Is Refinancing Your Singapore Home Loan Worth It in 2025?

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Introduction

Mortgage refinancing is often touted as a smart financial move—but is it really worth it in 2025?

With interest rates fluctuating over the past few years due to global economic uncertainty, rising inflation, and evolving monetary policy, many Singaporean homeowners are once again revisiting the question: should I refinance my home loan now?

Refinancing can offer a host of benefits—reduced interest costs, lower monthly instalments, or even a complete restructuring of your loan terms. However, the process also comes with its own costs and risks, making it essential to weigh the potential savings against the real costs and effort involved.

In this article, we break down the pros and cons of mortgage refinancing in the current 2025 market, examine the costs involved, and offer a practical framework to help you decide whether refinancing your Singapore home loan is truly worth it.

What Is Mortgage Refinancing?

Refinancing a home loan involves replacing your existing mortgage with a new one—either with the same bank (repricing) or a different one (refinancing)—to obtain more favorable loan terms. Typically, homeowners refinance to secure lower interest rates, extend or shorten the loan tenure, or shift between fixed and floating rate packages.

Refinancing is particularly common at the end of a mortgage’s lock-in period, when the interest rate typically increases (reversion rate), making alternative packages more appealing.

Why Singaporeans Refinance Their Home Loans

Let’s examine some of the key motivations that drive homeowners in Singapore to refinance:

  1. Lower Interest Rates
    A reduction in the interest rate, even by 0.5%, can save homeowners tens of thousands over the life of the loan.

  2. Switch Loan Type
    Moving from floating to fixed rate provides stability. Conversely, switching from fixed to floating may offer cost savings during a low-rate environment.

  3. Lower Monthly Instalments
    By refinancing to a lower rate or extending the loan tenure, homeowners can reduce their monthly cash outflow.

  4. Cash-Out Opportunities
    Some homeowners refinance to extract equity from their property to fund renovation, investments, or business expansion.

  5. Avoiding Reversion Rates
    After the initial 2- or 3-year promotional period, home loans revert to higher rates. Refinancing helps you avoid this jump.

The 2025 Market Context: Is Now a Good Time?

As of mid-2025, Singapore’s interest rates remain relatively stable compared to the spikes seen during the 2022–2023 global inflation crisis. The Singapore Overnight Rate Average (SORA)—the benchmark for most floating rate loans—has seen some easing, with banks adjusting their spreads in response to market demand.

  • Fixed-rate home loans are now averaging between 3.30% to 3.80%.

  • Floating-rate packages (based on 3M Compounded SORA) range from 3.10% to 3.50%, depending on the bank and the borrower’s profile.

If you’re currently on a home loan taken during the peak of interest rates (e.g., in 2022 or 2023), refinancing now could yield significant savings.

Calculating Potential Savings from Refinancing

Let’s look at a sample scenario:

  • Outstanding loan: $500,000

  • Remaining tenure: 25 years

  • Current interest rate: 4.20%

  • New interest rate: 3.10%

Current monthly instalment: ~$2,700
New monthly instalment: ~$2,370
Monthly savings: ~$330
Annual savings: ~$3,960
2-year savings: ~$7,920

Even after deducting legal and valuation fees (typically ~$2,500 to $3,000), the net savings could still exceed $5,000 over two years.

Costs and Risks of Refinancing

While the benefits are clear, there are also costs and potential downsides to consider:

1. Legal Fees

You’ll need a lawyer to discharge your current loan and execute the new one. Costs typically range from $2,000 to $3,000. Some banks offer subsidies for this.

2. Valuation Fees

Your property must be revalued, typically costing $200 to $500.

3. Penalty Fees

If you refinance during your loan’s lock-in period, you may be charged a penalty—commonly 1.5% of the outstanding loan.

4. Clawback of Subsidies

Banks that subsidised your legal fees or offered cash rebates during your previous loan may claw back those benefits if you refinance within a specific time frame.

5. Time and Effort

You’ll need to gather documents, liaise with the new bank, and coordinate with legal professionals.

When Is Refinancing Worth It?

Refinancing is generally worth considering if:

  • You are out of your lock-in period or nearing its end.

  • You are currently paying a reversion rate higher than what’s available in the market.

  • You can save more than you spend on legal and valuation fees within a reasonable time frame (typically 1 to 2 years).

  • You are not planning to sell your property in the short term.

  • You want to adjust your loan tenure to reduce monthly repayments or accelerate debt clearance.

Break-even analysis is crucial. Calculate how many months it will take for your monthly savings to cover the refinancing costs. If you reach break-even within 12–18 months, refinancing is likely worthwhile.

When Is Refinancing Not Worth It?

It may not be worth refinancing if:

  • You are still within your lock-in period and penalties outweigh potential savings.

  • Your current loan package is already very competitive.

  • You plan to sell or pay off your property soon, making the savings negligible.

  • You are on government-assisted loans such as HDB loans (you cannot return to HDB loans after switching to bank loans).

  • Your income situation has changed, making approval for refinancing difficult under current TDSR/MSR guidelines.

Repricing: An Alternative to Refinancing

If you prefer to avoid legal fees and the hassle of switching banks, repricing is a viable alternative. Repricing allows you to switch to a different loan package within the same bank.

Benefits of Repricing:

  • No legal fees or valuation costs

  • Shorter processing time

  • Less paperwork

Drawbacks of Repricing:

  • Fewer options compared to refinancing

  • May not offer the best market rates

  • Administrative fee may apply (usually ~$500)

If your current bank’s repricing offer is close to or competitive with market refinancing options, repricing could be a convenient and cost-effective solution.

Factors That Influence Refinancing Eligibility

Before refinancing, you must meet certain criteria:

  1. Credit Score
    A good credit history improves your approval odds and access to better rates.

  2. Total Debt Servicing Ratio (TDSR)
    TDSR limits your total monthly debt repayments to 55% of your gross monthly income. Existing debts (car loans, credit cards, personal loans) count toward this cap.

  3. Loan Tenure and Age
    Loan tenure must not exceed 30 years for HDB or 35 years for private property, and must not extend beyond age 65 for maximum LTV.

  4. Loan-to-Value (LTV) Ratio
    If your outstanding loan exceeds 75% of the property’s value, refinancing options may be limited.

Floating vs Fixed Rate: Which to Choose After Refinancing?

The choice between floating and fixed rates affects your future payments and savings:

  • Fixed Rate: Offers stability and predictability, usually with slightly higher interest.

  • Floating Rate (SORA-pegged): Usually starts lower but can rise depending on market conditions.

Choose Fixed If:

  • You are risk-averse

  • You prefer stable monthly payments

  • You expect interest rates to rise

Choose Floating If:

  • You are comfortable with fluctuations

  • You believe interest rates will fall or remain stable

  • You want more flexibility in early repayment or refinancing again

Refinancing for HDB Homeowners

HDB loan borrowers can refinance to a bank loan, but cannot revert to HDB once they switch. Bank loans typically offer lower interest rates (currently around 3.1% to 3.5%) compared to HDB’s fixed 2.6% rate.

Refinancing from HDB to bank loan makes sense if:

  • You have adequate CPF and cash to meet bank loan downpayment rules (minimum 25%, with 5% in cash).

  • You want to lower your interest burden.

  • You are financially stable and can handle market-based rate changes.

Tips for a Successful Refinance

  1. Review Your Loan Annually
    Check your current rate, remaining lock-in, and reversion details.

  2. Plan Ahead
    Start researching 3 to 6 months before your lock-in period ends.

  3. Use a Mortgage Broker
    Brokers can compare dozens of packages, handle paperwork, and often secure exclusive deals at no cost to you.

  4. Read the Fine Print
    Look beyond the headline rate. Understand lock-in periods, repricing options, subsidy clawbacks, and penalty clauses.

  5. Calculate the Break-Even Point
    Use refinancing calculators to determine how long it will take to recover costs.

Conclusion

Refinancing your mortgage in Singapore can be a smart financial move—if done at the right time, with the right bank, and for the right reasons. In 2025, with rates stabilising after years of volatility, many homeowners have the opportunity to reduce their monthly instalments, save on interest, and better align their loans with their long-term financial goals.

However, refinancing is not always a no-brainer. Weigh the benefits against the costs, and evaluate your plans for the property. If the numbers work out—and you stay within regulatory guidelines—refinancing can save you thousands of dollars over the life of your mortgage.

If you’re uncertain where to start or want to be sure you’re making the best choice, working with an experienced mortgage loan broker can help simplify the process, access the best packages, and ensure your refinance is truly worth it.

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