- 1 Should I refinance my housing loan? 10 things to consider
- 2 how many times can you refinance your house
Should I refinance my housing loan? 10 things to consider
Some early birds took the opportunity to refinance their home loans before the Federal Reserve raised interest rates on Wednesday. The Fed's move is likely to lead to an increase in the local benchmark interest rates Sibor and SOR in the near to medium term. As it turned out, the three-month Sibor climbed to 0.96555 last Friday. PHOTO: DESMOND WEE
Do so only if the savings outweigh the costs and if you foresee interest rates going up
Home owners, who have grown accustomed to consistently low interest rates, take note.
Now would be a good time - if you are able to refinance your mortgage - to review your housing loan options carefully.
Interest rates appear to be heading north with more impetus after long periods at historic lows.
In fact, some early birds had already refinanced their home loans, ahead of the United States Federal Reserve's rate hike announcement last Wednesday.
It was the first US hike in a year - and only the second since the 2008 global financial crisis.
As widely anticipated, the Fed raised interest rates by a quarter-point to a range of 0.5 to 0.75 per cent - still historically very low.
More significantly for many observers, the Fed projected three rate increases next year, more hawkish than the two forecast in September.
US rate hikes affect bank rates, bank savings accounts, mortgages, credit cards and vehicle loans in many places around the world, including Singapore.
At a free askST talk on refinancing home loans at [email protected], The Straits Times' deputy business editor Dennis Chan's advice was to refinance now as banks are fighting hard for market share and rates are very competitive in this initial period after the Fed decision.
Ms Grace Cheng of Get.com says redeeming a loan prematurely can result in penalties such as clawback of subsidies given by the existing lender.
Ms Tok Geok Peng of DBS says the home owner should first check with his bank to see if it can come up with other options that can better match his needs.
Ms Lee Mei Ling of OCBC has a word of caution for HDB flat owners. Once a loan is refinanced out of HDB, it cannot be refinanced back to HDB.
Mr Alvin Liew of UOB expects the Federal Reserve to raise interest rates in June, September and December next year.
Ms Selena Ling of OCBC expects the three-month Sibor and SOR to climb to around 1.3 per cent and 1.35 per cent by the end of next year.
Mr Vinod Nair of MoneySmart.sg recommends taking up a ''safer'' interest rate package tied to fixed or fixed deposit-linked rates.
Ms Grace Cheng, co-founder and editor-in-chief of personal finance website Get.com, expects to see local benchmark interest rates Sibor (Singapore interbank offered rate) and SOR (swap offer rate) continue to rise correspondingly in the near to medium term.
The Sibor is typically used to price some home loans.
Both the Sibor and SOR rose markedly immediately after the Fed decision, with the three-month Sibor rising to 0.96555 last Friday.
"This would make home financing more expensive, given that the majority of housing loan packages offered by banks in Singapore are pegged to floating rates, with about half of overall banks' housing loan packages pegged to Sibor/SOR and the rest being board-rate and fixed-rate packages," she said.
Ms Cheng added that the ability to capture existing favourable rates could help alleviate the cost of servicing one's mortgage. It would also help to relieve home owners of anxiety amid concerns over rising interest rates, job security and a challenging economic landscape.
10 factors to weigh up before you refinance
Refinancing or re-pricing typically refers to a situation where the property owners move from one housing loan package to another - within or outside the existing bank - with the intention of saving money by reducing interest rates or capturing favourable rates.
But before you rush in, do consider if you are better off:
•Sticking to your current housing loan package;
•Converting to a different package with your existing bank; or
•Taking up a refinanced package with a different bank.
If interest rates are on the rise, it makes sense to refinance at existing favourable rates.
But if interest rates are falling, it is better to keep an eye out for an opportune time to refinance at a lower rate, said Ms Cheng.
Home owners can consider a variety of home financing solutions, including a fixed rate, a floating rate and even a combination, said Mr Lim Beng Hua, head of secured loans at United Overseas Bank (UOB).
Ms Lee Mei Ling, OCBC Bank's head of home loans product management, advised that home owners can consider refinancing if there are tangible benefits such as savings or an additional facility for investment purposes.
3. LOCK-IN PERIOD AND CHARGES
The lock-in period for home loans usually ranges between one and three years.
This is the period during which the borrower has to keep the mortgage with the bank.
Redeeming the loan prematurely results in the borrower having to fork out charges associated with refinancing.
Consider the various charges and penalties to determine if the potential interest savings outweigh the costs.
They include prepayment penalties (usually ranging from 0.75 per cent to 2 per cent of loan amount redeemed), cancellation fees (0.5 per cent to 2 per cent of loan amount cancelled), legal fees (about 0.4 per cent of loan amount), valuation fees and clawback of subsidies given by the existing lender, said Ms Cheng.
Ms Lee said that in such a scenario, you should refinance your loan only if the savings from the reduced commitment are greater than the penalty charges.
offer subsidies to encourage prospective customers to take up their home loans.
The subsidies help to defray the cost of refinancing your home loan and usually pertain to legal fees, valuation fees and free fire insurance premiums.
For instance, OCBC provides cash rewards of up to $2,000 for this purpose.
This applies to loan packages pegged to Sibor or SOR.
So if you have such packages, bear in mind that you may incur penalties for redeeming the loan outside the specific interest reset dates.
"Let us assume you take up a loan on March 1 which is pegged to three-month Sibor. Since the loan interest rate resets every three months, you may redeem the loan only on March 1, June 1, Sept 1 or Dec 1. Otherwise, you may incur a penalty that usually ranges from 0.5 per cent to 2 per cent of the loan amount redeemed," said Ms Cheng.
6. REFINANCING REGULATIONS
Switching from one bank to another or changing the pricing package within the bank is subject to prevailing regulations on refinancing.
One such regulation is the Total Debt Servicing Ratio (TDSR) framework which requires a comprehensive assessment of affordability, taking into consideration a borrower's present and future commitments.
Ms Lee pointed out that the Monetary Authority of Singapore (MAS) has fine-tuned the framework to allow borrowers more flexibility in managing their debt obligations.
This is in response to feedback from some borrowers who are unable to refinance their existing property loans owing to the application of the TDSR threshold of 60 per cent. From Sept 1 this year, the two key changes are:
•TDSR need not be computed or applied to a borrower who is refinancing a housing loan on an owner-occupied residential property.
•TDSR need not be computed or applied to a borrower who commits to a debt reduction plan comprising a repayment of at least 3 per cent of the outstanding balance over a period of not more than three years.
In order to help potential home owners determine their TDSR for mortgage loan applications, UOB launched an online property loan calculator last year.
"This free service makes it easier for property buyers to find out how much they can borrow before they submit their loan applications to the bank.
"It also offers customers the option to pledge financial assets such as unit trusts, shares and bonds, and structured deposits as additional income streams for a detailed mortgage analysis," said Mr Lim.
It is a common myth that home owners should refinance with another bank to enjoy a better loan package, said Ms Tok Geok Peng, DBS Bank's executive director of secured lending.
"We urge home owners to speak with their banks first. As most of us will not be able to remember the details of our loan package, speaking to your bank helps you understand the features of your current loan packages and know if there is any lock-in condition and fees payable if you refinance with another bank.
"Share your concerns with your bank as they could advise you to either reprice your loan with another loan package which better suits your needs now, or help you explore other options," she added.
MR ALVIN LIEW, UOB SENIOR ECONOMIST:
"The US Federal Reserve, as widely expected, raised the policy Fed Funds Target Rate by 25 basis points from 0.5 to 0.75 per cent in the December 2016 FOMC meeting with a unanimous decision. We are now more hawkish for the Fed rate trajectory in the coming years.
"As we expect the Fed Reserve to adopt a pragmatic approach towards the likely Trump fiscal boost, details of which will only gradually become available, we believe that the Fed will remain on hold in the first quarter of 2017.
"Thereafter, we expect a faster trajectory with three rate hikes of 25 basis points each in the June, September and December FOMC meetings in 2017."
MS SELENA LING, OCBC BANK'S HEAD OF TREASURY RESEARCH & STRATEGY :
"If you look over 2016, both three-month Sibor and SOR have trended lower over the course of the year until very recently. In fact, Sibor has actually been very stable from July-October, whereas SOR is more reactive to the currency gyrations.
"Post-Trump victory and the ensuing bear-steepening of the US Treasury yield curve, domestic short-term interest rates have begun to edge higher as well going into the year-end, when liquidity and trading volumes traditionally also lighten up.
"Our forecast remains for the three-month Sibor and SOR to climb to around 1.3 per cent and 1.35 per cent by the end of next year."
MS GRACE CHENG, CO-FOUNDER OF GET.COM:
"The US Federal Reserve has just announced a quarter-point hike to the Fed Funds rate, with an indication of three quarter-point hikes next year and a projection of three additional rate hikes each year in 2018 and 2019.
"Based on recent historical records of actual US Fed rate movements coupled with a volatile global economic landscape, the general market consensus is that further interest rate increases, if any, would be maintained at a gradual pace in the near to medium term."
Ms Lee suggested that home buyers and owners take a holistic view that goes beyond just pricing.
"As a home loan is a long-term commitment, they should consider the overall package which best meets their needs, including the advisory service from the mortgage specialist," she said.
In addition, consider the benefits of refinancing in conjunction with one's decision to sell the property.
Home owners can consider a range of home-financing solutions, including a fixed rate, a floating rate and even a combination, says Mr Lim Beng Hua, head of secured loans at United Overseas Bank.
Ms Cheng said home owners who are not looking to sell their property within the next few years could enjoy interest savings by refinancing at a lower rate.
But those intending to sell in the near term may see the cost of refinancing negate the potential interest savings.
8. OTHER OPTIONS TO MANAGE YOUR HOME LOAN
There are several options to manage your home loan commitments, such as reducing the loan size by paying down the capital lengthening your loan duration.
Ms Tok noted that more home owners (about 10 per cent more) perform capital repayment to reduce their loan amount at the beginning of the year, probably using their bonus or savings.
"This is a good practice to reduce your financial commitment, especially if these are spare funds where you are unable to get a yield higher than your loan rate.
"Generally, we advise home owners to use cash instead of CPF funds since CPF pays at least 2.5 per cent and the funds could be used for retirement or for a rainy day," said Ms Tok.
Regardless of interest rate trends, she advised those who have a mortgage to service to set aside funds as a buffer against rate hikes or any unforeseen circumstances.
"Ideally, home owners should set aside some savings in cash, CPF funds or liquid assets that can be used to pay their monthly instalments for the next two years.
"This gives them sufficient time to restructure the loan or even sell the property should they run into any financial issues," she said.
Home owners who take a home loan with the Housing Board enjoy a fixed rate - now at 2.6 per cent - throughout the loan tenure.
HDB offers housing loans at a concessionary interest rate of 0.1 percentage point above the CPF Ordinary Account rate.
Ms Lee said: "Do note that once a loan is refinanced out of HDB, the loan cannot be refinanced back to HDB. Hence, customers should be very sure of settling mortgage commitments with a commercial bank once a loan is refinanced out from HDB."
Review your housing loan once every few years to see if it would be more advantageous to continue with your existing package - particularly after your lock-in period.
Ask your bank for repricing options before checking with others.
how many times can you refinance your house
In today’s real estate market, refinance loan rates are hovering at historical lows, with the average being in the 4% range. For millions of homeowners the potential savings on their home mortgage by refinancing into a new loan and securing a lower rate are extremely enticing. Who doesn’t want to save a couple hundred a month, or thousands of dollars over the life of the loan? Of course, there are times when you think you can get a great rate only to discover that your finances aren’t what you hoped or your home didn’t appraise for quite enough, and you’re stuck with a higher rate. Rather than dealing with this disappointment, here are a few things you can do to increase your chances of getting a better rate for your refinance. https://refinancey.com/wp-content/uploads/2016/01/Tricks-to-Improve-Your-Refinance-Rate.mp3 Using Your Resources to Compare Refinance Rates How to Hit the Jackpot by Lowering your Rate How are Homeowners Receiving Low Refinance Rates? Your Credit Score: Get Clear on Your Finances When you apply for a refinance to get lower refinance loan rates, the bank is going to want to know your entire financial situation. They need the ins and outs of your financial history, your assets, your credit report, your credit score, your job history, and more. It’s your job to make sure all of this is in place before you apply for a refinance. A good place to start is with your credit report. Contact the reporting agencies and get a report from each one so you know what is showing up on your history, and whether or not you can get anything off.
In the real estate market nearly all home loans are given through conventional lenders or those that have been approved by FHA. Conventional lenders follow the underwriting guidelines of Freddie Mac and Fannie Mae and they are not tied to the government programs. These underwriters are, however, subsidized by the government. FHA lenders follow the underwriting guidelines of the federal government and are much more lenient in their initial requirements for a homeowner to secure a loan or to refinance an existing loan. Between the two of them, they keep the real estate market functioning as it does today. As a homeowner, you’re probably thinking about refinancing, you may be wondering if you should have FHA refinance your mortgage. While this can be a great idea, there are some pros and cons that you should be aware of. https://refinancey.com/wp-content/uploads/2016/01/What-should-I-do-FHA-or-Conventional.mp3 The Secret to FHA No Costs Refinance Smart Steps to Take When Refinancing Your Loan What is a Conventional Refinance Conventional vs. FHA Requirements When you apply for a refinance through a conventional lender, you will have to meet the requirements that they have established for approval. Typically, lenders like you to have a really good credit score, in the 700 range at least but preferably higher. You also need to have a fairly low debt-to-income ratio, a stable job, and a good credit report. In addition to this, any asset you have will be marks in your favor. Each conventional lender has their own requirements that have to be met, but they are all fairly similar and they take the items mentioned above into account. If you are in.
For new homeowners, it is a step into the world of unknown territory after considering to refinance your mortgage. It can be quite jarring if you don’t know what they are doing. However, a good course of action from a good research plan will certainly make things easier. Find out why you should begin to refinance in the first place. Also, make sure that it’s a sensible decision. Here are a few things to keep in mind regarding your refinance method. https://refinancey.com/wp-content/uploads/2016/01/3-Steps-To-Help-You-Refinance-your-Mortgage.mp3 Did You Know Homeowners Can Still Refinance With No Equity? You’ll Never Believe How Easy It Is to Use a Refinance Calculator Smart Steps to Take When Refinancing Your Loan What Are Some Things to Consider in a Conventional Refinance? What’s the reason for refinancing your mortgage in the first place? Do you have a good relationship with your lender? This may determine how much you’ll have to pay in upfront closing costs. Some lenders will want you to put a 20% down payment. This is quite expensive for a new homeowner and this may take a serious bite out of your current livelihood. If you’re an adult that just graduated college, you may want to get to your student loans right away. It’ll take some time to pay a high down payment for a home. On another hand, a lender may want in between 5-10% upfront. This gives you a little breathing room to do other things. There are advantages to paying a large amount upfront. Pros and Cons of Choosing Federal Refinance Options Under FHA Guidelines Not only do you have new.
The real estate market is a huge player in the nation’s economy, which means that a lot of money funnels through it to individuals, businesses, and corporations. To help maintain this success, advertisements beckon you to buy a new home, take out a new loan, refinance the existing home, etc., this isn’t necessarily a bad thing. We all benefit from an economy that is flowing in as well as out. But the question is, should you listen to those advertisements and get a refinance? Is it worth it? They claim it will save you money, so will it? There is good and bad to a refinance, as there are with any major financial decision, and after learning a bit about the good and the bad, you’ll be better equipped to make the successful choice. https://refinancey.com/wp-content/uploads/2016/01/The-Good-and-the-Bad-When-Refinancing.mp3 Refinance Options – What Are Your Needs? Smart Steps to Take When Refinance Your Loan 4 Things to Consider Before You Refinance Your Mortgage Why You May Want to Refinance When you refinance a home you take out a new loan on an existing property. This new loan pays off the old loan and you are left with different terms. When you take out a new loan the power goes back into your hands to some degree, meaning you can adjust the terms you are dealing with rather than being stuck in the terms you already have. For example, your original loan has an interest rate of 5.5% and a 30-year-loan term. That’s not bad, but the current rate you can qualify for is 4.5% and you know you can afford a shorter loan term.
Did You Know Homeowners Can Still Refinance With No Equity?
A home purchase is typically done for two reasons. First, a place to live and second, an investment. Like any investment, this purchase can sometimes go the wrong direction, leaving the homeowner struggling to meet the demands of a debt that is more than the asset is worth. When you find yourself in this situation you may realize that a refinance can help solve the problem you are dealing with. Unfortunately, too many homeowners think a refinance isn’t a possibility for them because there is no equity. But here is a thought you might want to entertain, ‘Can I still refinance my home with no equity?’ This thought may be the key to getting you into a mortgage you can manage. 5 Key Points to Know about a HARP Loan 4 Things to Note Before Choosing the HARP Program HARP and HAMP After the real estate market had plummeted a few years ago, the government implemented multiple programs to help people who lost equity and who ended up in a mortgage that was worth more than the house. These programs are specifically for people who had the mortgage before the crash, and they have been a source of relief for thousands of homeowners. The first of these programs is HARP, which stands for the Home Affordable Refinance Program. When you ask yourself ‘can I refinance my home with no equity?’ The answer is yes; they may be able to if you qualify for HARP. The Home Affordable Refinance Program is specifically geared toward homeowners who do not have existing FHA mortgages. They also cannot be late on their payments.
Let’s Get Down to the Bottom of You’re Refinance Options
For most homeowners there comes a point during the life of their loan where they start to entertain the idea of a refinance. They may have noticed that the interest rates have dropped, or they’ve built up equity and are thinking of putting it to good use. The questions that should be asked before the refinance is, why are you refinancing, will it be beneficial, and what are my refinance options? While your loan officer and lender will be able to give you all the details of the refinance, here is a look at why people refinance and what options are available for them. Refinance Programs for Every Need Why are you refinancing? This is the first question you should ask yourself because it’s going to determine the refinance program that you pick. For most homeowners the reason they refinance will fall in one of these categories. They want to pull out the equity and use it for other investments or debt consolidation. They want to reduce the interest rate and/or the monthly mortgage payment. They want to adjust the loan terms, switching from and ARM to a fixed mortgage or altering the amount of time required to pay off the loan. They have family issues that must be dealt with. They are falling behind on their mortgage and want to alter it to make the burden easier to handle. Granted, these aren’t the only reasons people refinance, but they are the most common. So where do you fall in this list? By deciding what you need out of a refinance, you’ll be better equipped to choose the best.
You always want to come out on top after picking a refinance option you believe will help your situation. You want to get in a situation where you want to obtain the lowest refinance rates, but don’t incur so many other costs as a result. You may have needs such as stabilizing your mortgage to get back on better footing financially outside of your house obligations, or you may want to have the choice to utilizing equity to improve other sections of your life. In any case, here are a few ways homeowners are receiving lower rates. How to Hit the Jackpot by Lowering your Rate 5 Awesome FHA Refinance Options You Need to Know About What’s Your Motivation for Refinancing? We all have our individual reasons behind refinancing. Sometimes, this may not result in the lowest rates available but it will set us up for better financial stability down the line. You have to compromise a slightly higher refinance rate in order to get lower mortgage payments for a short period of time. However, you may find that this is the better solution to settle for a healthy medium. For example, if you were to apply for a federal streamline refinance, you may get the lowest refinance rate over an extended period of time that results in a higher mortgage balance. On the good side, you won’t have to wait a long time for your refinance request to be approved, unlike a conventional loan. Also, you won’t have to worry about a high level of credit or equity to go ahead with your plans. Look at the.
You’ll Never Believe How Easy It Is to Use a Refinance Calculator
In a hectic lifestyle, you always need a way to get things done a lot faster and more conveniently. FHA refinance calculator takes away all of the paperwork and confusion and puts forth all of the fees associated with a specific financial matter in one form. This is a great advantage because you can preview different refinance options presented by a number of lenders. You can utilize the calculator as a way of seeing what potential plans work for you. Here are some easy steps as you use the refinance calculator. Using a Refinance Calculator for Your FHA Loans Why Are Refinance Calculators Great For Your Mortgage? Why Should You Use a Refinance Loan Calculator? Using the Calculator Helps in Refinancing FHA Loans An established refinance company has a mortgage calculator on their website to punch in the fees to your financial plan. You need a good lender that will help you in the process of federal refinancing. Always be aware of all fees and how this will affect your financial situation. You shouldn’t depend on just your lender. Why not have one form and one system that’s efficient enough to take in all costs associated with a refinance choice? Remember, it’s not about working hard, but working smarter to save you time, energy, and money. Why hiring a financial adviser to handle all of this information when you can do it yourself? For those that are just considering federal loans, this would be a good way to view the difference in fees associated with a federal refinance plan and a conventional refinance. Find Plenty of.
If a survey was given to Americans on how they felt about Congress over the past several years, the results would most likely not be favorable. Whatever your affiliation may be, terms thrown around such as “a do nothing Congress” or “the worst Congress ever” cannot be limited to just one party. Anyone who continuously watches the news, reads news articles, or listens to it on the radio focuses on one theme; Americans are not happy with today’s government. This is not meant to say that everyone is unhappy about one particular topic and demand that the government should rectify it. This is meant to say that so many people have different things they value the most, so obviously the government cannot rectify everything. However, it is equally important to state that the government has put forth programs designed to help the needs of certain individuals. The Federal Housing Administration (FHA) has created programs for the purpose of providing types of loans that can help homeowners not only save money but keep their homes as well. There are options to choose from, keeping in mind that the process of acquiring a new loan or refinance may not be easy. It is important to learn what this program was designed for and then see when would be the best time to secure this type of mortgage. What People are Saying About FHA Refinance & HARP How Should I Refinance My Home Under FHA? Yippy, FHA is Going to Refinance my Home! What is an FHA No Cost Refinance? If homeowners feel embarrassed to question a lender about what an FHA.
The concept of FHA Home Affordable Refinance Program sounds quite believable due to the similarities of both FHA and HARP, but both are actually separate entities. HARP has nothing to do with federal loans, but rather comes from Sallie Mae and Freddie Mac loans. However, it is easy to see why some people may get confused with certain eligibility and regulations that are the same in each particular refinance service. Below are some key details of similarities and differences regarding both federal loans as well as a Home Affordable Refinance Program. For Many, the HARP Program Has Been Homeowners Saving Grace 4 Things to Note Before Choosing the HARP Program https://refinancey.com/wp-content/uploads/2015/11/What-People-are-Saying-About-FHA-Refinance.mp3 What is Home Affordable Refinance Program? First of all, you should know why HARP is beneficial. This was put forth during President Obama’s first term to help out homeowners who have a good mortgage record, but dwell in homes that are undervalued. The market crash of 2008 was the precursor to this type of program to help institute homeowners to cope with the tumbling rates. Eligibility for Home Affordable Refinancing requires your mortgage to have already been sold to Fannie Mae or Freddie Mac on or before May 31, 2009. Additionally, you cannot have chosen this type of refinancing prior unless you refinanced a Fannie Mae loan under this program during March-May, 2009. Make sure your loan to value (LTV) ratio is greater than 80%. Most recently under the Desktop Underwriter Approval (DU), there are some companies that will allow you to refinance even at 150%. This is very different from most refinance companies who see you.
Owning a home is great! Although owning a mortgage… Not so much. The great news is that with a mortgage you can refinance and save thousands. Although before jumping into it ask yourself the question “Should I Refinance?”.
Read this great resource that’ll help you decide when it’s a good time or not a good time to refinance your home.
So what’s the difference between interest rate and APR? Well, it’s pretty simple really. Although understanding what makes up an APR (Annual Percentage Rate) can make a huge difference in your monthly mortgage payment.
The basics are straightforward. You get a lender to pay off your old loan, you have now re-financed your mortgage and start making payments to your new lender (hopefully lower payments). Although, what is your motivation? Lower your payment, payoff your mortgage early, take another borrower off the loan?
Yes it’s true! Closing costs in-deed do suck, so how can you know you’re not getting ripped off? Well, make sure to pay attention to the “Good Faith Estimate” when shopping for your mortgage.
That’s a good question, and everyone in the mortgage industry is asking the same question. Mortgage Insurance has taken a huge hit since the 2008 mortgage industry tank! Hopefully this article can help answer.