In Singapore, most of you will take a property mortgage loan for your property purchase.
Be it HDB flats or private property.
Why should you restructure your property housing loan now and then?
There are a few possibilities.
1. You want to reduce your monthly instalment.
2. You want to save some interest.
3. You want to cash out for some emergency usage.
4. You want to maximise your investment.
Reducing your monthly instalment.
Why do you want to reduce your instalment?
1. You have extra funds.
Simple, make a partial lump-sum payment, reduce the remaining principal of the loan amount, your monthly instalment will reduce quite significantly.
2. Your incomes reduce
Nobody will know when you will face financial difficulty, pay cut etc....
If you do, the following may be a good tip for you to tide through your difficult times.
Let’s take look at the example below.
John has a private condominium, he has an outstanding loan of S$491K and a balance of 10 years to pay off his loan. He is now 40 years old. His income has reduced from S$9,000 to S$7,500 monthly. Currently, he is serving an instalment of S$4,552 monthly at a fixed interest of 2% per annum. He needs to reduce his monthly instalment.
Let’s assume the interest rate remains the same, John needs to extend his tenure of the loan to reduce his monthly instalment.
John is 40 years old, he can extend the tenure of his loan till his age of 75 years old of a maximum loan tenure of 30 years.
He chose to refinance for a 20 years loan tenure.
Existing monthly instalment: S$4,552.
Refinance on outstanding loan: S$491,000
Interest rate: 2%
The new monthly instalment will be reduced to S$2,484.
The reduces of S$2,068 (S$4,552 - S$2,484) give a great relieve for John
The set back is John will have to pay more interest to his property due to the extension of the loan tenure.
Savings on interest when the interest rate reduced.
The bank interest rates change according to the markets sentiments.
Singapore bank interest rates track the US.
So if the interest rate reduces, you are strongly recommended to refinance your property to a lower interest rate, and this will save you a sum of interest.
The following scenarios will give you a clearer picture.
Jane is 45 years old and she has a 5 room HDB flat in Kim Tian Road, taking a HDB loan with an outstanding loan S$470K, with balance tenure of 20 years. She has a monthly income of S$9,000.
She is now servicing her loan at a monthly instalment of S$2,522 at an interest rate of 2.6%
Now, the commercial bank market interest reduces to around 1.7%.
Jane decides to refinance her mortgage loan at a lower interest rate with the remaining tenure of 20 years.
Refinance mortgage loan: S$470,000
Interest rate: 1.7%
New monthly instalment amount: S$2,311
She saves S$211 ( S$2,522 - S$2,311) monthly with the new interest rate.
For 20 years, she will save up to S$50,604 if the rate remains