Refinancing vs Repricing Your Mortgage in Singapore

Navigating the intricacies of refinancing and repricing your mortgage is a critical aspect of managing home loans in Singapore. For homeowners, understanding these options can lead to significant savings and more favourable loan terms. With the dynamic nature of interest rates and the diverse mortgage products available, being informed about both routes is essential for optimising your financial commitments.

Understanding Refinancing and Repricing

Refinancing means moving your home loan to a different bank. Because it is by definition a switch away from your current lender, your existing bank will never appear in a refinancing proposal. Any package you see when you compare refinancing options is an offer from a competing bank.

This is precisely what makes refinancing worth exploring. It opens your loan up to the whole market rather than the single package your current bank happens to put in front of you, which means you can move to the most competitive rate available at that point in time. Banks compete hardest for new customers, so the sharpest pricing tends to sit with the lenders you are not currently with.

Repricing, on the other hand, means staying with your current bank and moving to a new interest rate package that it offers. Your existing bank will not be quoted to you as part of a refinancing comparison, so if you want to know what it is willing to offer, you need to approach it directly and ask for a repricing quote.

In practice, this means a complete picture requires two steps: compare refinancing packages from other banks, and separately request a repricing offer from your own bank. Only then can you see both sides and decide which is better.

When Is the Right Time to Refinance?

The short answer: start looking about three months before your lock-in period ends.

Refinancing is not instant. Most banks require you to serve a notice period of around three months before you redeem your existing loan, and the new bank needs time to process your application, arrange valuation and complete the legal work. Starting three months ahead means the new package can take effect the moment your lock-in expires, with no gap where you are sitting on an expensive rate.

Leave it any later and the usual outcome is that your loan quietly rolls onto the bank's prevailing rate, which is often noticeably higher than the promotional rate you originally signed up for. Those extra months of interest can wipe out much of the saving you were refinancing to capture in the first place.

So the practical timeline looks like this:

• Around three months before lock-in ends: start comparing packages across banks and request a repricing quote from your existing bank at the same time.
• Once you have decided: submit your application to the new bank and serve notice to your existing one.
• On expiry of the lock-in: the new loan takes over, with no period spent on a default rate.

It is also worth reviewing earlier than this if rates have moved sharply in your favour, since in some cases the savings outweigh the penalty for exiting a lock-in early. That is a calculation worth running rather than assuming either way.

Refinancing or Repricing?

Repricing may be the better route if you want to avoid the costs of switching lenders, such as legal and valuation fees, or if your bank's offer is competitive enough to close the gap.

The potential savings can be substantial. Reducing your interest rate by just 0.5% on a $500,000 loan saves roughly $2,500 a year. However, these savings need to be weighed against the costs involved.

Costs and Considerations

Refinancing typically carries legal fees of around $2,000 to $3,000 and valuation fees of roughly $300 to $500, though some banks offer subsidies that offset part of this. Repricing usually involves only an administrative fee charged by your existing bank, which is why a slightly higher repricing rate can still work out cheaper over a two year period.

Also check whether your current loan carries a penalty for early redemption, as this can erode or eliminate the benefit of switching if it is not factored in.

Ultimately, the decision should rest on a full comparison: the best refinancing packages available from other banks, set against the repricing offer from your own. By requesting both and accounting for all costs, Singapore homeowners can make strategic decisions that genuinely improve their financial position.