Refinancing In a Recession

Refinancing

The recent economic downturn has resulted in many of us tightening our belts. For most of us, this means having to forgo our annual overseas holidays, having to downgrade from going to restaurants to having our family meals at food court. Needless to say, everyone is looking for ways to reduce their spending. Very often, we often overlook the very obvious method (and also substantial) savings – Refinancing!

What exactly is the “refinancing” business all about? Well, refinancing simply means to replace your current housing loan with another – obviously one with a much lower interest rate! Most of us in Singapore are proud owners of our own home and we would have had taken up a housing loan at the time of purchasing our home.

Question to ask yourself – “When was the last time you took a good look at your housing loan statement?” “Are you still enjoying the promotional rates offered by the bank?”

For most of us, we would usually take up a housing loan at the time of purchasing our home. Being all excited to be proud owners, we are occupied with ideas of how to renovate & decorate our new home. We quickly sign the 10-page letter of offer filled with legal jargons provided to us by the bank officer so as to seal the deal. We are the least bit affected by the bank officer’s notification that the loan period is for 25 years.

Little do we realize, that for the majority of us, our current housing loan is secured by a mortgage based on the promotional rates offered by the bank at the time of taking up the loan. These promotional rates would only be low for the first couple of years (maximum 3 years), thereafter, the rates would have gotten progressively higher.

Can we really save money by refinancing? What are the real savings? Generally, we CAN REALLY SAVE money by refinancing! But before you take the plunge, you should factor in the cost of refinancing. You need to check if there is any penalty (usually 0.5% to 1% of outstanding loan amount) would be imposed if you terminate the existing housing loan early.he rates would have gotten progressively higher.

Final Tip: You should check with your current bank to review your loan rates. Most banks would allow their existing customers to convert to the “new package”. In that way, you will be able to enjoy the promotional interest rates without too much hassle and trouble.

Illustration of what the real savings are:

 CURRENT SITUATION – Loan Amount $600,000/- @ 5% p.a.

Year

Current Rates

Current Instalment

 

Total Payment Per Year

1

5%

$3,507.54

$42,090.48

2

5%

$3,507.54

$42,090.48

3

5%

$3,507.54

$42,090.48

4

5%

$3,507.54

$42,090.48

5

5%

$3,507.54

$42,090.48

NEW PROMOTIONAL RATES OFFERED BY BANKS

Loan Amount $600,000/- @ 1.08% (1st year); @ 1.18% (2nd year) & @ 1.48% (3rd year)

Year

Current Rates

Current Instalment

Total Payment Per Year

 

REAL SAVINGS!!

1

1.08%

$1,951.00

$23,412.00

 

$18,678.48

2

1.18%

$1,978.00

$23,736.00

 

$18,354.48

3

1.48%

$2,058.00

$24,696.00

 

$17,394.48

4

5.00%

$3,507.54

$42,090.48

 

$   –

5

5.00%

$3,507.54

$42,090.48

 

$   –

           
   

TOTAL REAL SAVINGS FOR 3 YEARS

 

$54,427.44

The information contained here is only intended to provide general information on the subject covered. Nothing in this publication should be regarded as constituting legal advice concerning any particular business, operational or other situations with which you might be faced. Further, the law may have changed since first publication and the reader is cautioned accordingly. Please seek professional advice before taking any action.

Chris Chua & Associates LLC is a limited liability law corporation with unique entity number: 201826324Z and regulated by the Ministry of Law, Singapore, license number: LSRA/LLC/2018/00019. Its registered office and principal place of business is at 138 Robinson Road, #10-04 Oxley Towers, Singapore 068906.Chris Chua & Associates LLC

Based in Singapore, we advise both local and international clients who wish to expand and preserve their business interests and wealth. Our Firm has assisted corporations in establishing and structuring new investments and business ventures in different sectors. We think beyond obvious legal issues and come up with pragmatic solutions to challenging commercial problems.

For more information, kindly visit our website www.ccnalaw.com or contact us at +65-62227500

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