Refinancing Vs Repricing | DBS Singapore (2024)

FAQs

Refinancing Vs Repricing | DBS Singapore? ›

Reprice or Refinance your Home loan? Consider these factors first: Repricing refers to switching to a new home loan package within the same bank while refinancing refers to closing your current home loan account and setting up a new home loan account with another bank.

A rule of thumb says that you'll benefit from refinancing if the new rate is at least 1% lower than the rate you have.

Con: Refinancing takes time.

It takes a lot of resources, time, and money, to secure a lower rate. This can be taxing on your life, especially if you don't see a large change in payments or interest.

As we venture into 2024, the interest rates are at a 22-year high in the target range of 5.25% and 5.50%. When the rates hit the imminent peak, they are anticipated to stabilise and decrease from the high. The uncertainty lies in the timing of this decrease, largely dependent on inflation and mortgage rate trends.

It's a good rule to refinance if you can reduce your interest rate by at least 1%. Mortgage rates naturally rise and fall. But, when the economy struggles, mortgage rates usually fall. Just because interest rates are low, though, doesn't mean it's the best choice for you to refinance.

As a rule of thumb, experts often say that it's not usually worth it to refinance unless your interest rate drops by at least 0.5% to 1%. But that may not be true for everyone. Refinancing for a 0.25% lower rate could be worth it if: You are switching from an adjustable-rate mortgage to a fixed-rate mortgage.

If your interest rate is 4.2 percent on $200,000 of principal, your monthly payment would be $978. When the rate dropped by . 25 percent, and the mortgage rates dropped on average to 3.75%, your monthly payment becomes $926.

Key Takeaways. Don't refinance if you have a long break-even period—the number of months to reach the point when you start saving. Refinancing to lower your monthly payment is great unless you're spending more money in the long-run.

Moving into a longer-term loan: If you're already at least halfway through the loan term, it's unlikely you'll save money refinancing. You've already reached the point where more of your payment is going to loan principal than interest; refinancing now means you'll restart the clock and pay more toward interest again.

The potential to lower your monthly payments, reduce your loan's overall interest and tap into your home's equity may be tempting. However, it's essential to factor in closing costs, the impact to your home's equity, and the possibility of extending your loan term. All are valid reasons to not refinance your home.

What is the outlook for Singapore in 2024? ›

Prospects for the Singapore economy should improve over the course of 2024, with GDP growth forecast to come in between 1–3%. The recovery in the manufacturing and financial sectors should resume, supported by the upturn in the electronics cycle and anticipated easing in global interest rates.

The LTV limit (known as the loan-to-value ratio limit) for a single-family property is 80%. That means you need to keep a minimum of 20% equity in your home when you do a cash-out refinance.

An often-quoted rule of thumb says that if mortgage rates are lower than your current rate by 1% or more, it might be a good idea to refinance.

If you have a mortgage with a higher balance and rate, a drop of 0.5% interest could be worth refinancing, according to Dell. "For a lower balance, rate and term refinance, it may be at least 1% or more to be worth your time and money," Dell says. It's also important to consider how long you plan on living in the home.

When you refinance a mortgage, a lower interest rate can reduce your payment and save you money on your home loan. To crunch the numbers, use a mortgage calculator. In general, refinancing for 0.5% only makes sense if you stay in your home long enough to break even on closing costs.

Over 30 years, the difference would save you $65,691 in interest. Buying power boost: If you budgeted about $1,846 a month for a mortgage payment, and the interest rate dropped 1 percentage point — from 7% to 6% — you could spend about $30,480 more on a home without increasing your monthly payment.

If you have a lot of high-interest debt, getting a cash out refinance at a higher interest rate than your current mortgage rate might make sense. With a cash out refinance, you replace your current mortgage with a new mortgage for a higher amount and get the difference in cash at closing.

To calculate the value of refinancing your home, compare the monthly payment of your current loan to the proposed payment on the new loan. Then use an amortization schedule to compare the principal balance on your proposed loan after making the same number of payments you've currently made on your existing loan.