Housing loan, advices needed!

[joanie_dan]

Wa the spread become so fierce? Spread alone nearly about my sor + 0.85% for entire duration.

Yup, sor + 0.85% throughout not bad, now dun have such rates Loh. Maybe bank a** may have combo + 0.95% throughout for selected projs.

 

[joanie_dan]

I just refinanced my property with CIMB based on their board rate with 2 year lock in, 1st year 0.86%, 2nd year 1.6%, with intent to refinance again after the 2nd year. Think this is better than the package you are looking at?

Buc n completed ppty loan is vastly different as disbursement is different.. Can't compare this way. Not forgetting sibor sor and board rate has its inherent risks characteristics. I'm not a fan of board rate.

 

[lusunshine]

One time free conversion must be utilized within 6 mths, may not have a better package to switch at that time, may have forgotten to switch etc,

Both have its merits, interest rates can move either direction , if interest rates continue to rise continually over 2-3 yrs, switching to fix rates is beneficial. However if rates start to decrease after 6mths or 1yr etc, e 12m sibor can be switched to 1m Sibor to benefit from e decrease. Hence there isn't a correct answer as to which option is the best. Pros and cons. It becomes your own judgement and comfort level.

Interest rate cycle is closely related to the economic cycle, the trend will last for at least 2~3 years or even longer, unlikely you will see it up and down frequently like stock markets.

 

[lusunshine]

I just refinanced my property with CIMB based on their board rate with 2 year lock in, 1st year 0.86%, 2nd year 1.6%, with intent to refinance again after the 2nd year. Think this is better than the package you are looking at?

If don't mind can share what's thereafter rate after 2 years for your CIMB package? I'm wondering how confident you think you will be able to refinance to a better package 2 years later?

 

[antonpoh]

Why not good to refinance your home loan after 3 years (loan 250k for 35yrs)

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 had 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?

 

[chopra]

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 had 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?

don't understand your math.

you should compare total loan without refinance vs. total loan (including refimancing legal fee) if refinance.

 

[antonpoh]

don't understand your math.

you should compare total loan without refinance vs. total loan (including refimancing legal fee) if refinance.

All housing loan interest is decreasing over the years and for the first few years they will take back more. So my 35 yrs loan, the Bank would have taken back all the interest they wish to charge me in 13.4 yrs.

So maybe if you refinance your loan to 20 yrs, the Bank could have taken back all the interest they need to charge you in aro 8.5 yrs. Bank don't wait for 20 yrs to take back all the profit from you.

Don't have to understand my math, if you have a housing loan just check it yourself.

 

[cct75]

All housing loan interest is decreasing over the years and for the first few years they will take back more. So my 35 yrs loan, the Bank would have taken back all the interest they wish to charge me in 13.4 yrs.

So maybe if you refinance your loan to 20 yrs, the Bank could have taken back all the interest they need to charge you in aro 8.5 yrs. Bank don't wait for 20 yrs to take back all the profit from you.

Don't have to understand my math, if you have a housing loan just check it yourself.

Hmmm ... unless your bank interest is locked at a capped rate (eg. POSB 10 years loan capped @ 2.5%), what if the bank interest after the initially lock in period rises above 2.6% or 3%?

The main reason why one will try to re-finance is to have the first 2-3 years back to the lower rate providing the interest still stays low as now

 

[swordspirit]

Hmmm ... unless your bank interest is locked at a capped rate (eg. POSB 10 years loan capped @ 2.5%), what if the bank interest after the initially lock in period rises above 2.6% or 3%?

The main reason why one will try to re-finance is to have the first 2-3 years back to the lower rate providing the interest still stays low as now

Nowadays spread all so high. Miss the days where the spread is at 0.7% permanently.

 

[DevilCurseYou]

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 had 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?

wrong calculation leads to wrong conclusion.

Amount going into Interest : $ 375 (monthly) - I get this from the 4 mths average interest paid.. see image attached.

this is approximately true. u are paying about $375 currently for interest. Assuming interest rate remain the same, with lower balance in the future, you will be paying less interest in the future.

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

your earlier mistake is chaining to a bigger mistake now. if you are only going to 152k in principal, why will the bank let you go? the principal you need to repay is 250k, and the bank is not going to let you off for anything less.

while you are now paying about 364 monthly for your principal, in the future when you have a lower balance, your interest will also be lower. hence, a greater portion of 739 monthly installment will go towards principal instead of interest.

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)

these are true. but the rest following is simply wrong, due to the mistakes above.

generally, just aim for the loan that gives the lowest rate. refinancing is usually a good choice as the first few years interest rate is lower

 

[joanie_dan]

Amortization vs simple interest calculation, of course figures will be wrong

 

[fishbuff]

i'm a noob in sg finance but i would like to know if the banks here;

- offer mortgages based on variable and fixed interest rate?
- will the interest repayment be recaculated if i repay more on the principle? This is usually what i got for variable rate mortgage.
- is there a line of credit associated with the mortgage? in the event i have more $$ in the pocket, i can dump it more into the princple to reduce it so that the interest repayment will be adjusted lower. And in the event should i need money, i can draw it out from this line of credit?

 

[arctician]

If don't mind can share what's thereafter rate after 2 years for your CIMB package? I'm wondering how confident you think you will be able to refinance to a better package 2 years later?

I didn't notice because I intent to sell my condo next year..if not I will do partial prepayment so high interest rates from 2nd year doesn't affect me

 

[antonpoh]

wrong calculation leads to wrong conclusion.

Since you're so good at calculation.. can u do a correct calculation base on the info there? 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.

 

[RoLanTo]

TS, wats the deal you got from DBS? 0.9 for 1st 3yrs, 1.0 for 4th and 1.25 thereafter?

i spoken to a DBS person last weekend just to understand whats the available promo currently as i actually already has a housing loan.. that guy give me 0.8 for 1st 3, and the rest same as yours.

TBH, you only need to see the 1st 3yrs, any lock-in period, and any free switch within same bank.. because most ppl will change after 3 yrs.. the lock-in/free switch is only good if there is sudden spike increase in SIBOR until u cannot take it, then quickly change to fix interest plan.

About someone commenting choose local bank vs foreign bank bcos ah gong back it up and lenient toward us, is it myth or true? i am with standchart loan.. dun scare me... i take 1 mth sibor

 

[antonpoh]

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 had 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

 

[RoLanTo]

anton, may i know whats the interest rate u are getting from bank?

please correct me if im wrong, are you trying to say, based on your understanding, the bank will modify the monthly payment (X) ratio such that the 1st three years, higher portion will goes into interest repayment, whereby smaller portion goes into principal repayment.. therefore it is better in long term wise stick with one loan, and pay throughout COMPARE against switching every 3 years?

also, if refinance, the principal loan amt is different already, so the total interest payment will not be constant 13500 for every 3 years throughout.. shld be smaller

 

[antonpoh]

anton, may i know whats the interest rate u are getting from bank?

please correct me if im wrong, are you trying to say, based on your understanding, the bank will modify the monthly payment (X) ratio such that the 1st three years, higher portion will goes into interest repayment, whereby smaller portion goes into principal repayment.. therefore it is better in long term wise stick with one loan, and pay throughout COMPARE against switching every 3 years?

also, if refinance, the principal loan amt is different already, so the total interest payment will not be constant 13500 for every 3 years throughout.. shld be smaller

Correct.

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).

I will go check my interest rate tonight when i get home. Don't have it with me in the office.

 

[antonpoh]

Ok, the interest rate i'm getting 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.

 

[henrylbh]

Ok, the interest rate i'm getting 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.

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%.