Article
Repricing incurs less administrative fees and hassle compared to refinancing.
Your source and stability of income affect the amount of loan you receive.
Loan structures change when you extend the loan tenure. You may want to change the loan structure depending on your housing needs and action plan.
Summary
The most important factors to consider in the letter of offer are the rates and how long the promotion amount lasts. The lock-in period is when you receive favourable rates but cannot do refinancing or repricing without a penalty. Once the lock-in period ends, the rates will rise.
1: Refinancing versus repricing
When you do refinancing, you will need to change the bank which incurs more administrative fees. However, if you are repricing, you can check with your bank to find out the current promotion rates. Repricing will involve another contract with a lock-in period at either floating or fixed rates but will incur considerably less administrative fees. The reason why refinancing is more often advertised is that refinancing, not repricing, earns them a referral fee. During this time, you should also check whether your letter of offer includes one-time-free conversion or one-time-free repricing.
2: Credit card
Previously, taking mortgage loans required you to produce credit card statements. Now, loan approval simply requires bankers to check with the Credit Bureau how much is on loan. Most importantly, simple decisions like taking up interest-free instalments on your TV will affect your loan amount. Having a stable income is important if you are taking a mortgage loan. If you are self-employed or receiving an allowance/commission, the bank will only take into consideration 70% of the income. If you are employed, the bank will take into consideration 100% of the income.
3: Loan structures
The most common bank loan structure is capped at 75% of the flat value, with a cash down payment of 5% and a remaining cash/CPF payment of 20%. Loan tenure is up to 65 years old or a maximum of 30 years. However, there is another bank loan structure for older customers who want to extend their loan tenure. Once the loan tenure is increased, the loan amount decreases to 55% of the flat value instead of 75%, while the cash down payment increases to 10%. Some of the older customers do not require 75% loan and may prefer the second calculation instead. Bankers do not know your housing and action plan, and will not advise you on the loan structure. In this respect, having a consultant to advise on your action plan and choice of loan will make a difference.