Most people will refinance their mortgage loans to shorten the mortgage term, get lower interest rates, and raise funds to consolidate debt, home improvement projects, or other financial emergencies. When you purchase a home through a mortgage loan, you’ll continue making the required monthly payments. This way, you’ll accumulate equity which is the difference between the new mortgage loan and the old one. If you want to refinance a mortgage loan in Singapore, visit https://dollarbackmortgage.com/mortgage-loan/. There are many things to consider before you refinance a mortgage loan in Singapore, as explained below:
1. Determine your home equity
It’ll be very challenging to refinance your mortgage loan if there’s no equity accumulated. If your home has negative equity, refinancing your mortgage loan won’t make sense. Financial experts recommend homeowners accumulate a relatively reasonable amount of equity before they think of refinancing their home loan. However, even if you’ve not accumulated much equity, you can still refinance your home loan, provided that the funds you’ll get will help you achieve your goals. Most conventional lenders won’t approve refinancing mortgages for borrowers with little equity.
2. Cost of refinancing
The average cost of refinancing mortgage loans in Singapore ranges between 3%-6% of the entire loan amount. However, it’s possible to lower these costs. You can increase your principal amount, especially if there’s adequate home equity. If you’re lucky enough, you can get a lender offering no-cost refinancing. In this case, you need to be ready to cover closing costs by paying relatively higher interest rates. You can also negotiate with the lender on the refinancing costs to save some money.
3. Determine your debt to income(DTI) ratio
Most people who purchased their homes through mortgage loans tend to think that they can automatically qualify to refinance mortgage loans in Singapore. Although this can be true, it’s essential to note that lenders are now strict when checking DTI ratios. Lenders want to ensure that borrowers can make the required monthly payments without struggling or missing. Most lenders want debt to income ratio of 43% for one to qualify to refinance a mortgage loan in Singapore.
4. Private mortgage insurance
If your home equity is below 20%, the lender will need payment of private mortgage insurance(PMI). This PMI will help cover costs that the lender incurs due to the borrower defaulting on the loan.
5. Check your credit score
Most lenders will check credit scores to determine whether to approve or reject the borrowers’ applications. You need a good credit rating of 760 or more to qualify to refinance your mortgage loan and get low-interest rates. Therefore, if you have a low credit score, you can start repairing it in advance before you make your application. You can repair your credit score in various ways, including making timely payments, automating payments, paying off debts, and disputing errors in your credit report.
In conclusion, these are things to consider before you refinance mortgage loans in Singapore. It’s beneficial to refinance your mortgage loan on the same lender since you won’t have to give your information again.