Understanding the True Cost of Mortgage Refinancing
When considering mortgage refinancing in Singapore, many property owners focus solely on interest rate savings and overlook the hidden costs that can significantly impact their financial decision. Refinancing isn't simply about switching to a lower rate—it involves multiple fees, charges, and considerations that determine whether refinancing actually saves you money. Homejourney helps you navigate these complexities by providing transparent rate comparisons and clear cost breakdowns, ensuring you make informed decisions about your home loan.
The refinancing process in Singapore involves several hidden costs that borrowers often discover only after committing to the switch. Understanding these expenses upfront is crucial for calculating your true savings and determining the break-even point for your refinancing decision.
The Hidden Costs You Must Factor In
Legal Fees and Conveyancing Costs
One of the most substantial hidden costs in refinancing is legal fees. When you refinance your mortgage with a new bank, you're essentially creating a new loan agreement, which requires legal documentation and processing. Conveyancing fees typically range from SGD 800 to SGD 1,500, depending on your property's value and the complexity of your refinancing arrangement.
These fees cover the legal work required to discharge your existing mortgage with your current bank and register the new mortgage with your new bank. The Law Society of Singapore sets recommended fee guidelines, but actual costs may vary based on your lawyer's rates and the specific circumstances of your refinancing.
Property Valuation Fees
Your new bank will require an updated property valuation to assess the current market value of your home and determine their lending amount. Valuation fees typically cost between SGD 300 and SGD 600, depending on your property type and location. For HDB flats, valuations are generally less expensive than for private condominiums or landed properties.
While this fee might seem modest, it's a mandatory cost that you cannot avoid when refinancing. Some banks may waive this fee as part of their promotional offers, which is worth negotiating when comparing refinancing options on Homejourney's bank rates comparison tool.
Early Repayment Clawback or Lock-In Penalties
This is perhaps the most overlooked hidden cost in refinancing decisions. If your current mortgage includes a lock-in period or early repayment clause, your existing bank may impose a clawback fee or penalty when you discharge your loan early. Lock-in periods typically range from 2 to 5 years, and clawback fees can be substantial—often ranging from 0.5% to 2% of your outstanding loan amount.
For example, if you have an outstanding loan of SGD 500,000 with a 1.5% clawback fee, you'll pay SGD 7,500 to exit your current mortgage. This cost must be factored into your refinancing break-even calculation. Always check your existing mortgage agreement for these penalty clauses before deciding to refinance.
Mortgage Insurance and Processing Fees
Some banks charge mortgage insurance or processing fees when you refinance. Mortgage insurance protects the bank if you default on your loan and typically costs 0.3% to 0.5% of your loan amount. Processing fees can range from SGD 200 to SGD 800. While not all banks charge these fees, they're common enough that you should ask about them when comparing refinancing offers.
Stamp Duty on the New Mortgage
When you refinance, the new mortgage is treated as a fresh loan agreement, which means you'll need to pay stamp duty on the new mortgage document. Stamp duty on mortgages in Singapore is calculated at 0.2% of the loan amount for the first SGD 180,000, then 0.1% for the remaining amount, with a maximum stamp duty of SGD 500 for residential properties.
For a SGD 500,000 refinance, you'd pay approximately SGD 500 in stamp duty. While this is capped at SGD 500, it's still a mandatory cost that adds to your total refinancing expenses.
Calculating Your Break-Even Point
The break-even point is the crucial calculation that determines whether refinancing makes financial sense. This is the number of months it takes for your interest rate savings to offset all the hidden costs you've incurred.
Here's how to calculate your break-even point:
- Add up all refinancing costs (legal fees, valuation, clawback, processing, stamp duty, insurance)
- Calculate your monthly interest savings (current rate minus new rate, multiplied by outstanding loan amount, divided by 12)
- Divide total costs by monthly savings to get break-even months
Example calculation: If your total refinancing costs are SGD 3,000 and your monthly interest savings are SGD 250, your break-even point is 12 months (3,000 ÷ 250 = 12). This means you need to stay in your new mortgage for at least 12 months to recover your refinancing costs.
Homejourney's refinancing calculator helps you perform this calculation instantly. By entering your current loan details, new rate offer, and outstanding loan amount, you can see exactly how many months until you break even and how much you'll save over your remaining loan tenure.
Interest Rate Environment and Timing
The current interest rate environment is critical to your refinancing decision. SORA (Singapore Overnight Rate Average) rates have fluctuated significantly, affecting both fixed and floating rate mortgages. Understanding current rate trends helps you determine whether now is the right time to refinance.
The chart below shows recent SORA trends to help you understand how rates have moved:
As you can see from the rate trends, timing your refinancing decision around rate movements can significantly impact your savings. If rates are expected to rise, refinancing sooner makes sense. If rates are expected to fall, you might want to wait. Homejourney tracks real-time SORA rates on our platform, allowing you to monitor rate movements and time your refinancing perfectly.
How Homejourney Makes Refinancing Easier
Compare Refinancing Rates in One Place
Rather than visiting multiple bank branches or calling individual banks, Homejourney's bank rates comparison tool lets you compare refinancing rates from DBS, OCBC, UOB, HSBC, Standard Chartered, Maybank, CIMB, RHB Bank, and other major lenders instantly. You can see all available rates, promotional offers, and fee waivers side-by-side, making it easy to identify which bank offers the best refinancing deal for your situation.
One-Click Multi-Bank Application
Instead of completing separate applications with each bank, Homejourney's multi-bank application feature lets you submit one refinancing application that goes to all major banks simultaneously. This means banks compete for your business, and you receive multiple offers without the hassle of visiting branches or repeating information multiple times. The process is faster, more transparent, and puts you in control.
Singpass Integration for Instant Verification
Homejourney's Singpass-verified loan application system auto-fills your personal and financial information using your official government data. This dramatically speeds up the application process and reduces the chance of errors. Your application is processed faster because banks receive verified information directly from the government system, not from manual data entry.
Transparent Cost Breakdown
When you compare refinancing options on Homejourney, you see the complete picture—not just the interest rate, but also any associated fees, promotional cash rebates, and fee waivers offered by each bank. This transparency ensures you're comparing true costs, not just headline rates. You can see exactly which bank offers the lowest total cost of refinancing, not just the lowest interest rate.
Refinancing Calculator with Hidden Cost Analysis
Homejourney's refinancing calculator goes beyond simple interest calculations. It factors in all hidden costs—legal fees, valuation, clawback penalties, stamp duty, and processing fees—to show you your true break-even point and actual savings over your remaining loan tenure. This comprehensive analysis ensures you make decisions based on complete financial information.
Money-Saving Strategies for Refinancing
Negotiate Fee Waivers
Banks compete for refinancing business, which means many fees are negotiable. When comparing offers on Homejourney, look for banks offering legal fee waivers, valuation fee waivers, or processing fee reductions. Some banks waive multiple fees to attract your refinancing business. Don't accept the standard fee schedule—ask if your bank will waive or reduce these costs.
Leverage Cash Rebate Offers
Many banks offer cash rebates or promotional incentives for refinancing. These rebates can range from SGD 500 to SGD 3,000 or more, depending on your loan amount and the bank's current promotion. These rebates effectively offset some of your hidden costs. Always factor promotional rebates into your break-even calculation, as they significantly improve your refinancing economics.
Time Your Refinancing Around Rate Movements
Refinancing makes the most sense when interest rates are falling or expected to stabilize at lower levels. If you're in a floating rate mortgage and rates are rising, refinancing to a fixed rate can protect you from future increases. Conversely, if rates are expected to fall, you might want to wait a few months before refinancing. Monitor SORA rates on Homejourney to identify the optimal timing.
Consider Your Remaining Loan Tenure
Refinancing makes more financial sense if you have a longer remaining loan tenure. If you're in the final 5 years of your 30-year mortgage, your break-even point might be longer than your remaining loan period, making refinancing uneconomical. However, if you're early in your mortgage tenure, even a small interest rate reduction can generate substantial savings over 20+ years.
When Refinancing Doesn't Make Sense
While refinancing can save money, it's not always the right decision. Avoid refinancing if:
- Your break-even point extends beyond your remaining loan tenure
- Your current interest rate is already competitive (within 0.3-0.5% of current market rates)
- You're planning to sell your property within the next 2-3 years
- Your lock-in period clawback fees are exceptionally high
- Interest rates are expected to rise significantly (unless you're switching to a fixed rate for stability)
In these scenarios, the hidden costs of refinancing outweigh the potential savings. Use Homejourney's calculator to verify whether refinancing makes financial sense for your specific situation before proceeding.
Refinancing vs. Repricing: Understanding the Difference
Many property owners confuse refinancing with repricing. While they sound similar, they're fundamentally different and have very different cost implications. Repricing involves changing your interest rate with your current bank without switching lenders. Repricing typically involves minimal costs—often just a processing fee of SGD 100-300—because you're not creating a new mortgage or paying legal fees.
Refinancing, by contrast, involves switching to a new bank and incurs all the hidden costs discussed in this article. However, refinancing often offers better rates than repricing because you're negotiating a completely new loan agreement with a different bank. For a detailed comparison of when to refinance versus reprice, see our guide on refinancing vs. repricing.
Getting Professional Guidance
While Homejourney provides all the tools you need to analyze refinancing options independently, many property owners benefit from professional guidance. When you apply for refinancing through Homejourney's bank rates page, you can connect with our Homejourney Mortgage Brokers who provide personalized guidance based on your financial situation.
Our brokers help you understand the complete cost implications of refinancing, identify the best offers for your circumstances, and navigate the application process. This professional guidance is particularly valuable if you have complex financial situations, multiple properties, or significant outstanding loans where small interest rate differences translate to substantial savings.
Frequently Asked Questions About Refinancing Costs
What is the typical total cost of refinancing in Singapore?
Total refinancing costs typically range from SGD 2,500 to SGD 4,500, depending on your loan amount, property type, and which fees the new bank waives. This includes legal fees (SGD 800-1,500), valuation (SGD 300-600), clawback penalties (varies), stamp duty (capped at SGD 500), and processing fees (SGD 200-800). Some banks waive multiple fees, reducing your total costs significantly.
Can I avoid the clawback fee when refinancing?
Clawback fees are typically non-negotiable if your current mortgage includes a lock-in period. However, you can avoid them by waiting until your lock-in period expires. Check your mortgage agreement to determine when your lock-in period ends. If you're near the end of your lock-in period, it might make sense to wait a few months to avoid this substantial cost.
