I received a letter recently from OCBC mortgage department regarding the increment of my instalments. This is the second time they are raising the 15FDMR rates in 2018.
More importantly, this jump is from 0.55% to 1.25%!
This is why if you are buying a HDB, it's safer to go with HDB loan. Rates are fixed at 2.6%p.a.
#LATEST UPDATE 2020, refinancing strategy! Check bottom of post
Consequences to my mortgage instalments
This hike will bring total monthly payments to 2.3%p.a from 16Jan2019 onwards.
As a result, I will need to pay $300/m more! That's for a loan sum of close to $900k.
I called OCBC mortgage department to understand their options for me to refinance.
When I signed the loan, I was promised a free option to refinance at every point of hike in the benchmark rates.
But the options given were inferior. It was like they had planned for me to be trapped in it.
The options given were
- Fixed rate 2.58% for 2y (There's no point paying 0.38% more if I'm guaranteed only 2years right?)
- Floating bank rate of 1.55% + 0.75% which came up to 2.3% also (coincidentally)
(Please note that packages can change along the way but this is accurate at time of writing)
DBS and UOB also raised rates last year
I'd posted onto a Facebook group to find out the experience with DBS and UOB.
If you are on their mortgage packages, you probably also saw 1 or 2 rate hikes as confirmed by fellow group members. No one is safe from rising rates unless you are on HDB loan (mention again)!
If you want to calculate mortgage for before buying a home, read this post below
Strategies for mortgage payment
If rates continue to increase above 2.5%, I'll be looking to clear some mortgage loan using CPFOA at least.
CPFOA earns 2.5% for amounts above the $20k mark. Hence, it is worth it.
Most packages require 1 month notice period.
Payments of up to half will be penalty-free.
Once rates are above 3%, I'll probably consider re-financing with other banks &/or use cash early payments.
Singapore Savings Bonds and most dividend accounts do not pay as much and cash is better used for early mortgage payments to save on interest.
NEW Repriced mortgage for 2020
Towards end of 2019, I repriced my mortgage loan.
BTW, "reprice" means stick with existing bank (OCBC in my case). "Refinance" is if you change banks and there will be legal fees and valuation fees potentially involved.
As of 2020, the fixed mortgage rate packages are cheaper than floating ones.
This would save about $180 per month and if rates drop further for 2021, I might lock in longer.
Last updated on January 15th, 2020 at 07:19 am