Housing loan, advices needed!

[antonpoh]

Based on the loan statement, it looks like you already passed the third year. Have you tried to renegotiate the spread or premium of 1.5% above 3m SOR? The statement tells me that your interest change date is 17 Sep and you are paying 1.88322% in Nov and Dec.

My loan is 0.85% (fixed for duration of loan) above 3m SOR and currently I am paying 1.06270%.

I heard some local Bank is giving 0% interest rate for 1st year. Haaha nope.. I won't negotiate or go refinance my loan.

For everyone here, please don't refinance your loan.
Go read the info i post below.

 

[RoLanTo]

hello anton.. i read my bank repayment schedule spreadsheet.. it's like not what u have described leh.

the interest calculation (X) = outstanding_loan * Interest/12.. so every month, the spreadsheet already calculated how much is the interest u gotto pay, u can modify the actual interest rate due to fluctuation of sibor.. but the figure is roughly there.

going by your explanation, if it is true, my monthly payment instead of paying (X) as interest, it will be (X+Y) where Y is the additional interest for future so that the bank can recover as much interest as possible.

i use standchart loan, they told me the payment is always compute monthly, so if every month i pay slightly more to cover the principal loan, over the years, the interest actually gets lesser.. so for me if yr 4 onwards i can get a loan based on my outstanding balance and rates lower than 1%+1m SIBOR, i should have more savings

 

[antonpoh]

hello anton.. i read my bank repayment schedule spreadsheet.. it's like not what u have described leh.

the interest calculation (X) = outstanding_loan * Interest/12.. so every month, the spreadsheet already calculated how much is the interest u gotto pay, u can modify the actual interest rate due to fluctuation of sibor.. but the figure is roughly there.

going by your explanation, if it is true, my monthly payment instead of paying (X) as interest, it will be (X+Y) where Y is the additional interest for future so that the bank can recover as much interest as possible.

i use standchart loan, they told me the payment is always compute monthly, so if every month i pay slightly more to cover the principal loan, over the years, the interest actually gets lesser.. so for me if yr 4 onwards i can get a loan based on my outstanding balance and rates lower than 1%+1m SIBOR, i should have more savings

I'm not using standchart loan and mine is not SIBOR so it could be different but i believe that for a 30yrs loan all Bank will try to recover as much interest in the first 10yrs.

You can take a photo of your loan statement and PM me or post it here.. i will see if i can calculate it for you.

Actually if anyone here who have refinance their housing loan every 3 yrs can share it with us too.

 

[DevilCurseYou]

Let's say i try and refinance my loan every 3 yrs

If interest rate keeps at this rate, total amount paid after 35yrs : $310,380

Total interest for 35yrs if didn't refinance would be : $60,380

Ok, first 3yrs i have paid a total of $13500 in interest. Let say i try and refinance it every 3 yrs so that i can keep this low rate i have now.

35yrs ÷ 3yrs = 11.6 (no. of times i refinance)

So if i refinance 11 times in those 35 yrs how much interest would i have paid? $13500 x 11 = $148,500

you did not digest the post by me and joanie_dan
interest for housing loan are calculated based on remaining balance, not initial balance.

Ok, first 3yrs i have paid a total of $13500 in interest. Let say i try and refinance it every 3 yrs so that i can keep this low rate i have now.

you will pay approximately 13500 in interest for your first 3 years. but in the first 3 years, you will also have paid down the balance, so the 3 next years, your interest is less than 13500.

for instance, at the end of 32nd year, your mortgage balance will only be about 24k. the interest payable for the next 3 years is less than 1k, not 13.5k

35yrs ÷ 3yrs = 11.6 (no. of times i refinance)

you can refinance for period under 3 years. this depends on your mortgage contract. some do not even have lock in period. when your mortgage balance is lower, like at 100k, banks may not be keen to refinance with you.

 

[antonpoh]

you did not digest the post by me and joanie_dan
interest for housing loan are calculated based on remaining balance, not initial balance.

Yes, know that the remaining balance will be lower every 3yrs. If my interest for first 3yrs is $13500, the next 3yrs would be around $12690 if i refinance. I think you miss one of the post. I put below in red.

you will pay approximately 13500 in interest for your first 3 years. but in the first 3 years, you will also have paid down the balance, so the 3 next years, your interest is less than 13500.

for instance, at the end of 32nd year, your mortgage balance will only be about 24k. the interest payable for the next 3 years is less than 1k, not 13.5k

Yes, if refinance with a lower principal loan amount and lower number of years, it will be lower than $13500. Base on my principal balance of 236k (94% of 250k) if i refinance it again with a 32yrs loan, the interest i would be paying for the next 3yrs would be around $12690 (94% of $13500).

This 94% is just estimate.. for illustration purposes. Should be around there.
Yes, i know max loan now is 30yrs. That 32yrs is also for illustration purposes. ^^

you can refinance for period under 3 years. this depends on your mortgage contract. some do not even have lock in period. when your mortgage balance is lower, like at 100k, banks may not be keen to refinance with you.

Please la, I have 3 property loan right now. I know if it goes below 100k no Bank will refinance it. This calculation of refinancing every 3yrs is for illustration purposes only.

Anyway the numbers don't need to be right to the last cent to know which one can save you more money. If you wish to refinance, go ahead lor.

 

[junkki]

The answer to you, anton, is very simple.
If you understood that interest is charged on remaining balance, then all your arguments don't matter anymore.

Basically, most home loans here work on a monthly reducing basis.

So, if your home loan is 300k, 5%, at 12 months (for simplicity sake).

Simple calculation tells you your monthly instalment is $25,682.
First month, you will pay 300k*5*/12 = 1,200 to interest.
So principal payment = $24,182.

End of first month, your principal is $300k - $24,182 = $275,818.

Second month, your interest payment is 275,818*5%/12= $1,149. Principal repayment will be $24,533.

Now, if you refinance at the end of first month at 3%, you will bring with you $275,818 worth of principal to another bank.

At 3% for another 1 year of loan, you will pay $275,818*3%/12 = $690 interest for your new loan.

Compare $1,149 to $690. How will you be paying more interest by refinancing?

Beats me.

 

[antonpoh]

Hi Junkki, guess you just read the top few post and never see my hdb loan statement attached below with all the step by step calculations. Go see it and you will know that Banks do charge a lot higher for interest for the first few years.

So, if your home loan is 300k, 5%, at 12 months (for simplicity sake).

Simple calculation tells you your monthly instalment is $25,682.
First month, you will pay 300k*5*/12 = 1,200 to interest.
So principal payment = $24,182.

I guess that $1200 amount of interest you get is interest per month, and if your property loan is for 1 year.

 

[henrylbh]

Hi Junkki, guess you just read the top few post and never see my hdb loan statement attached below with all the step by step calculations. Go see it and you will know that Banks do charge a lot higher for interest for the first few years.

That's a sweeping statement.

I passed what junkki said - that interest is charged on remaining balance, then all your arguments don't matter anymore.

For housing loans, what matters is the interest rate that you are paying. Higher interest rate means higher interest amount, unless the lender does not calculates interest on monthly rest basis.

By the way, I cant find "my hdb loan statement attached below with all the step by step calculations".

 

[antonpoh]

My hdb loan statement attached with step by step calculations

My Loan Amount (35yrs) : $250,000
Monthly installment : $ 739
Amount going into Interest : $ 375 (monthly) - I get this from the 4 mths average interest paid.. see image attached.

Left monthly amount to pay principal: $364 x 12 x 35yrs = $152,880 (how can finish paying the loan of 250k in 35yrs?)


If interest rate keeps at this rate, total amount paid after 35yrs : $739 x 12 x 35 = $310,380

Total interest for 35yrs would be : $310,380 - $250,000 = $60,380 (average $1725 per yr)

So how many years would the bank have needed to take back all their interest for those 35yrs: $60,380 ÷ $375 = 161 ÷ 12 = 13.4yrs.


So for my 35yrs loan, the Bank will take back all their interest in just 13.4yrs.

After 3yrs, the interest i would have paid : $60,380 ÷ 13.4 x 3 = $13,517

So how many years of interest would i have paid in those 3yrs : $13517 ÷ $1725 = 7.8yrs.



So do you still want to refinance?

Let's say i try and refinance my loan every 3 yrs

If interest rate keeps at this rate, total amount paid after 35yrs : $310,380

Total interest for 35yrs if didn't refinance would be : $60,380

Ok, first 3yrs i have paid a total of $13500 in interest. Let say i try and refinance it every 3 yrs so that i can keep this low rate i have now.

35yrs ÷ 3yrs = 11.6 (no. of times i refinance)

So if i refinance 11 times in those 35 yrs how much interest would i have paid? $13500 x 11 = $148,500. Of cause the amount should be lower than this because of remaining balance should be lower but this amount would still not be lower than the 60k amount if i don't refinance.

 

[antonpoh]

Let's say i try and refinance my loan every 3 yrs

If interest rate keeps at this rate, total amount paid after 35yrs : $310,380

Total interest for 35yrs if didn't refinance would be : $60,380

Ok, first 3yrs i have paid a total of $13500 in interest. Let say i try and refinance it every 3 yrs so that i can keep this low rate i have now.

35yrs ÷ 3yrs = 11.6 (no. of times i refinance)

So if i refinance 11 times in those 35 yrs how much interest would i have paid? $13500 x 11 = $148,500. Of cause the amount should be lower than this because of remaining balance should be lower but this amount would still not be lower than the 60k amount if i don't refinance.

Yes, if refinance with a lower principal loan amount and lower number of years, it will be lower than $13500. Base on my principal balance of 236k (94% of 250k) if i refinance it again with a 32yrs loan, the interest i would be paying for the next 3yrs would be around $12690 (94% of $13500).

1st 3yrs (Loan 35yrs ) - $13500
2nd 3yrs (Loan 32yrs ) - $12600 (94% drop)
3rd 3yrs (Loan 29yrs) - $11800
4th 3yrs (Loan 26yrs) - $11000
5th 3yrs (Loan 23yrs) - $10300
6th 3yrs (Loan 20yrs) - $9600
7th 3yrs (Loan 17yrs) - $9000
8th 3yrs (Loan 14yrs) - $8400
9th 3yrs (Loan 11yrs) - $7900
10th 3yrs (Loan 8yrs) - $7400
11th 3yrs (Loan 5yrs) - $6900

Total interest paid: $108400 (if i refinance my loan 11 times)

 

[joanie_dan]

Base on your statement, your interest rate is almost 2%. Ya dont refinance nvm la, you have 3 concurrent property loans right? Rich man spotted. Haha

 

[antonpoh]

Base on your statement, your interest rate is almost 2%. Ya dont refinance nvm la, you have 3 concurrent property loans right? Rich man spotted. Haha

Nah, 2 of the property i only have 20-25% share only. Anyway, i workout all these calculations for my sister who keep insisting on refinancing every few years when rates are lower.

 

[warr]

citi currently has promotion for BUC packages as:
1st: 1m sibor+0.95
2nd:+0.95
3rd:+0.85
4th:+0.85
after: +1.25
lockin 2 years. free switching among sibor tenors upon TOP.

is this a good deal compared with conventional packages? What is the catch in it?
most other loans:
1st year: sibor+0.85
2nd: +0.85
3rd: +0.85
4th: +1.25/1.0
after: +1.25

 

[joanie_dan]

citi currently has promotion for BUC packages as:
1st: 1m sibor+0.95
2nd:+0.95
3rd:+0.85
4th:+0.85
after: +1.25
lockin 2 years. free switching among sibor tenors upon TOP.

is this a good deal compared with conventional packages? What is the catch in it?
most other loans:
1st year: sibor+0.85
2nd: +0.85
3rd: +0.85
4th: +1.25/1.0
after: +1.25

Base on the above 2, Citi Confirm better. All buc loans are technically lock in til CSC when full loan disbursed, else there will be cancellation fee. Hence the 2yr lock will only affect partial prepayments in e first Two years. Also e unlimited free sibor switching is available right from e start, 1/3m before TOP, and 1/3/6/12m after TOP.

However you may want to check with SCB, they have a 5yr lock in, 1mS+0.80% package for buc, with mortgageOne interest offset. And you can change package to fix rate after TOP. Interesting package.

 

[cisconet]

Base on the above 2, Citi Confirm better. All buc loans are technically lock in til CSC when full loan disbursed, else there will be cancellation fee. Hence the 2yr lock will only affect partial prepayments in e first Two years. Also e unlimited free sibor switching is available right from e start, 1/3m before TOP, and 1/3/6/12m after TOP.

However you may want to check with SCB, they have a 5yr lock in, 1mS+0.80% package for buc, with mortgageOne interest offset. And you can change package to fix rate after TOP. Interesting package.

SCB offers two options:
Option1
Year 1 to 3 - 0.95 + Sibor
Thereafter 1.25 + Sibor
No lock in

Option2
Year 1 to 3 - 0.8 + Sibor
Thereafter 1.25 + Sibor
5 Years Lock In
30% partial redemption allow with no penalty
One time conversion within lock in
BUT minimum $50K deposit with SCB

Worth it?

Some ppl says local bank better as rates do not raise so fast as compared to foreign bank.. True?

 

[ChaOrEn]

Not true. It depends on how much the bank values your business. I managed to get this rate from them for BUC after bargaining.

1st to 3rd Year: SIBOR + 0.70 %
4th year onwards: SIBOR + 1.00%

And there is No lock-in period! My Loan Dispersement has not started, probably end of this year will start

 

[cisconet]

Not true. It depends on how much the bank values your business. I managed to get this rate from them for BUC after bargaining.

1st to 3rd Year: SIBOR + 0.70 %
4th year onwards: SIBOR + 1.00%

And there is No lock-in period! My Loan Dispersement has not started, probably end of this year will start

Wow.. Which bank is it? Could share?

 

[DevilCurseYou]

Here is the amortisation schedule. I have generated for 1.8%, 1.3% and 1.1% interest.

the monthly payment for 1.8% is 804, more than your 739.
This can be due to:
1.the 739 you paid is calculated using concessionary interest rate in the earlier years. you can expect an upward revision to ensure you will finish paying in 35 years.
2. you made some excess payment earlier

Yes, if refinance with a lower principal loan amount and lower number of years, it will be lower than $13500. Base on my principal balance of 236k (94% of 250k) if i refinance it again with a 32yrs loan, the interest i would be paying for the next 3yrs would be around $12690 (94% of $13500).

1st 3yrs (Loan 35yrs ) - $13500
2nd 3yrs (Loan 32yrs ) - $12600 (94% drop)
3rd 3yrs (Loan 29yrs) - $11800
4th 3yrs (Loan 26yrs) - $11000
5th 3yrs (Loan 23yrs) - $10300
6th 3yrs (Loan 20yrs) - $9600
7th 3yrs (Loan 17yrs) - $9000
8th 3yrs (Loan 14yrs) - $8400
9th 3yrs (Loan 11yrs) - $7900
10th 3yrs (Loan 8yrs) - $7400
11th 3yrs (Loan 5yrs) - $6900

Total interest paid: $108400 (if i refinance my loan 11 times)

The interest payable in the initial years is indeed more, but how much more?

The interest paid for 4th year vs 1st year
the interest paid for 4th year is 93.5% of the interest paid for 1st year for 1.8% interest. so you are right to claim that 4th year has a 6% drop in interest payment.

The interest paid for 35th year vs 1st year
the interest paid for 35th year is less than 100, more than 97% decline compared to the first year. this is so vastly different from your projection of only 49% decline.

Please learn the actual calculation before you start approximating away, so that you know how far off your approximation is...

Just need to estimate how many years of interest am i actually paying for the first 3 yrs.

What i get is 7.8 yrs.. i could be wrong.

you are wrong. you pay 3 years of interest in the first 3 year. if you can pay the loan in full at the end of third year, you only paid 3 years of interest.

PS: if there are so many other people saying that you are wrong, and you have no supporter, please think through others argument before posting. You might still be correct, but ...

 

[antonpoh]

Btw, I didn't make any excess payment earlier. And the interest rate for my housing loan is:

1st year - 0.85% above SOR
2nd year - 1% above SOR
3rd year - 1.5% above SOR

Thereafter interest on the loan shall be charge at 1.5% above SOR.

How come your 1.8% interest rate is higher but after 3 yrs the amount of interest i have paid is much higher than your calculated amount of 9.4k?