Sweetangtang
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Naturally you wouldn't switch from a HDB loan to a bank loan unless you could lower your interest costs more than a few dollars.
The same basic scenario can apply with resale units. Let's suppose you buy a resale HDB unit with a HDB loan, but then...surprise! Your family is growing, and you or your spouse give birth to twins. Maybe your existing HDB unit isn't big enough, and maybe you can afford a bigger one, fairly soon anyway. So you decide you'll do the best you can for 2 or 3 years, but in the meantime you refinance with a lower interest bank loan to save some money for the babies. In other words, if you know you're going to sell your home within a couple years, that's one great time to take a look at mortgage refinancing with a bank. Really any scenario involving sale of the property in about 3 years (or less) works fine, because that's within the available bank loan's fixed interest rate period.
I think it's important to understand what the impact of a possible rate increase is. Let's suppose that you're financing $500,000 at 2.6% interest for 25 years. If my particular mortgage calculator is correct, that should be $2,264.81 per month.
OK, you make payments for a few years, then you decide to refinance $450,000 with a bank at 1.8% interest for 21 years with a 3 year rate lock. Now your payment is $2,144.33 per month. OK, now with about $400,000 and about 17 years to go the interest rate zooms up to 4.0%. Now your monthly payment shoots up to ~$2,698.84. These numbers are only very rough, but you get the basic idea, hopefully. When the interest rate increases you can get a fairly substantial increase in the monthly payment amount. (I picked 4.0% because that's probably right about at the level where the bank rate could be while the HDB loan rate is still at 2.6% and OA interest rate still at 2.5%. Above about 4.0% I think we'd start to see OA and HDB loan interest rates rise.)
Of course if that higher monthly payment is troublesome, one solution that may be available is to refinance to stretch out the loan term. (Maybe.)
Anyway, you can and should play with these numbers in your particular situation, but the basic idea is that you should be prepared for the possibility that a bank loan repayment amount could rise fairly significantly after the fixed interest rate period. And if your general reaction is something like, "$2264 rising to $2698? I can live with that," and if the interest cost savings is decent enough, then maybe refinancing with a bank for a lower interest rate is right for you.
Thanks BBCW for the enlightenment! It is because the loan duration is long, there is a lot of uncertainty in the interest rate though it is very attractive now to go with bank loan as the interest rate is as low as 1.2% but no one knows when this low interest rate will last and if it really increases to 4% after 3 years, I will be stuck for my remaining loan unless I refinance it. So I guess it really depends on individual preference, affordability and the risk appetite. Not sure if it makes sense to use OA to wipe off part of the purchase price and reduce the loan amount so I can save some of the 2.6% hdb loan and AI assuming I use cash to service the now lower monthly loan, or transfer OA to SA to earn 4% and use cpf to service the remaining hdb loan?