What refinancing means
Refinancing moves your home loan from your current bank to a new one, usually to get a lower interest rate once your lock-in period ends. The lock-in period is the first few years of a package, during which repaying or switching the loan costs a penalty on the amount redeemed. Cashew compares refinancing packages from all major banks for private property, HDB flats and commercial property.
Legal and valuation subsidies
Refinancing redeems your existing loan and registers a new mortgage, which is legal work that must be done by a conveyancing lawyer. The new bank also values your property. Together these usually cost $2,000 to $3,000. Many banks offer a legal and valuation subsidy that covers most or all of this on loans above $250,000. See conveyancing fees for what the legal work involves.
Clawbacks and lock-in penalties
A subsidy is not free money: if you redeem the loan within a set period, the bank can claw it back. Before you switch, check two things on your current loan: whether you are still in the lock-in period, and whether a clawback period on your old subsidy has ended. Leaving inside either one can wipe out the savings from a lower rate.
A typical refinancing timeline
- About four months before your lock-in ends: compare offers and check your clawback period.
- Apply to the new bank: it checks your income and debts and issues a Letter of Offer, the binding loan offer.
- Give notice: most banks ask for around three months notice before you redeem the loan.
- Completion: the lawyers pay off your old loan with the new one, and your new rate starts.
Repricing or refinancing?
Repricing moves you to a new package with your current bank. It is simpler and usually needs no lawyer, but you only see one bank's offers. Refinancing opens up every bank, which can unlock a better rate, at the cost of legal work and a valuation. We compare both, including the costs, so you can see which one leaves you better off.
Refinancing an HDB loan
HDB loan borrowers can refinance to a bank loan too, often at a lower rate, but cannot switch back to HDB afterwards. Read refinancing an HDB loan to a bank loan first, and follow the benchmark most floating packages use on our SORA rates page.
