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Excerpts from HSBC Webinar

HSBC Webinar: Understanding The Impact of Refinancing Your Home Loan

Different types of interest rates impact your mortgages differently. As Singapore transitions to Singapore Overnight Rate Average (SORA), your home loan might be affected too.

FinanceDIY invited Ms Teresa Lim from HSBC bank, on 11th November, to share with our clients on how to save more interest on your home loan, and insights for your mortgage options.  

Teresa Lim (Teresa) has been in the Banking industry for 18 years and has been a Mortgage Banker with HSBC for 13 years. Prior to joining the banking industry, Teresa Lim was a Tax Officer with IRAS for 4 years. She has great knowledge and passion in Mortgage and will definitely bring a wealth of experience in helping her business partners and clients find suitable mortgage products, based on their needs.

Excerpts from the Webinar : Understanding The Impact of Refinancing Your Home Loan

SORA is the volume-weighted average rate of borrowing transactions in the unsecured overnight interbank SGD cash market in Singapore, between 8pm and 6.15pm. Every business day in Singapore, reporting banks will provide data on all eligible transactions traded and booked between the said window. Then the Monetary Authority of Singapore (MAS) will conduct data validation checks and determine SORA, which will be published on the MAS website the next business day at 9am.

Singapore Dollar Swap Offer Rate (SOR) will be discontinued after June 30, 2023; while the six-month Singapore Interbank Offered Rate (SIBOR) will cease publication after Mar 31, 2022; and the one-month and three-month SIBOR after Dec 31, 2024. This means that SORA will replace SOR and SIBOR as the key interest rate benchmark for the Singapore Dollar (SGD) financial markets in 2025.

However, SORA will only affect your home mortgage if you’re using floating rate mortgages. If you have signed up for a fixed rate home loan, you will still continue paying the same rates.

How Will Refinancing Impact Your Interest and Loan Tenure?

Refinancing is the replacement of an existing debt obligation, with another debt obligation under a different term, usually for interest rate savings.

There are many benefits of refinancing your house mortgage, namely lower interest rates, reduced monthly payments, reduced mortgage tenure, as well as access equity in your home. Typically, our customers choose to refinance for lower interest rates, or to use their home’s equity to pay for home improvements, consolidate high-interest rate debt, or cover major expenses.

Refinancing, if done right, will potentially help you save a lot of money on interests. For example, let’s say Mr. Tan has an outstanding home loan of $400,000 with about 20 years left, and his current interest rate is 2.50%. That means his monthly repayment is approximately $2,120.

Assuming that the bank offers Mr Tan a home loan package of 1.15% fixed rate for the first 2 years, and he decides to take it up, he will only need to pay $1867 every month. That means Mr Tan will save $253 every month, $3,036 a year and $6,072 after 2 years!

However, it is important to note that you might incur some costs when refinancing your home loans. This will depend on whether your loan has a lock-in period. For example, if your current home loan has a lock-in period of three years, and cash rebates were provided when you sign up, there could possibly be early redemption penalties or claw back of cash rebates if you decide to refinance your loan during the first three years of your loan. So you need to be clear of the terms and conditions of your home mortgage before refinancing it.

At HSBC, we are proud to offer a smart mortgage that allows our customers to link their home loan account with a current account, reducing their mortgage interest by offsetting interest earned in the current account.

We also offer our customers a free conversion so they have the freedom to choose whether they want a fixed rate home loan or a SORA-pegged loan (floating rate loan), even during the home tenure. In other words, with HSBC’s SmartMortgage, if you decide halfway through your loan tenure that a SORA-pegged loan offers lower interest rate than a fixed rate home loan, you can convert your loan for free, with terms applied.

Why Should I Apply Through FinanceDIY?

FinanceDIY has many experienced home loan consultants, and we work with multiple banks to help you get competitive valuations and the lowest loan rates efficiently, so you can make an offer on a hot property.

You can also get up to $3,000* cash incentives + $250 cashback on successful loans, which can be directed to your home improvement or other expenditures instead!

Interested to know more?

Email (best way to reach us): [email protected]

WhatsApp: +65 9151 5963 (Mon to Fri: 9am – 5pm)

Posted in Home Loan, Webinar

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