What Are the Costs of Refinancing a Home Loan in Singapore?
1. Legal Fees ($1,800 – $2,500 depending on loan outstanding)
- You need to engage a law firm to handle the legal work, including discharging your existing loan and setting up the new mortgage.
- Some banks offer subsidies on legal fees or cash rebates to attract new customers.
2. Valuation Fees ($200 – $700 depending on the scale of the valuation of the property)
- The new bank requires a fresh property valuation to assess your home’s current market value before approving the loan.
- The valuation cost depends on the type of property (HDB, condo, landed property) as well as the valuation of the property.
3. Prepayment Penalty (If Still Under Lock-In Period: 1.5% of Loan Amount)
- If your current loan is still under a lock-in period, refinancing early might trigger a prepayment penalty (usually 1.5% of the outstanding loan).
- If you’re past the lock-in period, no penalty applies.
4. Fire Insurance & Mortgage Insurance Transfer Fees (estimated in excess of $100 per year depending on fire replacement value, type of property)
- Some banks require you to take up a new fire insurance policy when switching lenders.
5. Cash Out Refinancing (If Applicable: Additional Costs & TDSR Considerations)
- If you opt for cash-out refinancing, where you unlock home equity, you might incur higher legal costs.
Given These Costs, Why Refinance Instead of Repricing?
Why Refinancing Can Be Better Than Repricing:
Lower Interest Rates – Banks attract new customers with better rates than they offer for repricing existing customers. If a competing bank offers lower rates, refinancing could lead to savings over time.
More Competitive Loan Packages – New lenders often provide better loan structures, such as:
- Lower spreads on floating rates
- Fixed-rate options with lower interest for the first few years
- More flexible repayment terms
- Free conversion of package
- Waiver of penalty due to sale of property
Bank Subsidies for Refinancing Costs – Many banks offer cash rebates or subsidies (e.g., legal fee waivers) to offset the cost of refinancing, making the switch cost-effective.
Unlock Equity Through Cash-Out Refinancing – Refinancing lets you tap into home equity, which can be useful for funding investments, renovations, consolidation of debt or other financial goals.
When Should You Reprice Instead of Refinance?
Repricing may be the better option if:
- Your existing bank is offering a competitive rate close to the market rate.
- You are still within a lock-in period and the penalty for refinancing outweighs the benefits.
- You prefer less paperwork since repricing requires minimal documentation.
- You don’t qualify for refinancing due to TDSR (Total Debt Servicing Ratio) restrictions.
Final Verdict: Should You Refinance or Reprice?
Refinance if:
✔️ You want better interest rates and more attractive mortgage terms.
✔️ The cost of refinancing is covered by bank subsidies or offset by future savings.
✔️ You are planning to stay in your property long enough to enjoy the benefits.
✔️ You want to unlock cash through cash-out refinancing.
Reprice if:
✔️ Your current bank offers a competitive package with minimal hassle.
✔️ You are still in a lock-in period, making refinancing costly.
✔️ Your loan balance is small, and savings from refinancing are not significant.
Conclusion
Refinancing a home loan in Singapore comes with costs, but it can offer significant long-term savings compared to repricing. Before deciding, always compare rates, check refinancing promotions, and calculate your total cost savings. If you’re unsure, consult a mortgage expert or use an online mortgage comparison tool like IQrate to make an informed decision.
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