- Refinancing replaces your existing mortgage with a new loan from another lender.
- A lawyer must handle the discharge and new mortgage where a bank loan is involved.
- Redemption notice is typically given two to three months before the redemption date.
- Redeeming during a lock-in period can trigger early repayment penalties.
What refinancing involves
Refinancing replaces your current mortgage with a new loan, usually to get a better interest rate or different terms. The new bank pays off the old loan, and the old bank's mortgage over your property is discharged and replaced with the new bank's mortgage.
Because the mortgage is registered against the title, the change has to be properly documented and lodged. Where a bank loan is involved, appointing a lawyer is required, whether the property is an HDB flat, a condominium or a landed home.
Choosing a lawyer
Banks will only proceed with a lawyer on their approved panel, so the new bank will usually suggest firms from its panel. New banks often subsidise part of the legal fees for a refinancing, so check the terms of the loan offer.
The steps
In outline, a refinancing usually runs like this:
- You accept the new bank's loan offer and appoint a lawyer.
- Notice is given to your existing bank that you intend to redeem the loan, typically two to three months before the redemption date, depending on the bank's terms.
- The lawyer obtains the redemption figure and prepares the discharge of the old mortgage and the new mortgage documents.
- On the redemption date, the new bank releases the funds to repay the old loan.
- The lawyer lodges the discharge and the new mortgage with the Singapore Land Authority.
One firm puts the whole process at typically four to eight weeks once things are under way, depending on the banks.
Lock-in periods and penalties
Many home loans have a lock-in period, commonly one to three years. Redeeming the loan during that period can trigger an early repayment penalty under the loan agreement, which may cancel out the savings from a lower rate. After the lock-in ends, the loan can generally be redeemed without that penalty. Read your existing loan agreement, including the notice requirements, before you commit to a new bank.
Using CPF
If you use CPF savings towards the loan, the bank's approval and the CPF Board's processes are involved, and your lawyer will deal with the CPF paperwork as part of the transaction.
Refinancing is often straightforward, but the timing, lock-in and fee subsidy terms all affect whether it is worthwhile. A lawyer can explain the legal steps and costs for your loan.
This article is general information on Singapore law and is not legal advice. Rules and agency policies change, and every situation is different. For advice on your own circumstances, speak with one of our lawyers.
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