Step-by-Step Guide to Refinancing Your Home Loan

Step 1: Review Your Current Loan Details

Start by pulling out the details of your existing home loan. You need to know: What is your current interest rate and is it floating or fixed? How much is the outstanding loan amount and remaining tenure? Crucially, note if you are in a lock-in period, and if so, when it ends and what the penalty is for early redemption. Also, check if there’s a clawback on subsidies (for example, did you get a legal subsidy that requires you to stay X years?). This information is usually in the loan facility letter or terms. Understanding where you stand helps determine if now is the right time to refinance. For instance, if you’re 6 months away from your lock-in expiring, you can start the process now because by the time the new loan kicks in, you’ll be free. If you’re smack in the middle of a lock-in, you’ll likely wait, unless the interest savings clearly outweigh the penalty. Calculate your current interest rate vs. market rates: are you paying, say, 2.5% while new loans are 1.8%? That’s a sign to explore refinancing.

Step 2: Check Your Credit and Finances

Refinancing essentially means applying for a new loan, so the bank will assess your creditworthiness afresh. It’s a good idea to ensure your credit report is clean (no overdue debts, no recent late payments on any loans or credit cards). In Singapore, you could purchase your credit report from CBS for a small fee, but if you’ve been prompt in payments, it should be okay. Also, think about any changes in your financial situation since you first took the loan: Is your income higher, lower, or stable? Any new debts? Under TDSR rules, it’s generally easier to refinance the same loan amount or lower (since you’ve been paying down the loan), but if your income dropped significantly, theoretically a bank could offer you less. This is rare for refinancing if you’ve kept up with payments, but ensure you still meet the requirements. Most of the time, refinancing is straightforward since you already qualified once, but just sanity-check your current debt/income. If you find any issues (like a surprise credit problem), you may fix those or approach a broker to advise on how to proceed.

Step 3: Compare Refinancing Offers

Just like when you chose your original loan, you should shop around for the best refinancing deal. Start looking about 2-3 months before you want to refinance (especially if timing with lock-in end). Use online comparison tools or consult a mortgage broker to see current interest rates from different banks. Focus on packages that suit your needs (fixed vs floating, lock-in preference, etc.). Since you already have a loan, you might now have a clearer idea of what you want – maybe you learned you prefer a fixed rate for peace of mind, or you want no lock-in next time. Look out for refinancing promotions: banks often have them, like cash rebates or legal fee subsidies, for refinancers. Shortlist the top 2 or 3 options with the lowest rates and good terms. Also, approach your current bank to ask if they have a retention offer (repricing). They might quote you something; even if you intend to leave, it’s good to have that info as a benchmark. Once you have the contenders, calculate the potential savings. For example, if Bank A offers 1.8% and Bank B 1.9% but Bank B gives a $2k subsidy and Bank A doesn’t, how does that net out? A broker can help make these comparisons easy. Ultimately, decide on the package that gives you the best value considering rate and any subsidies.

Step 4: Apply for the New Loan

After picking a lender/package, it’s application time. Applying to refinance is very similar to a new loan application, but often with less stress on timing (since you’re not chasing an OTP deadline). You’ll fill out the loan application form (or your broker will do much of it for you) and submit supporting documents: income documents (payslips, CPF contribution history for salaried employees, or Notice of Assessment for self-employed), proof of ownership of the property (like current loan statements or CPF Home Ownership page), and identification documents. The bank will also require a copy of your property’s current value; typically they will initiate a valuation. In many cases, the bank can do a desktop valuation first to give an indicative value. If everything looks good (and you meet TDSR/MSR, etc.), they’ll issue an In-Principle Approval for the refinancing loan. This can take 1-2 weeks, sometimes faster. Once approved, the bank will provide a Letter of Offer. Review it carefully – check the loan amount, interest rates, lock-in, any subsidies (should be stated that they’ll reimburse legal fees up to $X), and conditions (e.g., you must redeem existing loan by a certain date). If all in order, sign the Letter of Offer. Congratulations, you have a new loan lined up!

Step 5: Appoint a Lawyer and Complete Legal Work

With the new loan approved, you’ll engage a lawyer to handle the refinancing. If the bank has a panel of law firms, you’ll choose one (your broker can recommend or the bank might assign by default). The lawyer’s job is to discharge your old mortgage from Bank X and register the new mortgage with Bank Y. They’ll also liaise to draw down the new loan to pay off the old loan. Early on, the lawyer will ask you to sign a bunch of documents – the mortgage form, CPF withdrawal form (if you’re using CPF to pay for loan ongoing, etc.), and the deed of assignment, etc. You usually pay the lawyer first, then later, if the bank subsidy covers it, you’ll get reimbursed by the bank (some banks offset the subsidy directly with the firm too). The lawyer will inform your existing bank that you intend to redeem the loan and ask for a redemption statement, which outlines how much is needed to fully pay it off (principal + accrued interest up to the target redemption date). If you’re timing with lock-in expiry, they’ll likely set the redemption date to the day after your lock-in ends to avoid penalty. If any penalty or clawback does apply, that will be included in the redemption amount. About 1-2 days before the redemption, the new bank will disburse the loan to the lawyer’s account, who then pays off the old bank on redemption day. You might need to attend one more session at the law firm to complete any final paperwork or collect any documents. The CPF Board will also be notified if you’re refinancing; if you have been using CPF, it’s seamless – CPF just continues to be used for the new loan (you sign new deduction instructions as part of paperwork). Once the old loan is paid off, you’ll receive a discharge document (or your lawyer will) and your relationship with the old bank ends. The new bank’s mortgage is now in effect.

Step 6: Start Repaying the New Loan (and Enjoy the Savings!)

Your refinance is essentially done! Your new loan takes over from the agreed date, and going forward you’ll make your monthly payments to the new bank. Make sure to update any GIRO or CPF arrangements for the new loan (often part of the setup, but double-check that, for instance, your CPF contributions are now directed to pay the new bank). If you were paying by GIRO from a bank account, you’ll set up a new GIRO for the new bank’s loan. Typically, there might be a month where you pay the old bank pro-rated interest up to the switch date, and then the new bank interest from that date onwards. The schedule will be provided by the new bank. Now, importantly, take note of any lock-in period on the new loan and any new features. Set reminders for when this new loan’s fixed rate ends or when its lock-in ends, so you can rinse and repeat the process in the future if needed. But for now, pat yourself on the back – you successfully refinanced and likely reduced your mortgage costs. Maybe your monthly installment dropped, freeing up cash for other uses. Some people channel these savings to prepay the loan principal faster (you can consider doing that if no penalty, to finish the loan sooner).

A quick example to illustrate: Say you were paying $2,500/month on the old loan and the new loan is now $2,200/month. That’s $300 saved each month. Over a year, $3,600 saved. And maybe the legal cost was fully subsidized by the bank. That’s a tangible benefit for a bit of admin work over a few weeks – well worth it!

Refinancing can seem administrative, but as you see, it’s quite step-by-step. And if you use Cashew or another broker, we handle a lot of the coordination, reminding you of what to do when, so it’s even more painless. The key takeaway: don’t be afraid to refinance if there are real savings on the table. It’s a normal part of managing a home loan in Singapore. By following this guide, you’ve demystified the process. Now you can share with your friends how easy it is to refinance and save money, and of course, enjoy the extra cash or shorter loan tenure you’ve gained from your smart move!