you and determine the dates and will serve the redemption notice to the bank on your behalf.
Timeline and procedures
Ask your existing bank for repricing options, before checking with other banks. Check whether the lock-in period still applies to your loan. If so, certain penalties may apply.
Ask your bank the following questions:
- Will I incur any penalties for refinancing within the lock-in period.
- Are there any rate reset date to take note of?
- Are there any claw backs on legal Subsidy?
After the law firm gathers all the information from you, they send out a redemption notice to the bank by hand. The letter will state what is the redemption for, when is the date served and when is the completion date.
Closer to the completion date, the law firm will arrange a meeting with you to sign the mortgage documents to drawdown the loan from the new bank.
Similarly to a refinancing, the law firm will serve a 2 months notice to the bank after getting your details.