Industry players expect more homeowners to refinance their mortgage loans

Industry watchers expect more home owners to consider refinancing their mortgage loans as interest rates look set to dip further.

In fact, mortgage and financial planning firm SingCapital has seen a three-fold jump in enquiries in the last two months.

Property agents are also getting a crash course in mortgage planning, including answering questions about refinancing of home loans.

This occurs when homeowners seek out more favourable loan packages from other lenders.

Industry players said it’s the right time to refinance, which could save a huge amount in interest payments.

Alfred Chia, CEO of SingCapital, said: “Just from last year itself, interest rate could be as high as four per cent, compared to current rates where the average is about 2.5 per cent per annum. There’s a big difference over there. Based on what we can see, interest rates will continue to fall, till the next six months.”

Market watchers expect interest rates to fall a further half a percentage point in the Singapore Interbank Offered Rate or SIBOR by September.

It’s partly linked to the recent cuts in US interest rates to contain the fallout from the sub-prime crisis.

SingCapital said it receives about 60 enquiries on refinancing each month.

Among these, seven in ten are private property owners.

Banks have also been enticing more customers with Maybank, Standard Chartered Bank and DBS among the most aggressive in the home loans market.

Mr Chia added: “There’re some packages currently that offer 2.88 fixed for three years with a cash back of one percent. If it’s a refinancing case, the one percent cash back would be given to the owners one month after the loans is disbursed.

“So if you add this interest rate, minus the cash rebates, the cumulative rate is only seven over percent, on average every year it’s about 2.5 or 2.6 per cent interest.

“And it gives you the stability to plan for other finances, knowing that your monthly instalment for the house is going to be fixed at that price for the next three years.

Even though this may look like a good time to consider refinancing mortgage loans, industry players said home owners should assess the different packages based on their individual needs.

They should also be aware of the potential risks arising from the US sub-prime crisis and inflation.

Source : Channel NewsAsia – 24 Mar 2008

Not to Do(s) When Financing / Refinancing

If you are looking to finance or refinance your home, here are a few things NOT TO DO:

Don’t Kick The Tires. How much you put down, credit affects your interest rate. It drives lenders crazy to pick up the phone and be asked what their best rate is. How much you put down on your home and how good your credit is directly affecting the interest rate on your loan. You can shop for rates, but be prepared to spend time on the phone or in person providing your lender with enough information to give you an intelligent answer.

Don’t Lie On Your Application. Some borrowers lie. They inflate their income, deny credit problems, and minimize debts like car and school loans. Be sure you tell your lender about any credit problems you have. The lender has to verify your income, debts and credit score, so everything will come out in the end. If you lie, you just end up looking bad, and you could go to jail for fraud.

Don’t Expect Your Lender To Drop Everything And Work On Your Loan. Good lenders are busy working on hundreds of other loan applications. Don’t assume yours will immediately rise to the top of the pile. If you have a short window of time, ask the lender if he or she can get your loan done faster. If the answer is no, find someone else.

Don’t “Play The Float”. Most borrowers don’t understand how a rate lock works. A fixed rate is a commitment by the lender to lock in a specific interest rate for a specific period of time. If you wait to lock in, hoping rates will go down, and they go up, you are out of luck.

Don’t Listen Selectively. Lenders complain that they explain things to borrowers who choose not to hear them. While it’s true that some of these concept are a little difficult, you should tune in and listen to everything the lenders tells you. Write it down if you have to. If the lender tells you they need certain documents, provide them. If you don’t, you could find that your application drops to the bottom of the stack.