HDB Loan with Bank - Refinancing

[tolong1]

My Father took loan (4 Room HDB) from Bank to purchase HDB flat when the Bank interest rate was low. Last month the HDB interest rate increased to 1M SIBOR (3.6250%) + 1.25% = 4.8750%

Now he left with around $60K loan, My father is close to 60 years and requested bank to lower interest rate. So the revised rate they offered is 2.8095% with two years lock in period

The interest rate is not locked but we have to lock in for two years for reduced rate from 4.875% to 2.8095%
My father wants to downgrade to 3 room HDB in an year time as his earning dropped also some health issues.

1) Can we get HDB loan lower than 2.8095% from bank without refinancing with another bank? Refinancing to another bank is costly and no bank wants to lend $60K loan which is small.

2) What other options my father have?

3) My father has around $35K in his CPF ordinary account. I think first $20K earns 4% interest in ordinary account balance $15K earns 2.5%. My mom has another $40K in her ordinary account. At present only my father is paying from CPF for housing. Should we close the loan account with bank by combining my Mom CPF and Dad CPF?

4) Any other options?

Thanks

 

[pohw0008]

I think the 2.8095 is refer to 3 month sora right?? Still need to add 1%?? The 3 month sora will raise to at least 3.7% 3 months later.. 4% is even possible in 2023..

 

[Jov1623]

My friend got at 3.8 locked 2 years too

 

[dork32]

My Father took loan (4 Room HDB) from Bank to purchase HDB flat when the Bank interest rate was low. Last month the HDB interest rate increased to 1M SIBOR (3.6250%) + 1.25% = 4.8750%

Now he left with around $60K loan, My father is close to 60 years and requested bank to lower interest rate. So the revised rate they offered is 2.8095% with two years lock in period

The interest rate is not locked but we have to lock in for two years for reduced rate from 4.875% to 2.8095%
My father wants to downgrade to 3 room HDB in an year time as his earning dropped also some health issues.

1) Can we get HDB loan lower than 2.8095% from bank without refinancing with another bank? Refinancing to another bank is costly and no bank wants to lend $60K loan which is small.

2) What other options my father have?

3) My father has around $35K in his CPF ordinary account. I think first $20K earns 4% interest in ordinary account balance $15K earns 2.5%. My mom has another $40K in her ordinary account. At present only my father is paying from CPF for housing. Should we close the loan account with bank by combining my Mom CPF and Dad CPF?

4) Any other options?

Thanks

2.8% is a fantastic rate now. it will be dumb not to take it. but do note. 2 years is a long time. if the rates drop then you xiao liao.

and if your dad has 60k or more ra + ma, the whole oa earns 2.5% and even if the oa is earning the addtional interest, the interest is not credited to the oa. it goes to the ra which cannot be used for the house

 

[pohw0008]

3) My father has around $35K in his CPF ordinary account. I think first $20K earns 4% interest in ordinary account balance $15K earns 2.5%. My mom has another $40K in her ordinary account. At present only my father is paying from CPF for housing. Should we close the loan account with bank by combining my Mom CPF and Dad CPF?

It's the combined cpf balance.. etc if your medisave account have $60k.. then the extra 1-2% can come from it.. don't need to be from OA.. you can check with cpf whether can use it to repay or not..

 

[BBCWatcher]

My Father took loan (4 Room HDB) from Bank to purchase HDB flat when the Bank interest rate was low. Last month the HDB interest rate increased to 1M SIBOR (3.6250%) + 1.25% = 4.8750%

Now he left with around $60K loan, My father is close to 60 years and requested bank to lower interest rate. So the revised rate they offered is 2.8095% with two years lock in period

The interest rate is not locked but we have to lock in for two years for reduced rate from 4.875% to 2.8095%
My father wants to downgrade to 3 room HDB in an year time as his earning dropped also some health issues.

1) Can we get HDB loan lower than 2.8095% from bank without refinancing with another bank? Refinancing to another bank is costly and no bank wants to lend $60K loan which is small.

That’s exactly right. At $60K he’s stuck with the current lender or could pay off the loan.

One option he may have with the current lender is to extend the current loan term, and (if possible) that would reduce the monthly payment.

3) My father has around $35K in his CPF ordinary account. I think first $20K earns 4% interest in ordinary account balance $15K earns 2.5%. My mom has another $40K in her ordinary account. At present only my father is paying from CPF for housing. Should we close the loan account with bank by combining my Mom CPF and Dad CPF?

That’s not a bad idea. As other posters have mentioned they’re probably not earning an extra 1% interest on their first $20K of OA. OA only factors into bonus interest computation when MA+SA+RA is less than $60,000.

4) Any other options?

Partial repayment is possible, for example he could pay $20,000 from his OA, drop the loan outstanding to $40K, and reprice that $40K with the current lender (and with a longer loan term if possible).

It’s hard to generalize because we don’t know how much liquidity they have. Obviously they should be able to use most of their remaining OA balances to pay off the rest of the loan, but would that mean they’d be left with too little liquid savings to handle other potential or actual needs? There’s not enough information to determine that, but that’s a key question.

Another concern: if they were to take this floating rate offer with a 2 year lock-in would they pay a penalty to the lender when they sell the home a year from now (because they’d break the 2 year lock)? Or is there an exception for a home sale? Obviously a home sale exception is desirable.

 

[mp4005 help]

just use their OA to pay off the loan.

you can always top up their CPF for retirement or give them allowance.
if you want , you can pay the $60k for your parents.

based on your parents age - you should be an adult.


Read HWZ Forum Rules!

 

[tolong1]

Thank you everyone for sharing your inputs. Appreciate.


I wrote to the bank. Here is there reply
Looks like very costly, even for closing the loan. One positive aspect is my father is not in Lock-in Period.
Their reply is for during Lock in Period. Since I am not in lock in, I have asked bank again.


I remember Bank said during the lock in period, If I have to close the loan, there is a fee. But I don't remember there is a partial redemption or full redemption fee when no lock-in period.

Again for closing the loan I need to engage a lawyer. What is the typical lawyer fee?

The better option may be pay 50K and keep the balance and reduce the remaining payment period to 1 year.
Any one have experience? Any suggestions? Appreciate


Thanks

Hence, you may proceed with partial or full redemption from now onwards without any penalty charges.



Partial Redemption

• There shall be a 1.50% partial redemption fee payable on the amount of the Mortgage Facilities prepaid during the Lock-In Period.
• You may redeem your loan in part if you serve us one (1) months’ notice in writing or pay us one (1) month’s interest in lieu of notice.
• Your partial prepayment must be of a minimum of SGD10,000.
• No lawyer involve for partial repayment request and you just need deposit sufficient fund into your repayment account for amount deduction.
• You may submit the Loan Change Request Form to any nearest branch or via mail. (hardcopy only)
• If you’re making partial repayment using CPF, you’re not require to serve notice and you just need to inform CPF for the payment arrangement.

Full Redemption

• There shall be a 1.50% full redemption fee payable on the amount of the Mortgage Facilities redeemed during the Lock-In Period.
• You may redeem your loan in full if you serve us two (2) months’ notice in writing or two (2) months’ interest in lieu of notice.
• You may submit the Loan Change Request Form to any nearest branch or via mail. (hardcopy only)
• You also can appoint any panel lawyer to serve the notice, if not the bank will appoint a panel lawyer once the bank received the redemption notice.
• Kindly take note that the legal fees are paid by you.

 

[mp4005 help]

Thank you everyone for sharing your inputs. Appreciate.
I wrote to the bank. Here is there reply
Looks like very costly, even for closing the loan. One positive aspect is my father is not in Lock-in Period.
Their reply is for during Lock in Period. Since I am not in lock in, I have asked bank again.
I remember Bank said during the lock in period, If I have to close the loan, there is a fee. But I don't remember there is a partial redemption or full redemption fee when no lock-in period.
Again for closing the loan I need to engage a lawyer. What is the typical lawyer fee?
The better option may be pay 50K and keep the balance and reduce the remaining payment period to 1 year.
Any one have experience? Any suggestions? Appreciate
Thanks

why do you not want to fully pay for the home ?

no lock in period, there isn't any penalty for partial pay or to fully redeem the loan , but still need to serve notice typically 2 to 3 months for full redemption of loan and 1 month maybe for partial pay. it is not immediately.

yes , need to engage lawyer to close the loan (fully pay home). I suspect under $1k to do it. vaguely remember DBS told me around $800 cause I also want to fully pay next year .

just check their CPF to see how much more can they use to pay for the house too. some people like hit the CPF limit to pay meaning need cash to pay off the loan due to the CPF housing limit based on 1xx% of home valuation

 

[BBCWatcher]

why do you not want to fully pay for the home ?

We don’t know this household’s cash flow and liquidity characteristics except that the husband’s income from work has fallen, so their incoming cashflow is lower. If an unexpected (or perhaps expected) major expense occurs then this household might not have sufficient liquidity to handle the expense if they fully pay off the home loan now.

Being debt free, but unable to borrow at low rates and with limited or zero savings, can be very risky. For some weird reason(s) this class of risks doesn’t seem to be as widely appreciated as it should be.

We don’t know what the situation is, so we shouldn’t leap to conclusions without understanding whether the household would be too vulnerable to this class of risks.

 

[mp4005 help]

We don’t know this household’s cash flow and liquidity characteristics except that the husband’s income from work has fallen, so their incoming cashflow is lower. If an unexpected (or perhaps expected) major expense occurs then this household might not have sufficient liquidity to handle the expense if they fully pay off the home loan now.
Being debt free, but unable to borrow at low rates and with limited or zero savings, can be very risky. For some weird reason(s) this class of risks doesn’t seem to be as widely appreciated as it should be.
We don’t know what the situation is, so we shouldn’t leap to conclusions without understanding whether the household would be too vulnerable to this class of risks.

they have enough OA to fully pay. I am not insinuating that they use cash to pay.

I don't know what we can use the OA for besides paying off your house or for emergency uses. unless there is a way to liquidate OA for emergency?

besides the father already have RA setup and still has SA and MA.

 

[Geonasen]

You could try Hong Leong Finance to see if they are fine with refinancing yours. Based on their website, theirs is fixed at 4.25% p.a., up to 70 years old.

 

[BBCWatcher]

they have enough OA to fully pay. I am not insinuating that they use cash to pay.

This distinction might not matter. OA often turns into liquid cash at age 55+, and at least one member of this particular household is age 55+.

The household income (we know it’s lower) and liquidity positions really do matter. I suppose it’s also possible this flat is still under the Home Protection Scheme or other MRTA, so if one of the heads of household dies tomorrow, or too soon, paying off the mortgage now would end up being a very bad decision in hindsight. We also don’t know the health status(es) of this couple.

besides the father already have RA setup and still has SA and MA.

Do we know that? And do we know what those balances are relative to needs? I don’t think we have that information.

You could try Hong Leong Finance to see if they are fine with refinancing yours. Based on their website, theirs is fixed at 4.25% p.a., up to 70 years old.

Worth checking I suppose, but refinancing a $60K home loan with another lender tends to be expensive even if they’re willing.

If the 2.X% floating rate repricing offer has no prepayment penalty when the home is sold then it might be tempting, perhaps combined with partial prepayment and/or lengthening the loan term.

 

[mp4005 help]

This distinction might not matter. OA often turns into liquid cash at age 55+, and at least one member of this particular household is age 55+.
The household income (we know it’s lower) and liquidity positions really do matter. I suppose it’s also possible this flat is still under the Home Protection Scheme or other MRTA, so if one of the heads of household dies tomorrow, or too soon, paying off the mortgage now would end up being a very bad decision in hindsight. We also don’t know the health status(es) of this couple.
Do we know that? And do we know what those balances are relative to needs? I don’t think we have that information.
Worth checking I suppose, but refinancing a $60K home loan with another lender tends to be expensive even if they’re willing.
If the 2.X% floating rate repricing offer has no prepayment penalty when the home is sold then it might be tempting, perhaps combined with partial prepayment and/or lengthening the loan term.

RA is created at 55. father is approching 60.
even self contribution to CPF is to three funds. medisave is priority.

HPS - you cant be on it with private loan.
MRTA - based on profile , I doubt so. it is just extra cost.

but sure. thread is about TS. let's stick to topic and let TS hear the different views.

 

[BBCWatcher]

RA is created at 55. father is approching 60.

Yes, but were there dollars to fund RA? How well is it funded? And does it matter/would it matter if the household is running on fumes until age 65+? We don't know. We simply don't know the household's overall liquidity position, income flow (except it's lower), household spending and emergency reserve needs, and health statuses. These factors matter in deciding whether to pay down a $60K outstanding mortgage any faster than required. Higher interest rates are suggestive but not dispositive pending further information (which may or may not be forthcoming).

HPS - you cant be on it with private loan.

That's incorrect. HPS (or substitute insurance) is required when you pay for housing in Singapore from OA. The lender doesn't matter.