If you are not happy with the current housing loan Singapore that you are in or maybe feeling that it no longer meets all your needs, you might consider refinancing home loan. There will be a lot of money lenders and financial institutions who can offer you home loans, you will just need to study the deals carefully.
Refinancing a home loan is when you switch your current home loan to a brand new lender or with your current lender company. It is mostly performed to get a home loan with lower interest fees or whilst situations change like when you renovate your house.
Two Types of Home Loan Refinancing
Rate and Term Refinance
The first one is the rate and term refinance wherein your remaining balance on the current loan is being transferred into a new loan that may have a better or lower rate and term that will suit your current situation.
The second one is the cash out refinance wherein you liquidate your home equity and create a new loan that consists of the previous loan balance and the cash you got.
You can definitely choose where you can do the refinancing of your home loan, you do not have to get it from the current lender that you have if ever you see a better deal.
You can surely shop around to find the best deal that will fit all your needs and will benefit you the most.
Refinance Home Loan Benefits
There are reasons why it will be best for you to refinance home loan and we will be giving 6 of those reasons:
Lower monthly payments
An steeply-priced occurrence like having a new baby, unexpected clinical bills, or a natural disaster can sometimes have you positioned in a scenario where you need to lessen your monthly expenses and refinancing will let you amplify the length of your loan, thereby decreasing your monthly installments.
Like, if you owe 2 more years on your home loan, it may be possible to refinance and increase the time period to 4 years.
Improved credit grade
You may have a boost on your credit score over the past few years with your home loan, with this you can surely get a better rate and refinance your home loan. Your credit score may help you to save thousands of dollars with the interest rate over the loan period.
If you formerly had a bad credit score, it is advisable to check if you can refinance your home loan after multiple years to see if you can be granted better offers. Your credit score might also have been better to qualify you for a much lower interest rate.
Fixed period on adjustable rate mortgage is about to end
Once the fixed period ends on your home, the interest rate may have a significant increase on your monthly payments. By switching from an adjustable rate mortgage to a fixed rate mortgage, you can definitely avoid this situation.
While your new fixed fee will in all likelihood be higher than your usual adjustable fee, you will be covered from future price increases.
However, if you intend to sell your house in the coming years, having the adjustable rate mortgage can lower down your rate and your monthly payments until the fixed period ends and sell the house by then.
Opt to a higher payment every month
If by any chance, you are blessed with your finances, you might consider changing the length of your loan if ever you are refinancing. This can be an advantage to you because you will be able to afford higher monthly payments and you can do refinancing for a shorter period of time so that you can easily finish your mortgage earlier than expected.
You can opt to pay higher in a shorter period of time, this way, you will need to pay less interest rate for your loan.
Cash out refinancing
Cash out refinancing is when you work with the built up value of your own home as a collateral for a needed loan. It uses the capital tied up in your property without you actually selling your home.
You can consider Cash out refinancing a large advantage for individuals who own private properties and there is no way that you can do this with an HDB flat. This is definitely one of the best options that you have other than selling the house that you have always dreamed of.
Another famous reason why people do refinancing is to consolidate their debts. This may involve additional automobile loans, personal loans or credit card loans into your mortgage to grab the opportunity of getting a lower rate natural to a home loan.
While the benefit can mean being able to hastily pay off your debt, this form of refinance calls for strict financial discipline. If you roll your credit score card debt into your mortgage for example, but then make normal payments, the shorter term debts you consolidated will now be paid off along with your loan, taking as long as 25 up to 30 years.
However, if you preserve making the same repayments you were previously making or if extra payments are being made toward the current loan, then this definitely will be the easy way out to pay off your debts faster.
Before you decide to refinance your home loan, there are some considerations that you need to take into account and one of those is that a decreased interest rate alone does not always imply that the loan will be inexpensive than the loan you already have.
Some loans are promoted on the idea of a lower interest rate however, when you look closely, you can discover that the costs will more than make up for the decreased interest rate. You can also check out GM Creditz for more home loan packages and refinancing options.