Compare the average interest rate within the lock in period
We tend to love header front page rates. Forget header rates, compare the mean average rate within the lock-in period or 1st 3 years average.
Compare the lock in period
The lock in period typically varies between 1 to 3 years depending on your needs and investment horizon. Some may allow partial prepayments for added flexibility.
Compare the reference interest rate reference
Mortgages are typically pegged to 3 main stream of interest rate reference mechanism – Board Rate/Fixed Deposit Pegged, Sibor Pegged and Fixed Rates. Varying interest rate references could have varying fluctuating characteristics, Sibor would offer absolute transparency while fixed rates would absolute certainty and fixed deposit pegged/board rate packages may offer varying degree of stability.
Compute the one time transfer cost
Refinancing your mortgage will entail a one-time transfer cost like legal and valuation fees. Compute your cost and breakeven points.
Compare the thereafter rates
While thereafter rates are generally of low importance, it could highly favour clients who are aging or have low outstanding balances on their mortgage as they face increasing difficulties either due to income factors or cost break-even hurdles when they try to refinance again few years down the road.
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