How to Calculate If Refinancing is Worth It: A Singapore Homeowner's Guide
Refinancing your home loan can save you thousands of dollars in interest, but only if the numbers work in your favour. The key question every Singapore homeowner asks is: "Will I actually save money?" The answer depends on three critical factors—your break-even point, the total costs involved, and your timeline for staying in the property.
This guide walks you through the exact calculation methodology that Homejourney uses to help homeowners make confident refinancing decisions. By the end, you'll understand whether refinancing makes financial sense for your situation and how to compare offers from Singapore's major banks.
Understanding the Refinancing Decision Framework
Before diving into calculations, it's important to distinguish between two common options: refinancing and repricing. While both involve changing your loan terms, they work differently and have different costs. For a detailed comparison, see our guide on Refinancing vs Repricing: Which Saves You More Money in 2026? ">refinancing vs repricing.
Refinancing means switching to a completely new loan from a different bank. This involves legal fees, valuation costs, and a new loan agreement. Repricing means staying with your current bank but changing your interest rate package—typically with lower or no additional costs.
The decision between these two options significantly impacts your financial calculation. Most homeowners can refinance and break even within 1-3 years due to cash rebates offered by new banks, but this varies based on your loan amount and current rate.
The Break-Even Calculation: Step-by-Step
Your break-even point is the moment when your total monthly savings equal your refinancing costs. After this point, every dollar saved is pure benefit. Here's how to calculate it:
Step 1: Calculate Your Monthly Payment Difference
Start by determining how much your monthly payment would decrease with the new rate. Use this formula:
Monthly Savings = Current Monthly Payment − New Monthly Payment
For example, if your current payment is S$3,500 and a new refinance offer brings it down to S$3,250, your monthly savings would be S$250. You can use Homejourney's refinancing calculator to instantly see this comparison across multiple banks.
Step 2: Identify All Refinancing Costs
This is where many homeowners make mistakes. Refinancing costs include:
- Legal fees: Typically S$800–S$1,500 (varies by bank and loan amount)
- Valuation fee: Usually S$300–S$600 depending on property value
- Clawback amount: If your current bank charges an early redemption penalty (typically 1.5% of remaining loan balance for fixed-rate packages within lock-in period)
- Stamp duty: Usually covered by the new bank, but confirm this
- Less: Cash rebate from new bank: Most banks offer S$2,000–S$2,800 rebates for refinancing loans above S$500,000
The good news: Most banks in Singapore now cover legal and valuation fees as part of their refinancing incentives. In fact, many homeowners end up with a net cash benefit after accounting for rebates. According to current market data, refinancing loans above S$1 million typically receive cash rebates of S$2,500–S$2,800, which often exceed the actual transaction costs.
Step 3: Calculate Your Net Refinancing Cost
Net Refinancing Cost = Total Fees − Cash Rebate
For a S$600,000 loan with S$1,200 in total fees and a S$2,000 bank rebate, your net cost is actually negative—you receive S$800 in the process. This is why many homeowners find refinancing worthwhile even with modest rate reductions.
Step 4: Calculate Your Break-Even Period
Break-Even Months = Net Refinancing Cost ÷ Monthly Savings
Using our example: If your net cost is S$800 and monthly savings are S$250, your break-even point is 3.2 months. After just over three months, you're in pure savings territory.
For a more comprehensive understanding of hidden costs, review our detailed guide on Hidden Costs of Mortgage Refinancing You Need to Know | Homejourney ">hidden costs of mortgage refinancing.
Real-World Example: Breaking Down the Numbers
Let's work through a realistic Singapore scenario:
Your Current Situation:
- Loan amount: S$500,000
- Current interest rate: 3.25% (fixed)
- Remaining tenure: 20 years
- Current monthly payment: S$2,917
- Lock-in period: Expired (no clawback penalty)
Refinancing Offer from Bank B:
- New interest rate: 2.85% (fixed for 2 years)
- New monthly payment: S$2,698
- Monthly savings: S$219
- Legal fees: S$1,200
- Valuation fee: S$450
- Bank rebate: S$2,000
Calculation:
- Total costs: S$1,200 + S$450 = S$1,650
- Net cost after rebate: S$1,650 − S$2,000 = −S$350 (you receive S$350)
- Break-even: Since you're already ahead, you break even immediately
- Total savings over 20 years: S$219 × 240 months = S$52,560 (minus the S$350 you received)
In this scenario, you not only break even instantly but also save over S$52,000 over the remaining loan period. This is why refinancing can be such a powerful wealth-building move when rates drop.
When Should You Refinance? Timing Considerations
The calculation above assumes you stay in the property for the full remaining tenure. However, your timeline matters significantly:
If you plan to sell within 2-3 years: Refinancing may not be worthwhile unless your monthly savings are substantial (S$300+) or you receive a significant net cash benefit. The break-even period needs to fit within your timeline.
If you plan to stay 5+ years: Refinancing is almost always worthwhile, even with modest rate reductions of 0.25–0.50%. Your accumulated savings will far exceed the refinancing costs.
If you're in a lock-in period: Calculate whether your savings justify the early redemption penalty (typically 1.5% of remaining balance). For a S$500,000 loan, this penalty could be S$7,500. You'd need significant monthly savings to justify this cost.
Comparing Rates Across Singapore Banks
The interest rate environment in Singapore is dynamic, and different banks offer different packages. As of January 2026, rates for refinancing typically range from 1.30% to 3.00% fixed for the first 2-3 years, depending on the bank and loan amount.
Rather than visiting multiple bank branches, Homejourney allows you to compare refinancing rates from DBS, OCBC, UOB, HSBC, Standard Chartered, Maybank, and other major lenders in one place. This transparency helps you identify the best offer before committing to any bank.
When comparing offers, look beyond just the interest rate. Consider:
- Lock-in period: Some banks offer 2-year locks, others 3-year. Shorter locks give you flexibility sooner.
- Conversion options: Can you switch from fixed to floating after the lock-in period? Some banks charge for this, others don't.
- Cash rebate amount: Banks currently offer S$2,000–S$2,800 for loans above S$500,000. Confirm this in writing.
- Prepayment flexibility: Can you pay down the loan faster without penalties? This matters if you want to accelerate your mortgage payoff.
Using Homejourney's Tools to Simplify the Decision
While the calculations above are straightforward, doing them manually for multiple banks is time-consuming. This is why Homejourney's refinancing calculator exists—to automate these calculations and help you compare scenarios instantly.
Here's how to use Homejourney's tools effectively:
- Input your current loan details: Loan amount, current interest rate, remaining tenure, and current monthly payment. You can find most of this on your latest mortgage statement.
- Compare refinancing offers: Enter rates from different banks to see which delivers the best break-even point and total savings.
- Factor in your timeline: Adjust the calculator to show savings over your expected holding period (2 years, 5 years, 10 years, etc.).
- Submit one application: Once you've identified the best offer, use Homejourney's multi-bank application system to submit your refinancing request to multiple lenders simultaneously. This lets banks compete for your business and often results in better final offers.
By submitting through Homejourney's bank rates page, you'll connect with our mortgage brokers who can guide you through the process and help negotiate better terms on your behalf.
The Interest Rate Environment: Timing Your Refinance
One question homeowners frequently ask: "Is now the right time to refinance?" The answer depends on the current interest rate environment and your expectations for future rate movements.
In Singapore, most mortgages are benchmarked to SORA (Singapore Overnight Rate Average), which is set by the Monetary Authority of Singapore. When SORA rises, floating-rate mortgages become more expensive. When SORA falls, refinancing to a lower rate becomes attractive.
The chart below shows recent SORA trends to help you understand how rates have moved:
If you're currently on a high fixed rate and SORA-based rates have fallen, refinancing makes sense. However, if you're already on a competitive floating rate and SORA is expected to rise, you might consider locking in a fixed rate through refinancing to protect yourself against future increases.
For a comprehensive analysis of the current refinancing landscape, see our Mortgage Refinancing Singapore 2026: Homejourney Ultimate Guide ">ultimate refinancing guide for 2026.
Key Mistakes to Avoid in Your Refinancing Calculation
Mistake 1: Forgetting to include all costs. Many homeowners only consider legal fees and forget valuation costs or early redemption penalties. Use the comprehensive cost checklist above to ensure you haven't missed anything.
Mistake 2: Ignoring the cash rebate. Banks now offer generous rebates that often exceed your actual transaction costs. Always factor this into your net cost calculation—it often makes refinancing worthwhile even with modest rate savings.
Mistake 3: Not considering your timeline. If you're planning to sell in 18 months, refinancing might not be worth it. Always calculate your break-even period and compare it to how long you plan to stay.
Mistake 4: Accepting the first offer. Different banks offer different rates and rebates. By comparing offers on Homejourney or through a mortgage broker, you could save an additional 0.10–0.25% on your interest rate, which translates to thousands of dollars over the loan period.
Mistake 5: Refinancing too frequently. Each refinance incurs costs. Unless you're capturing a significant rate drop (0.50%+), refinancing more than once every 3-5 years rarely makes financial sense.
Frequently Asked Questions About Refinancing Calculations
Q: How much interest rate drop justifies refinancing?
A: As a general rule, a 0.25–0.50% rate reduction justifies refinancing, especially if you receive a cash rebate that covers your transaction costs. For larger loans (S$800,000+), even a 0.15–0.25% drop can be worthwhile. Use Homejourney's calculator to determine your specific break-even point.
Q: What if I'm still in my lock-in period?
A: You'll face an early redemption penalty (typically 1.5% of remaining balance). Calculate whether your monthly savings justify this penalty. For example, if the penalty is S$7,500 and you save S$300/month, you need 25 months to break even. If you plan to stay longer than this, refinancing is still worthwhile.
Q: Can I refinance an HDB flat?
A: Yes, HDB flats can be refinanced through commercial banks. The calculation methodology is identical, though HDB flats typically have lower property values, which may result in smaller cash rebates. Confirm the exact rebate amount with the new bank.
