Hidden Costs of Refinancing: What You Need to Know Before Switching Banks
When refinancing your home loan in Singapore, the interest rate difference often steals the spotlight—but the hidden costs lurking beneath the surface can significantly impact your actual savings. Many homeowners focus solely on securing a lower interest rate, only to discover that legal fees, valuation charges, early redemption penalties, and clawback clauses can eat into their projected savings or even make refinancing financially unwise.
At Homejourney, we believe in transparent financial guidance that helps you make confident decisions. This guide breaks down every cost involved in refinancing, shows you how to calculate true savings, and explains why comparing refinancing rates from all major banks—DBS, OCBC, UOB, HSBC, Standard Chartered, and more—is essential before you switch.
The Two Main Costs of Refinancing Explained
When you refinance your home loan, two primary costs emerge: legal fees and valuation fees. Understanding these is the foundation of calculating whether refinancing makes financial sense for your situation.
Legal fees typically range from S$1,500 to S$3,000 and are paid directly to the law firm handling your mortgage documentation and transfer.[1] These fees cover the legal work required to discharge your existing mortgage and register the new one with the bank and Land Titles Registry.
Valuation fees are charged by the new bank to assess your property's current market value. This is a standard requirement for all new mortgages, regardless of whether you've refinanced before. The cost varies but is typically several hundred dollars.
The good news? Banks often subsidise these costs to win your business. If your remaining loan amount is S$300,000 or above for HDB properties, or S$400,000 or above for private properties, most banks will provide full legal subsidy and may partially subsidise valuation fees.[1][2] This means your actual out-of-pocket cost could be minimal—or even zero if the bank offers cash rebates that exceed the fees.
The Hidden Killer: Early Redemption Fees During Lock-In Periods
This is where many homeowners get caught off guard. If you refinance while still within your loan's lock-in period (typically 2-3 years), your current bank will charge an early redemption fee of approximately 1.5% of your remaining loan balance.[1][3]
For example, if you have a remaining loan of S$400,000 and refinance during the lock-in period, you could face a penalty of S$6,000. This substantial cost must be factored into your break-even calculation. Many homeowners discover too late that their interest rate savings don't justify this penalty.
The strategic approach? Wait until your lock-in period expires before refinancing. Mortgage advisers consistently recommend timing your refinancing to avoid these penalties entirely.[7] If rates drop significantly during your lock-in period, you might consider repricing with your current bank instead (see below), though this comes with its own costs.
Refinancing vs. Repricing: Understanding the Cost Difference
Before committing to refinancing, understand how it differs from repricing—because the cost structure is fundamentally different.
Refinancing means switching to a different bank. You'll incur legal and valuation fees (typically S$3,000 and above), but you avoid lock-in penalties if your period has expired.[3] You also gain access to potentially better rates from competing banks.
Repricing means changing your interest rate package with your current bank. This typically costs only S$800 to S$1,000 in administrative or conversion fees.[1][3] However, the rates offered by your current bank for repricing are often worse than what they offer new-to-bank customers, which is why many homeowners still choose to refinance despite higher upfront costs.
The real question: Is the interest rate savings from refinancing worth the S$2,000-S$3,000 in additional costs compared to repricing? This requires careful calculation—which we'll address in the next section.
The Clawback Clause: A Cost That Appears Later
Here's a hidden cost that catches many refinancers by surprise: the clawback period. When banks offer cash rebates or subsidies to cover your refinancing costs, they typically attach a 3-year clawback clause.[2] This means if you switch banks again or fully pay off your loan within 3 years, you must repay the entire subsidy or rebate—without proration.
Example: Your new bank offers S$2,500 in legal subsidy and S$500 cash rebate. If you refinance again after 2 years, you'll need to repay the full S$3,000 to your previous bank. This effectively erases your savings and creates a significant hidden cost.
Before accepting any bank's refinancing offer, ask explicitly about clawback terms and whether exceptions apply to your situation. Some rare circumstances allow you to avoid clawback penalties, but these require careful negotiation and professional guidance.
Calculating Your True Break-Even Point
The only way to know if refinancing makes sense is to calculate your break-even point—the number of months it takes for your monthly interest savings to cover the refinancing costs.
Here's the formula:
Break-even months = Total refinancing costs ÷ Monthly interest savings
Example calculation: You have a S$400,000 remaining loan at 3.0% with your current bank. A new bank offers 1.6% for a 2-year fixed package. Your monthly savings would be approximately S$467 (based on a 25-year remaining tenure). If refinancing costs total S$2,000 after subsidies, your break-even point is 2,000 ÷ 467 = 4.3 months.
If you plan to stay in the property for at least 5-6 months beyond your break-even point, refinancing is financially justified. However, if you're considering selling or refinancing again within 3 years (due to the clawback clause), the calculation changes significantly.
This is where comparing refinancing rates from all major banks matters critically. A 0.2% rate difference between banks might seem small, but over your loan tenure, it compounds into thousands of dollars. Using Homejourney's Bank Rates comparison tool, you can instantly see rates from DBS, OCBC, UOB, HSBC, Standard Chartered, and other major banks to identify the best option for your situation.
Additional Costs to Factor In
Cancellation fees for new properties: If you're refinancing a property still under construction (at TOP—Transfer of Ownership), banks charge a 1% cancellation fee on the undisbursed portion of your loan, with a minimum of S$1,000.[5] This applies even if you're switching to a better rate.
Broker fees: If you use a mortgage broker (like Homejourney's mortgage specialists), clarify whether there are any broker fees. Many brokers, including Homejourney, receive referral fees from lenders as part of standard product distribution costs, meaning you pay nothing extra—the bank covers it.
Processing delays and opportunity costs: Refinancing typically takes 4-6 weeks to complete. During this period, you might miss better rate opportunities or face rate lock-in decisions. This isn't a direct fee, but it's a real cost to consider.
Why Bank Subsidies Matter More Than You Think
Banks aggressively compete for refinancing business because they know switching costs create customer lock-in. This competition works in your favor—banks will subsidise your legal and valuation fees to win your business.
The difference between banks can be substantial. One bank might offer full legal subsidy plus S$500 cash rebate, while another offers only partial legal subsidy. Over your loan tenure, this S$500-S$1,000 difference in net costs translates to approximately 0.05% in additional savings.[5]
This is why comparing offers from multiple banks is essential. Don't accept the first offer. When you submit your refinancing application through Homejourney's Bank Rates platform, you can receive competing offers from DBS, OCBC, UOB, HSBC, Standard Chartered, and more simultaneously. Banks will compete for your business by offering better rates and more generous subsidies.
Real-World Example: How Hidden Costs Impact Your Savings
Let's walk through a realistic scenario that shows how hidden costs can dramatically affect your refinancing decision.
Your situation: You have a S$350,000 HDB loan at 2.8% with 20 years remaining. You've completed your 3-year lock-in period. Bank A offers 1.6% fixed for 2 years.
Monthly savings: Approximately S$350
Refinancing costs:
- Legal fees: S$2,500 (full subsidy from Bank A)
- Valuation fee: S$400 (50% subsidy from Bank A, you pay S$200)
- Early redemption fee: S$0 (lock-in period expired)
- Total out-of-pocket: S$200
Break-even calculation: S$200 ÷ S$350 monthly savings = 0.57 months (less than 1 month)
Conclusion: Refinancing is highly worthwhile. You break even in less than a month and enjoy S$350 monthly savings for the remaining 20 years. However, if you had refinanced during your lock-in period, you would have faced a S$5,250 early redemption penalty (1.5% of S$350,000), making the break-even point 15 months instead—still worthwhile, but significantly less attractive.
How to Compare Refinancing Rates Safely and Effectively
Comparing rates from all major banks is non-negotiable, but doing it safely requires a structured approach:
1. Gather your loan documents: Have your current mortgage statement, property valuation, and identification ready. You'll need your remaining loan balance, current interest rate, lock-in period end date, and property details.
2. Use a trusted comparison platform: Rather than visiting each bank individually, use Homejourney's Bank Rates page to compare rates from DBS, OCBC, UOB, HSBC, Standard Chartered, Maybank, CIMB, RHB Bank, Public Bank, Hong Leong Bank, and Citibank in one place. This saves time and ensures you're seeing current rates.
3. Request detailed cost breakdowns: Don't just compare interest rates. Ask each bank for a detailed breakdown of legal fees, valuation fees, cash rebates, and any other costs. Some banks bury attractive rates behind minimal subsidies.
4. Calculate net costs, not just interest rates: The lowest interest rate isn't always the best deal. A bank offering 1.55% with S$1,000 in subsidies might be better than 1.50% with no subsidies, depending on your loan amount and tenure.
5. Check clawback terms: Before committing, ask about the clawback period and whether any exceptions apply. If you might refinance again within 3 years, factor this into your decision.
6. Submit one application, receive multiple offers: Homejourney's multi-bank application system allows you to submit your details once and receive competing offers from multiple banks. This is far more efficient than visiting branches individually and gives you genuine negotiating power.
Timing Your Refinancing: When Costs Are Worth It
Beyond calculating break-even points, timing matters for managing hidden costs:
Wait for lock-in period expiration: This eliminates the 1.5% early redemption fee, which often exceeds S$5,000. Waiting a few months can save more than refinancing immediately.
Monitor interest rate trends: Refinancing costs are fixed, but interest rate savings depend on market conditions. When rates drop significantly (like they have in early 2026), refinancing becomes more attractive because your savings multiply over time. Use Homejourney's real-time SORA tracking to understand rate movements and time your application strategically.
Avoid refinancing if you're selling soon: If you plan to sell within 2-3 years, refinancing costs likely won't be recovered through interest savings. The clawback clause also becomes a liability.
Consider your life plans: Will you stay in the property for at least 5 more years? Are you planning major renovations or upgrades? These factors should influence your refinancing timeline.
How Homejourney Helps You Navigate Hidden Costs
At Homejourney, we're committed to creating a safe, trusted environment where you can make confident financial decisions. Here's how our platform helps you avoid hidden costs and compare refinancing rates effectively:
Bank rates comparison: View current rates from DBS, OCBC, UOB, HSBC, Standard Chartered, and other major banks on our Bank Rates page. See interest rates, promotional packages, and subsidy details side-by-side.
Refinancing calculator: Use our Bank Rates calculator to instantly determine your break-even point and projected savings. Input your loan amount, current rate, proposed rate, and remaining tenure to see the real financial impact.
Multi-bank application: Submit one refinancing application through Homejourney and receive competing offers from multiple banks. This eliminates the need to visit branches individually and gives banks incentive to offer better rates and subsidies to win your business.
Singpass integration:
