Re-financing Home Loan - Wise?

[MetalTab 3]

Hi, need some clarification on whether it is wise to re-finance a home loan, after the lock-in period is past.

I was under the impression that it was prudent to do so. However, someone explained to me that this may not always be the case. He went on to elaborate that as we often pay more of the interest (than principal) in the early few years of the loan period, jumping to re-finance will only re-start the loan (and the principal would hardly have been lowered). So this 2nd loan will once again start with the majority of monthly payments servicing the interests rather than principal... and the cycle repeats itself.

Any bankers or people familiar, please share.

Many thanks!

[bepgof 20]

Hi, need some clarification on whether it is wise to re-finance a home loan, after the lock-in period is past.

I was under the impression that it was prudent to do so. However, someone explained to me that this may not always be the case. He went on to elaborate that as we often pay more of the interest (than principal) in the early few years of the loan period, jumping to re-finance will only re-start the loan (and the principal would hardly have been lowered). So this 2nd loan will once again start with the majority of monthly payments servicing the interests rather than principal... and the cycle repeats itself.

Any bankers or people familiar, please share.

Many thanks!

Who is that someone? He "elaborated" by lip service? I now elaborate you with figures. 1. $300,000 for 30 yrs @ 3% interest flat

2. At end of first 3rd yr, outstanding = $280,632.48, take as $280,633 and carry on with 3% flat 27 years for another 3 yrs.

3. Or, at end of 1st 3rd yr, you switch and refinance. Outstanding amount = $280,633, for 27 years, at 2% interest, tenure=27 yrs, for 3 years.

Figures speak for "themselves".

Monthly instalment/payment toward intest/payment toward principal

2. 1264.81/701.58/563.23 vs

3. 1121.66/467.72/653.94

So would you choose 2 or 3? If no other opportunity costs involved.

http://img222.imageshack.us/img222/9547/130000030yr3pc.jpg

http://img132.imageshack.us/img132/1115/228063327yr3pc.jpg

http://img221.imageshack.us/img221/9891/3r...063327yr2pc.jpg

Edited December 30, 2010 by bepgof

[forgotten 1]

Hehe I guess that 'someone' should be banker from the bank of his current home loan

[MetalTab 3]

Who is that someone? He "elaborated" by lip service? I now elaborate you with figures. 1. $300,000 for 30 yrs @ 3% interest flat

2. At end of first 3rd yr, outstanding = $280,632.48, take as $280,633 and carry on with 3% flat 27 years for another 3 yrs.

3. Or, at end of 1st 3rd yr, you switch and refinance. Outstanding amount = $280,633, for 27 years, at 2% interest, tenure=27 yrs, for 3 years.

Figures speak for "themselves".

Monthly instalment/payment toward intest/payment toward principal

2. 1264.81/701.58/563.23 vs

3. 1121.66/467.72/653.94

So would you choose 2 or 3? If no other opportunity costs involved.

http://img222.imageshack.us/img222/9547/130000030yr3pc.jpg

http://img132.imageshack.us/img132/1115/228063327yr3pc.jpg

http://img221.imageshack.us/img221/9891/3r...063327yr2pc.jpg

Thank you much for the tables.

Comparing the figures, I am wondering why there is such a disparity in the payment to principal:payment to interest ratio for illustration 3 (starting from 58:42 in 1st month and scaling to close to 62:38 in 36th month) as compared to the same ratio for illustration 2 (45:55 in 1st mth and 49:51 in 36th mth).

The differing ratios lead to 60:40 for illustration 3 and 47:53 for illustration 2 at the end of 36 months.

Am wondering if we are comparing apple for apple or did I miss out something. Hope you can help clarify.

Thank you again!

[bepgof 20]

Thank you much for the tables.

Comparing the figures, I am wondering why there is such a disparity in the payment to principal:payment to interest ratio for illustration 3 (starting from 58:42 in 1st month and scaling to close to 62:38 in 36th month) as compared to the same ratio for illustration 2 (45:55 in 1st mth and 49:51 in 36th mth).

The differing ratios lead to 60:40 for illustration 3 and 47:53 for illustration 2 at the end of 36 months.

Am wondering if we are comparing apple for apple or did I miss out something. Hope you can help clarify.

Thank you again!

The formular built-in are beyond word description. PM me your email, I'll send to you, then take your time to analyse the formular slowly.

[alecponting 0]

Thanks for accepting me, i really like to join this community and tries for the good general posts...

[Webbit 0]

I won't give numeric examples but all I'll say is, definitely switch if you can find another home loan package with lower interests.

I recently switched from UOB to HSBC because HSBC offered much more competitive rates:

Hope this helps some.

[matrix0405 0]

Anyone refinanced/took pte pty loan recently? What is the 'typical' housing loan rate now for Sibor 3mth, then u wont get chop carrot?

[weezersg 5]

I am with citibank but they rejected my request for refinance becoz my outstanding is <150K . I wonder if other banks have such a stupid rule.

Anyway for people thinking of refinancing I found this website that is quite good coz you can really see your savings and all terms and expense are clearly stated.

http://moneyiq.sg/jsp/index.jsp

If I refinance with sibor link loan....my total interest for 1st 3 years is 4K plus (assuming sibor stays low) as it is my current loan is 3.75% total interest I paid in 1 year alone is already more than 5K

Even if sibor is trending up...I think the margin of safety is quite large due to the 'high' interest I am paying now.

When I took my loan ...... at that time they only have fixed or variable rate type.

I took the 'variable' loan. I guessed it is variable in the sense that it goes up if overall interest (sibor) go up but they never adjust it downward when interest environment is low as it is now.

Edited February 8, 2011 by weezersg

[random_username 0]

I am with citibank but they rejected my request for refinance becoz my outstanding is <150K . I wonder if other banks have such a stupid rule.

Anyway for people thinking of refinancing I found this website that is quite good coz you can really see your savings and all terms and expense are clearly stated.

http://moneyiq.sg/jsp/index.jsp

If I refinance with sibor link loan....my total interest for 1st 3 years is 4K plus (assuming sibor stays low) as it is my current loan is 3.75% total interest I paid in 1 year alone is already more than 5K

Even if sibor is trending up...I think the margin of safety is quite large due to the 'high' interest I am paying now.

When I took my loan ...... at that time they only have fixed or variable rate type.

I took the 'variable' loan. I guessed it is variable in the sense that it goes up if overall interest (sibor) go up but they never adjust it downward when interest environment is low as it is now.

no comment on this, but other banks have it too, amount may be different depending on when you are looking at. for us, was anything below 100k outstanding about a year or 2 back? (can't remember already) - we were with another bank.

Edited February 9, 2011 by random_username

[heyhoe 0]

Hi,

I am with UOB for 15 years loan and on fixed rate for the 1st, 3 years. By mid of this year, my fixed rate will end. Thus, does this mean I won't be able to refinance if the amount falls below $100K? Please advise.

If not, it will be difficult to refinance, isn't it? What other option can I have?

Edited May 5, 2011 by heyhoe

[Yaling 0]

Any idea which bank offered better rate? I am thinking to refinance my condo. Have been with UOB for 2 years and past the lock in period.

I have zero idea on how to calculate the percentage that offered by bank.

[MortgagePremier 0]

Good Day,

Hi guys, regarding these refinancing issues, I would like to offer an additonal option for your worries. Do feel free to contact me at john@mortgagepremier.com.sg or simply call at 90488433 for Marc with all your issues. Plese do not worry as it will all be a non-obligatory discussion.

Cheers,

Johnathan Ong

[kliee11 0]

Hi,

I am with UOB for 15 years loan and on fixed rate for the 1st, 3 years. By mid of this year, my fixed rate will end. Thus, does this mean I won't be able to refinance if the amount falls below $100K? Please advise.

If not, it will be difficult to refinance, isn't it? What other option can I have?

Check with UOB to see if they can possibly do a repricing for you. honestly, if it's below 100k, not many banks will take up the refinancing.

[kliee11 0]

Any idea which bank offered better rate? I am thinking to refinance my condo. Have been with UOB for 2 years and past the lock in period.

I have zero idea on how to calculate the percentage that offered by bank.

First of all, you should know what's the interest rate that you're paying. Approach the bank and find that out. Few things to note,

1) what kind of package (floating/fixed)

2) if floating, based on what variable? (SIBOR/SOR/Bank mortgage rate)

3) clauses? (Be very careful if under SOR, coz there might be implication if the timing of your refinancing is wrong, you'll end up PAYING! PM me if you need to find out more)

4) Reimbursement for subsidies(Legal, valuation and fire insurance), there's normally a three years lock in for this.

Then, you'll have 3 options I feel:-

1) If rate is favourable, stick to them.

2) If rate is bad, check with them for their current packages, if it's decent and competitive, ask them to do a repricing for you. (Saves legal fees and hassle)

3) If rate is bad, and current packages equally so, approach other banks or mortgage broker and check for the best packages.

Refinancing out involves cost (legal fees, valuation report, although most of the time is subsidized by the bank), hence, sometimes a saving of 0.05%pa., I'd rather not go through the hassle.

Hope this helps.