With the implementation of cooling measures such as the Total Debt Servicing Ratio (TDSR) and buyer’s / seller’s stamp duties, buyer's purchasing power and seller's willingness to sell has been greatly constricted, causing a drastic drop in transaction volume and new home loan sales.
Developers, real estate agencies and banks are feeling the chill from the slowdown while the recent oil price and stock market correction has further dampen sentiment. Rentals are in correction mode with the impeding supply of new flats and condos, giving consumers plenty of options and choices to choose from, hence it is absolutely necessary for home owners to keep an active tab on their costs to maximise their rental yield.
The simplest strategy of all is to monitor and refinance your mortgage as soon as it’s due. The life cycle for refinancing typically ranges from 2 - 5 years depending on the choice of package that you took up.
What is Refinancing?
Refinancing is the transferring of your existing mortgage loan to another bank. Most of the time, it makes money sense to refinance as the promotional honeymoon rates are typically only applicable in the initial few years period.
With the exemptions of TDSR introduced since February 2014, home owners and property investors will face less restrictions in refinancing their residential home loans with waivers and higher TDSR limits if they have purchased their properties before 29 June 2013.
Home owners and investors who have purchased properties for investment and face TDSR restrictions may also apply debt reduction plan waivers to qualify for the refinancing of their investment property mortgages.
Benefits of refinancing?
Let’s that a look at an illustration below:
Loan Amount: $800,000
Tenure: Remaining 28 years
Current Interest Rate: 2.5%
Monthly Repayments: $3313.11
Principal Repayments: $1646.44
New Interest Rate: 1.65%
Monthly Repayments: $2974.76
Principal Repayments: $1874.76
Monthly Savings: $566.67/month
Yearly Savings: ~$6800.04
In addition, banks may also provide subsidies to help offset your cost. Contact us for a full discussion today.