Re-Finance of HDB Home Loan

With rising costs and increased learning needs, financing our children's education is no longer a simple walk in the park. Discuss with other parents about how they are managing their finances to cope with their expenses.

Re-Finance of HDB Home Loan

Postby tech_wizard » Mon Mar 07, 2011 4:13 pm

Hi All,

I would appreciate some advice regarding the home loan, got very confused reading about SOR & SIBOR & Inter Bank Rate.

I am currently using UOB for my home loan it is a fixed rate loan for 3 years and ending in May this year, the new rate if I were to continue with them is at 2.6% and still have to incur a $500 admin fee.

Current loan blance amount by May should be about $185k.

Your advice or comments is appreciated.

tech_wizard
KiasuNewbie
KiasuNewbie
 
Posts: 8
Joined: Tue Oct 05, 2010 1:06 pm
Total Likes: 0


Postby 30plus » Mon Mar 07, 2011 8:45 pm

Interbank rate = SIBOR, it is floating
SOR is another type of floating rate
Quite difficult to explain in detail. Roughly speaking, SOR is more volatile. Historically, it is higher than SIBOR but currently it is much lower.

You have 2 options:
1. Ask your current bank to re-price
2. Refinance to another bank

Typically, there is repricing fee - a few hundred dollars. To refinance, there is another round of legal fee about 2K+. Most refinance bank will subsidize legal fee but will subject to a limit (0.4-0.5%) and there will be 3 year lock in.

So, you can ask around and see what is your best option.

30plus
GreenBelt
GreenBelt
 
Posts: 114
Joined: Thu Oct 21, 2010 12:13 am
Total Likes: 0


Postby tech_wizard » Tue Mar 08, 2011 12:22 am

Hi 30plus,

Thank you for the reply, I have asked my current bank for a reprice but it seems their rate is not that fantastic and they dont seem to be interested to negotiate. Will start to look for other banks.

Cheers.
TW

30plus wrote:Interbank rate = SIBOR, it is floating
SOR is another type of floating rate
Quite difficult to explain in detail. Roughly speaking, SOR is more volatile. Historically, it is higher than SIBOR but currently it is much lower.

You have 2 options:
1. Ask your current bank to re-price
2. Refinance to another bank

Typically, there is repricing fee - a few hundred dollars. To refinance, there is another round of legal fee about 2K+. Most refinance bank will subsidize legal fee but will subject to a limit (0.4-0.5%) and there will be 3 year lock in.

So, you can ask around and see what is your best option.

tech_wizard
KiasuNewbie
KiasuNewbie
 
Posts: 8
Joined: Tue Oct 05, 2010 1:06 pm
Total Likes: 0


Postby 30plus » Tue Mar 08, 2011 10:42 am

To be frank, you may be stuck. Main reason is that your loan quantum is small. Banks are more interested in loans at least 300K. Banks give better deal for even larger loan. You can not refinance more (leverage up) because of HDB regulation.

If you refinance to fixed rate package, it will be about 2%. Your saving may just cover legal fee.

If you refinance to floating rate package, it will be about 1-1.5% now. But everyone says interest rate will go up, although they have been saying for long time.

The good thing is that you should be quite happy because you have only a little bit outstanding loan. :D

30plus
GreenBelt
GreenBelt
 
Posts: 114
Joined: Thu Oct 21, 2010 12:13 am
Total Likes: 0


Postby tech_wizard » Tue Mar 08, 2011 9:22 pm

Just got quote from DBS and Hong Leong, interest rate is rather attractive and with the subsidy it does help especially when i express my disbelief on the legal charges which is about $2500 before the subsidy.

With the refinance I am slightly still ahead, every penny counts as we just bought another house.

Cheers.

30plus wrote:To be frank, you may be stuck. Main reason is that your loan quantum is small. Banks are more interested in loans at least 300K. Banks give better deal for even larger loan. You can not refinance more (leverage up) because of HDB regulation.

If you refinance to fixed rate package, it will be about 2%. Your saving may just cover legal fee.

If you refinance to floating rate package, it will be about 1-1.5% now. But everyone says interest rate will go up, although they have been saying for long time.

The good thing is that you should be quite happy because you have only a little bit outstanding loan. :D

tech_wizard
KiasuNewbie
KiasuNewbie
 
Posts: 8
Joined: Tue Oct 05, 2010 1:06 pm
Total Likes: 0



Postby 30plus » Tue Mar 08, 2011 9:30 pm

A few things:

1. Will you sell your house in near future? Subsidy is subject to 3 year claw back. You may have more penalty because of the new lock in period.

2. You can not expect the floating rate stays so low for next few years.

3. Double check with your old bank to see which date you can pay back. You may attract unnecessary penalty. Some banks are quite strict on that.

30plus
GreenBelt
GreenBelt
 
Posts: 114
Joined: Thu Oct 21, 2010 12:13 am
Total Likes: 0


Postby tech_wizard » Tue Mar 08, 2011 9:49 pm

30plus wrote:A few things:

1. Will you sell your house in near future? Subsidy is subject to 3 year claw back. You may have more penalty because of the new lock in period.

REPLY : Will not be selling, we will be keeping both. As discuused with the Mrs. if one day our kids decide to kick us out of the house we move back to the HDB. But for the meantime we will be renting out the flat to help pay for the mortage on the HDB.

2. You can not expect the floating rate stays so low for next few years.

REPLY: We plan to pay off the loan on the HDB when at the end of the 3 years. Actually we can afford to pay off the loan now but after much consideration we decided to keep the cash in the event of emergency.. Medical, Unemployment, Death...etc

3. Double check with your old bank to see which date you can pay back. You may attract unnecessary penalty. Some banks are quite strict on that.


REPLY: I have email confirmation from my current bank there is no penalty so long as we give them 3 months notice, the notice can be served immediately so long as the start of the new mortage does not fall within the lock-in period.

tech_wizard
KiasuNewbie
KiasuNewbie
 
Posts: 8
Joined: Tue Oct 05, 2010 1:06 pm
Total Likes: 0


Postby titank » Wed Mar 09, 2011 9:29 am

Recently a bank also asking me to refinance my HDB home loan to bank loan. What they trying to say I can get a lot of savings as the interest rate is a lot lower than my current paying at 2.6%. My home loan still have another 10 years more to go with HDB.

titank
KiasuGrandMaster
KiasuGrandMaster
 
Posts: 3978
Joined: Sat Apr 26, 2008 12:56 am
Total Likes: 4


Postby hquek » Wed Mar 09, 2011 9:35 am

titank wrote:Recently a bank also asking me to refinance my HDB home loan to bank loan. What they trying to say I can get a lot of savings as the interest rate is a lot lower than my current paying at 2.6%. My home loan still have another 10 years more to go with HDB.


if your's is with hdb, at the hdb rate, DON"T change. Banks entice you with low low rates, but they will progressively go up. I refinanced some years back at 1%. But after 2 years, it started going up and up and up - I receive letter every few months telling me there is a change in rates.

And once the loan amount is less than 100K, nobody will want to talk about refinancing. Ended up I paid 4+% for a few years for my hdb flat. Story ended when I terminated my loan early via capital repayment. Now I can rest easy.

hquek
Councillor
Councillor
 
Posts: 6535
Joined: Fri Jul 18, 2008 10:07 am
Total Likes: 70


Postby teh_oh » Wed Mar 09, 2011 10:30 am

Hi,

If
1) i have a lump sum at my CPF, should I do capital repayment? i read something about 3.5% interest for first $60k in the cpf account, but if my RA and MA already hit somewhere near $60k, does it mean that my OA will only attract 2.5%?
2) if I have the same outstanding amount as TS and manage to accumulate the same amount of cash on hand, do i do repayment or is it wiser to invest in another property? What is the min. sum component one need to maintain at CPF for multiple properties right now? Does this apply to both co-owners or only the co-owner who is working? Can we pledge our HDB instead of setting aside this amount?

Thanks. We are thinking of getting a second property jointly with our parents so that they can have rental income when they retire in a few years time (as well as long term investment as well as they can still stay at their place without moving in with us :oops:).

teh_oh
BlueBelt
BlueBelt
 
Posts: 394
Joined: Thu Nov 11, 2010 10:15 pm
Total Likes: 0


Next

Return to Money Matters