Posts Tagged my housing loan
Choosing Between Fixed And Variable Interest Rates – Darn What A Choice!
Posted by Adam Bell in Currency & Finance on January 8th, 2010
Once you decide to avail a mortgage, the immediate matter that storms your brain is choosing between fixed and floating rate of interest. It is easy to get stuck at this level if you are not financially educated.
If the media and banks are screaming about increased interest rates you make feel pressed to go and rush into fixing your mortgage rates. Your bank or financial advisor may even propose this.
Now ideally as it should be, we assume that once you choose fixed rate plan for yourself the rate of interest will continue unaltered for the entire period you have fixed the interest rate for irrespective of any incidental increase in the same. But actually this is not necessarily the case.
Here we demystify the nature of fixed interest rate mortgage transaction for you so that you can make an informed decision over the matter.
* Check the small print of a loan. The bank has the right to serve you 30 or 60-days notice that it intends to increase its rates.
* The bank’s first-year rates are binding on the bank only for that short period of 1 or 2 months. The 2nd-year home loan rates are not binding at all. Neither are the bank’s 3rd-year loan rates.
* Force Majeure Clause
So, while you read your mortgage contract, you can spot clauses like this:
“Provided further that from time to time, the bank may in its sole discretion alter the rate of interest suitably and prospectively on account of change in the internal policies or if unforeseen or extraordinary changes in the money market conditions take place during the period of the agreement.”
This is called Force Majeure Clause that enables the lender to undertake appropriate adjustments in the interest rates on home loans they sanction to their borrowers.
So remember to look at refinancing every couple of years so that you do not pay too much. If you select a good home loan company you can save a lot of money over the life of your housing loan and in almost all cases the consultation cost is free.
Learn more about a premier Housing Loan advisory firm, providing Housing Loans with free mortgage broking.
Refinancing Your Home
Posted by Andrew Gan in Currency & Finance on January 8th, 2010
When it comes to housing loans, numerous people do not refinance. A fundamental number are unaware they have the alternative of changing their loan to another financier; others are simply apathetic. They stick with their very first loaner and the “reward” for such loyalty tends to be higher interest rates. Due to the order of magnitude of housing loans and the tenure that the home loan is amortized over, the interest we are talking about here can well extend from 1000’s to hundreds of thousands of dollars. Take a look at the following elements to see whether it’s time for you to consider refinancing.
Current Interest Rate
It is decidedly a positive indication for you to research refinancing when your current interest rate is higher than available housing loan packages on the market. A first step to take is to go back to your existing bank or financial institution and ask them to revise your package, otherwise known as repricing. If your lender comes back with an offer, it will normally be better than your current one. You can then compare this offer with offers from other lenders to see whether you should switch or stay put.
Lock-in and Clawback Periods
When you take up a housing loan, there may be a lock-in period where your mortgage lender will charge you a penalty fee, normally a percentage of your outstanding loan amount, if you were to fully repay your housing loan. Almost all mortgages also come with a clawback period where the lender will claim back “freebies”, such as legal expenses, that they “gave” you when you take up your home loan (Note: lock-in period is separate from clawback period). It may not be valuable for you to refinance due to such costs.
Loan Quantum
The larger your mortgage amount, the greater your savings for the same reduction in interest rates. For example, 1% on a loan of S$100,000 is much less than 1% on a loan of S$500,000. However, fixed cost to refinancing, which represents mainly of legal fees, do not vary much with loan quantum. The difference between your current and refinancing interest rates, therefore, has to be bigger for a comparatively smaller home loan as fixed cost eats into a more substantial portion of your interest rate savings.
Perceived Interest Rate Movements
Your view on how interest rates is moving can be a factor when considering whether you should refinance. If you are presently on a fixed rate package and think interest rates are dropping, you may want to refinance to a floating rate package. Conversely, if you are on floating rates and believe interest rates are skyrocketing, shifting to fixed rates may be a solid choice.
Individual Financial Assessment
If there is a change in your financial state, you may want to change your package details via refinancing. For example, you are starting your own business and do not want unpredictability in other areas. Give some thought to taking up a fixed rate package. Maybe you want cash to invest in another place. Consider increasing your loan quantum. Or your monthly income has increased and you want to reduce interest loan payments. Contemplate reducing your loan tenure.
Consider calling us today if you are looking for refinancing in Singapore. We can save you a lot of money plus give you the latest advice all for free.
Find out more about a premier Housing Loan advisory firm, providing Housing Loans with free mortgage broking.
Reinvest Your Home
Posted by Pamela Smith in Currency & Finance on January 6th, 2010
Most of the people don’t know that take can change their loan to other investor; others are simply dismissive. They tend to be loyal with their very first lender but they don’t know that such loyalty will bring higher interest rates. Because of increasing number of housing loans and amortization period, the interest can range from thousands to hundreds of thousands of money. Below are some considerations when reinvesting your home.
Latest Interest Rate
If your latest interest rate is higher than other housing loan packages, consider reinvesting. Ask your bank or financial institution to reprice your loan package. Your lender might give you an offer. Make a comparison between this offer and with offers from other lenders to see whether you should switch or stay put.
Lock-in and Clawback Time Periods
Lock-in period is when your lender give you a penalty if you want to fully repay your loan. Most of housing loans have a clawback period wherein the lender will claim back “giveaways”, such as legal subsidies, that they “gave” you when you take up your housing loan. Lock-in period and clawback period are different from each other. Thus, it is not advisable for you to reinvest due to these extra costs.
Loan Quantum
The higher the amount of your loan, the greater your savings for the same decrease in interest rates will be. However, fixed cost to reinvesting, which comprises mainly of legal fees, does not vary much with loan quantum. The difference between your current and reinvesting interest rates has to be larger for a relatively lower loan as fixed cost consumes into a more considerable portion of your interest rate savings.
Distinguish Interest Rate Movements
Analyze how interest rates flow. Try a floating rate package as an alternative to fixed rate package if the interest rates are decreasing. However, if you are on floating rates, try to switch in fixed rates if the interest rates are increasing.
Personal Financial Evaluation
If your financial state changed, consider reinvesting. Give some thought to take fixed rate package. Think of increasing your loan quantum. On the other hand, if your monthly income has increased and you want to lower interest payments, think of reducing your loan tenure.
Learn more about a premier Housing Loan advisory firm, providing Housing Loans with free mortgage broking.
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