WITH interest rates in Singapore still falling and the property market turning quiet, banks are now gunning for the mortgage refinancing business.

Refinancing means replacing your current mortgage with another that comes with lower interest rates. This can be done with the same bank or by switching to another bank.

Many home owners are now considering this because the Singapore Inter-bank Offered Rate (Sibor) has fallen from over 3 per cent to below 1.3 per cent. Sibor, the rate at which banks lend to one another, is a key component used in setting home loan rates.

Some home owners have taken the bait. At HSBC Singapore, for example, refinancing applications have increased by more than 50 per cent in number over the past three months. Other banks, such as United Overseas Bank, have been circulating new refinancing packages by mail to home owners.

But before you take the plunge, you should be aware that refinancing a mortgage comes at a cost. Penalties could be imposed if you terminate your housing loan early with your existing lender, and you could incur legal fees if you refinance the loan with another bank.

Mr Dennis Ng, the founder of mortgage consultancy portal www.HousingLoanSG.com, reckons that if you are paying 3.5 per cent or higher on your home loan, you should be able to enjoy savings in interest by refinancing the loan.

He has worked out that, based on a 30-year loan tenure, refinancing an outstanding loan amount of $215,000 to a lower interest rate of 2.2 per cent, down from the current 4.5 per cent, would result in interest savings of about $14,730 over three years.

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