Five quick and easy home loan tips

(1) Typical lock-in periods are two years for variable and three years for fixed-rate home loans. The penalty for refinancing before that is usually 1.5 per cent of the loan amount. For example, it is $3,000 for a $200,000 loan.

(2) Banks use the term ‘refinance’ when you move your loan to another bank. If you move to a lower interest rate at the same bank, they call it re-pricing or converting your home loan.

The fee for re-pricing is usually $500 or $800. To keep your business, however, banks often waive this fee.

(3) Banks usually provide a legal subsidy of 0.4 per cent of the loan up to a maximum of $2,000 to $3,000. The bank will claw back the legal subsidy if you refinance within three years.

But you can always re-price your loan at the same bank so it will not incur legal fees. Then, the bank will not charge a legal subsidy clawback.

(4) Consider refinancing your loan with a group of friends. As a group, you can drive a harder bargain than if you negotiate with the banks individually.

(5) Maybank has the lowest first-year variable-rate home loan with a two-year lock-in. It is 2.78 per cent compared to 3.25 per cent at most other banks.

Source : Straits Times - 17 Apr 2007