Repricing vs Refinance Home Loan: How to Tell Them Apart

Repricing and refinancing both aim to lower the interest rate and monthly repayment amount of a home loan.

The key difference is: repricing means getting a new home loan with the same bank, while refinancing home loan means switching your existing home loan to a new one with a different financial institution.

Take a look at the table below for the detailed comparison.

What’s the Difference Between Them?

Here’s a table outlining other differences between the loans:

Repricing will cost you less. It requires that you pay a fixed conversion/admin fee of between S$200 and S$800, depending on the financial institution. Some banks charge as much as S$1,000. Meanwhile, refinancing demands that you pay legal and valuation fees to your new bank. 

Home loan refinancing involves conveyancing since your original bank has to release your property’s title deed to use it in the financial institution you’re looking to refinance. Here’s where the legal fees are charged. An HDB property’s price is S$1,500, while a private property is S$1,800 to S$2,000.

The bank you’d like to refinance generates a valuation report for refinancing reasons and depending on your property’s market value. An HDB property’s valuation fee is S$150 to S$200, while a private property is S$150 to S$700.

You’ll also have to pay 1.5% of your outstanding loan amount to your original bank if you haven’t met the lock-in duration of 1-3 years. Lock-in periods are a duration in which you’ll have to pay the penalty if you’d like to end your home loan earlier than agreed.

Which Option Should You Choose?

Your suitable option depends on your situation:

Who Should Go for Reprising?

Many Singaporeans choose home loan repricing when their risk profile decreases. As such, it’s ideal for home owners if they wish to enjoy savings and receive a home loan package that matches your changing requirements.

Reprising Strengths and Limitations

Here are some of its strengths and weak points that you should know:

For strengths:

• You don’t have to switch accounts- you simply change the loan’s terms and conditions.
• Repricing fees are more affordable- your bank will only charge you an admin fee ranging from S$500 to S$1,000.
• It has a shorter loan tenure- reprising takes a month or less, depending on your bank.
• You feel more at home- you’re working with a bank you’re used to but under improved terms.

For limitation:

• It limits variety- since you’re working with the same bank, you never know what sweeter deals await you elsewhere.

Who Should Go for Refinancing?

Refinancing enables homeowners to close their home loan account and open another one in a different bank. Many financial institutions support this, mostly for Singaporeans whose financial standing has improved and who are eligible for a low-interest loan.

It’s a perfect fit for you if you seek a better deal on your home loan. Banks that offer it work round the clock to ensure you receive it on time.

Refinancing Strengths and Limitations

For strengths:

• Lower monthly payments- when you refinance with a loan that has lower interest rate, you can enjoy a lower monthly obligation. 
• It brings something new to the table- a new bank means new features and bank loan opportunities.

For limitations:

• It’s tedious- moving from one bank to another is an involving process.
• It’s costly- there’s so much involved, so you’ll have to part with lots of cash: Specifically legal fees of between S$2,000-S$3,000. And a penalty fee that typically amounts to 1.5% of your outstanding loan if you refinance before your lock-in duration is over.
• Refinancing takes longer- you’ll have to wait 3-4 months before it materializes, depending on the financial institution.
• You start from scratch- you’ll have to set up a new loan account with it, which might take a while, depending on your experience.

NB: Refinancing can also mean shifting your HDB home loan from HDB to a bank home loan instead. Refinancing to a bank home loan enables you to save on interest charges. This is because an HDB home loan interest is pegged to your CPF OA interest rate.

An HDB home loan interest rate is always 0.1 percent above the CPF OA interest rate, which is 0.1% + 2.5% currently= 2.6% (this figure may change if the CPF OA interest rate changes).

A bank home loan in Singapore is always averagely at least 1.5-1.8 percent fixed for HDB properties in the long-term. 

See Also: Maximum HDB Loan Guide and HDB Income Ceiling

Things to Consider

The following are some of the aspects you should consider as you compare refinancing vs repricing:

• Special features – some awesome features that most banks offer over other banks are changing to another interest rate package free of charge, making partial payment minus penalty, and penalty waivers when you sell your property.
• Fresh funds promotion – banks usually run promotions connected to their mortgage for new funds to attract a massive depositor base. Some of these promotions include a priority or privileged relationship with the bank and a lower housing loan interest rate package.
• Interest offset mortgage accounts – these accounts function like savings accounts. However, they earn you high-interest rates that match your home loan interest rate.
• Loan tenure – shorter loan tenures mean higher monthly loan installments but lower overall interest costs. The reverse is also applicable: A longer loan tenure equals more reduced monthly installments but higher overall interest costs.
• Your age – your age determines how much you can borrow (Loan to Value Limit). Consider picking a mortgage loan you can repay within your active employment age. The earlier you consider borrowing the better, as long as you’re within the accepted age limit and you have a stable source of income.

Final Word

While refinancing is a more straightforward option, repricing typically offers more attractive interest rates. However, repricing might be more costly in terms of legal and valuation costs. One simple way you can determine what option is beneficial for you is by comparing how much savings you can get from the two. 

But no matter what option you’ll choose, make sure to reprise or refinance after the locked-in period (if any). 

Key Takeaways

• Repricing and refinancing home loans help homeowners save money. They can switch their home loans for others with lower interest rates.
• Repricing loans are generally less involved than refinancing loans. They’re ideal for you if you’d like to enjoy savings and a home loan package that suits your changing requirements.
• It’s wiser to take either refinancing or repricing loans before your lock-in period is over (1 month prior for repricing and 3-6 months for refinancing) to avoid incurring extra costs, especially with refinancing loans.

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