Compare Best Home Loan Refinance Rate in Singapore (2023)

You may be subjected to a new lock in period

You may need to bear additional conveyance and valuation cost if you refinance to another financial institution

Your new home loan package may hinder you even more later when there is a change in its policy (e.g. rising interest rates)

Before applying or refinancing your home loan, you may have come across these two terms; fixed and variable home loan rate.

A Fixed Rate is a loan package offered by the lender at a fixed interest rate for a specific set of time.

For example, you will get to enjoy paying a fixed monthly instalment for a period of 1, 2, 3 or even 5 years. The main advantage of taking a fixed interest rate is to protect against paying a higher instalment when the market/bank interest rate increases.

Therefore, it is always better to opt for a fixed interest package during a rising interest rate environment.

Due to the stability a fixed interest rate provide, one disadvantage is that financial institutions will usually impose a higher first year interest rate as compared to a variable interest rate package.

In contrast, a variable or floating interest rate package will subject you to a different monthly instalment amount regularly depending on the nature of your home loan package.

Variable rates are typically pegged to a reference rate from an international body or a financial institution’s in-house rate.

SIBOR – Singapore Interbank Offered Rate is determined by the interest rate which banks in Singapore lend unsecured funds to each other at a maturity of 1, 3, 6 or 12 months.

SORA – SORA is defined as the volume-weighted average rate of borrowing transactions in the unsecured overnight interbank SGD cash market in Singapore between 8am and 6.15pm.

Bank Board Rate – This is determined by the bank in-house board rate and are usually not as transparent as compared to SIBOR/SOR, banks may publish the rates on the website or their respective branches

Fixed Deposit Home Loan Rates – The fixed deposit home loan rates is another type of bank board rate that are benchmarked with the banks’ existing fixed deposit rate based on a term etc. 12 months.

Bank or financial institutions will commonly use a spread to determine your home loan rate, such as 0.5% spread + 3 months SIBOR. Hence, if 3 months SIBOR is at 1.5%, a 3m SIBOR variable rate with a 0.5% spread will make your total home loan interest rate to be 2% p.a.

A variable rate will be more advantage to you during a decreasing interest rate environment.

It is always better to opt for a fixed interest package during a rising interest rate environment.

It is always better to opt for a variable interest package during a falling interest rate environment.

On top of the valuation and conveyance fee one has to pay for taking up a home loan from a financial institution, there may be certain clawbacks clauses on subsidies on a typical home loan package.

Claw back - on legal subsidies

Margin calls – When the value of the property falls below your loan amount

Lock in period – a fixed period; usually 2 to 3 years you are obligated to remain on loan with the bank.

Engaging an experienced Mortgage broker may make a difference in the next few years. For Example, during the extremely low interest rate environment from 2020 to 2021, many bankers may suggest you take a variable rate, however as we approach the end of 2021, there were reports of high inflation resulting in central banks increasing interest rates. This will impact those on variable interest package to eventually pay a much higher rate later than those who locked in a slightly higher fixed rate during 2020-2021 period. An experienced mortgage broker will have the foresight to project such risk and advise on a longer-term to ensure certainty in your instalment in the first few years.

Mortgage broker may help to speed up your home loan application with the bank, they will do the leg work for you, put in 3 – 5 applications with different banks and highlight potential issues especially if you do not have the time to handle your own home loan application. A home loan applicant will find a mortgage broker particularly useful when they are facing some bad credit situation, not be able to get the desired loan amount or are faced with a complex financing issue such as part purchased or de-coupling.

At Moneyline.SG our partnered mortgage brokers are extremely experienced, and their service are 100% free as the bank will pay them a referral fee for any successful loan application. Please note that there will be strictly no rebate offered if a mortgage broker is being engaged to handle your home loan application.

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