Is It Necessary To Refinance Our Housing Loans?

Most Singaporeans who have bought their own property will have to take up housing loans in order to afford one. We may have heard about refinancing in one way or another but what exactly is it and is it necessary to refinance our housing loans? Did you know that if you refinance a 1 Million property loan regularly, you could save more than $50,000 through it? Each time of refinancing can save you at least $10,000 in interest every 3-4 years. With higher housing prices, refinancing becomes more important as it could save us a lot of money in the process.

Not many people refinance their housing loans as it seems quite troublesome. But if I tell you there's an easier way out for refinancing without having to search for the better loan packages yourself and without having to queue up at the bank, would you reconsider it? Let's look at how refinance can help us save money and how easily it can be done.

Credit: https://commons.wikimedia.org/wiki/File:Housing_and_Development_Board_flats_in_Bukit_Panjang,_Singapore_-_20130131_(multi-row_panorama).jpg

What is Refinancing?

Before we get into how refinancing can help save us money, let's understand what is refinance? Refinance is a term used to describe the change of loan terms from one bank to another. If there's a better package from another bank at lower rates, we can refinance there to get better rates for our loans.


How Bank Loans Work?

We can take up housing loans mainly from 2 places. Firstly, HDB does provide housing loans at interest of 0.1% above the CPF OA. It is currently at 2.6% interest. Secondly, we can take housing loans from banks which currently has interest rates lower than 2.6%.

In this post, I will focus on bank loans and how it works. From here, you'll be able to understand why it makes sense to refinance your housing loans on a regular basis.


Two Types of Housing Loans Packages

Fixed Rate Packages

Banks will not fix any rates for the long term. Fixed rate packages in Singapore are normally fixed for 2-5 years only. Thereafter, it will revert to floating rate again.

For example, if a bank say they have this fixed rate package at 1.80%, the rate may be fixed for 3 years and then becomes floating rate later from the 4th year onwards depending on market conditions. Refinancing before the rate reverts to floating will guarantee us fixed rates again.


Floating Rate Packages

For floating rate packages, the rate also changes after a short period of time, typically on average 3 years. Banks will always offer a discounted rate for the first 3 years then revert to a higher rate from the 4th year onwards.

For example, if a bank say they have this floating rate package at 1.5%, the rate is usually made up of a spread + 3m SIBOR, board rate or other floating scheme the bank has. The spread is normally lower at a discounted rate for the first 3 years and then revised upwards from the 4th year onwards. If we refinance before the rate reverts, we can always get the lower discounted rate.

How a typical floating rate home loan package looks like:

Year 1	Year 2	Year 3	Year 4 onwards
0.75% + 3m Sibor	0.75% + 3m Sibor	0.75% + 3m Sibor	1.25% + 3m Sibor

As we can see above, a typical loan package will have lower spread rates for the first 3 years then from 4th year onwards, the spread rates will revised upwards. Refinancing our loans before the rates revise upwards will ensure we always get the lower spread rate.

*The above is just an illustration of rates and do not represent any packages from any banks or financial institutions

How Much Do We Actually Pay In Interest?

Did you know you would have paid $330,523.23 in interest alone for a 1 Million mortgage loan over a 30 year period at 2% interest? If we just refinance it at 0.5% lower, we would have saved almost $100,000 in interest. $100,000 is quite a significant sum of money.

Maybe we don't want to look at long term but how about the instalment we pay every month? Will there be a difference if we refinance our housing loans? Yes there will be. If we have a 1 Million loan at 2.6% interest to be paid over 30 years, the monthly loan instalment is $4,004.00. If we can get a rate of 1.5%, the monthly loan instalment drops to $3,452.00. This helps us save almost $600 every month! Even for a few hundred thousand dollars loan for a HDB flat, we could still save a few hundred dollars a month just by refinancing.

Refinance With Ease And Skip the Queues

The benefits of refinancing is quite significant to help us save on the interest paid and even lower our monthly loan instalment. We could save a few hundred dollars a month and almost $100,000 over the long term. The problem why many people don't refinance is they don't know where to get the best rates or they don't have time to go to the banks to do it.

Refinancing is made easier with mortgage brokering services. Through this service, you get free advice on your home loans and get the best rates. All applications can be done without going down to the bank itself. Its a one stop service that addresses the needs of individuals or families to help them save time and money. You can now refinance your loans with ease.

One month ago, I decided to explore mortgage brokering service and offer it to everyone here after going through the necessary trainings. I like that this service is provided free of charge and at the same time I can help people get the best rates and also help them save time and money.

You can refinance your home loans with me where I can personally help you to calculate on your potential savings and recommend the best rates as I compare against 16 different banks and financial institutions in Singapore. Check out the service I provide here: http://sgyounginvestment.blogspot.sg/p/mortgage-consultancy.html

You can also email me at sgyounginvestment@gmail.com for any enquires which you might have.

Refinancing smartly can help save us a substantial sum of money.

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Related Posts:
1. Can You Afford That Million Dollar Condominium?
2. How Much Loan Can You Get For Your HDB flat?

10 Terms to Know Before Taking Out a Mortgage Loan

There is no doubt that modern Singapore is an incredible place to live in, one of the brightest and busiest centres of culture and commerce in the world.  It routinely ranks among the top 20 richest cities in the world. In 2015, however, Mercer’s survey also ranked it among the top ten most expensive cities. Practically speaking, this means if you’re considering buying a home in Singapore, there’s probably a mortgage loan you’ll need in the future.

To the layperson, trying to understand a home loan for the first time is like deciphering a foreign language. Here are the top ten terms and acronyms you’re likely to run across as you prepare to take out a loan and buy a home, and what they mean for you.

1. MAS: Monetary Authority of Singapore

If you’re a Singaporean, there’s a good chance you are already familiar with this abbreviation. The Monetary Authority of Singapore is the country’s central bank, and the centre of financial regulation. You’ll come across MAS often when reading about home loans, as they set all the rules of lending.

2. Loan-to-Value Ratio

Your loan-to-value ratio, or LTV, is one of two ratios that will help you determine how much you can afford to spend on a property. Your LTV is exactly what it says on the tin: the ratio of how much you borrow against the value of the property. In general, your LTV can’t be higher than 80 percent.

3. Mortgage Servicing Ratio

The MSR is the percentage of your total monthly income that will go to paying back your mortgage every month. In 2013, MAS capped the mortgage service ratio at 30 percent. Your LTV and MSR are the first things you’ll need to figure out before you take up a home loan. Fortunately, there are some great online tools to help you do just that. Tools such as LTV and MSR calculators will show you exactly how much you can afford to spend. Once you’ve figured out your price range, it’s time to move on to the next step: who are you borrowing from.

4. HDB Loans

The Housing Development Board manages public housing estates, and they also offer loans for first time home buyers. HDB loans have a “concessionary” interest rate, based on the current CPF rate plus 0.1%. To get a HDB loan, you must have an income below S$10,000 per month, and be a Singapore citizen. 

5. Bank Loans

The alternative to a HDB loan is to borrow from a private bank. Banks offer a wider range of options and flexibility, like floating interest loans or fixed rate loans (more on those later.) You can also refinance a HDB loan to a bank loan. But be very careful before you take this option! Once you’ve applied for a bank loan, you will no longer be eligible to go back to HDB.

6. In-Principal Approval

If you decide to take a bank loan, obtaining an IPA will be your first step. An IPA will tell you how much that bank is willing to let you borrow, and lay out your options for interest rates and repayment plans. After you pick a loan package, the bank will give you a Letter of Offer, and that will let you use your option to purchase. Of course, selecting a loan package will mean deciding between a varieties of different interest rates. 

7. Floating Rate Mortgages

A floating rate mortgage is one of the options a bank loan will offer you: your interest rate will vary with changing national or international market conditions. Floating rate mortgages come in two primary types: SIBOR and SOR.

8. SIBOR: Singapore Interbank Offered Rate

SIBOR is a reference rate that is calculated daily, based on the rate at which Singapore banks lend funds to each other. It is subject to fluctuations base on the economic conditions.

9. SOR: Singapore Swap Offer Rate

SOR is SIBOR’s international cousin. Where SIBOR uses the exchange rate within the country, SOR trades on an international platform: the predicted exchange rate between the US dollar and the Singapore dollar. SOR is much more flexible: when it’s at a low, it will be lower than a SIBOR rate…but when it peaks, it will be higher than SIBOR. After the global economic crisis in 2011, SOR has lost some popularity, but there are still banks that offer it.

10. Fixed Rate Mortgages

You can also obtain a locked in rate from a bank. Most fixed rate mortgages will lock your rate up to a period of five years only, before it defaults back to a floating rate. Because the rate is fixed, the bank is taking some risk that you’ll be paying less than the current national interest rate. This means that fixed rate mortgages are stable but come at a higher base price.

Conclusion

Don’t feel like you need to buy a new dictionary to apply for a home loan: once you get the basics down, you’ll start recognizing the same terms popping up all over the place! With a little research and tools like Property Guru, you’ll be well on your way to a new home in Singapore.

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Entrepreneurship : How To Setup A New Company In Singapore?

The following is a guest article from: The New Savvy

Entrepreneurship seems to be the buzz word in Singapore nowadays, with many people rushing to create new companies. If you’re getting ready to make that first step and create your own start up, you might be confused by the many different types of business structures available to you.

Here’s all you need to know about being your own boss and setting up a business:

Things You Need To Consider

1. Are you alone in this venture, or do you have partners?
2. Are you willing to risk unlimited liability, or do you want to limit liability?
3. Are you willing to be taxed at a personal level? Or would you like the venture to carry the tax burden?

Things You Need

1. Singapore Citizens/PR

Singpass
If you’re a Singapore citizen who has forgotten your Singpass password, it can be reset most Community Centres and locations here or reset it online.

An online payment method

Details of all the partners in the new venture (I/C Number., Address, Name, Contact No.)

2. Foreigner

An Entrepass which you must apply for
An online payment method


Different Business Structures

1. Sole Proprietorship

One of the most common form of business in Singapore, a Sole Proprietorship is a business run by a single person. The business and the owner are considered the same legal entity. The owner is personally liable for all debts and losses of the business. Profits are taxed at the owner’s personal income tax rates. Sole proprietorships need to be renewed every year.

Set-up Fee: $65

2. Partnership

A business that has between 2 – 20 partners. The business and its owners are considered the same legal entity and the partners are each personally liable for the partnerships debts and losses. Profits are taxed at each partner’s person income tax rates. Partnerships need to be renewed every year.

Set-up Fee: $65

3. Company

A business that is a separate legal entity from its shareholder and directors. The business is considered a separate legal entity from its shareholders. Shareholders are not personally liable for debts and losses of the companies, though they may lose as much as they had invested. The rules on companies are set out in the Companies Act. Profits from a company are taxed at the corporate tax level. It should be noted as well that the annual filing procedures for a company are probably the most sophisticated among all the business structures mentioned.

Set-up Fee: $315

4. Limited Liability Partnership (LLP)

A structure that was not available in Singapore till just a few years back, an LLP provides the partners some rights of a partnership and some rights of a company. LLP’s do not have unlimited liability, like a company their partners are not responsible for any debts or losses that the business incurs on a personal level, unless the partner is personally responsible.

LLP profits are also taxed on a personal level instead of the corporate level, thus combing the best elements of a partnership and a company.

Set-up Fee: $165

5. Limited Partnership

Limited Partnerships is the newest business structure available in Singapore. With a minimum of two partners, a minimum of one as a general partner and a minimum of 1 as a limited partner. General partners are liable for all debts and obligations while limited partners have their obligation limited to the amount they contribute to the business. In most other aspects though, this is similar to a partnership.

Set-up Fee: $65

How To Set Up Your Company

Go to ACRA website and click under the appropriate tabs and follow the instructions.



Read more at The New Savvy  if you want to know more. The New Savvy is a financial platform that aims to empower women through meaningful content that are relevant and practical. The New Savvy provides resources to demystify finance and spur financial consciousness. We want to make money interesting to women and transform women’s relationship with money.

Republished with permission. All rights reserved.