Home loan refinancing means taking out a new home loan in order to repay the old one.

A lot of people decide to refinance their home loan sometimes during the payback period. But what exactly is home loan refinancing? It simply means taking out a new home loan in order to repay the old one. The main reasons why people decide to use refinancing are quite obvious, and include a drop in interest rates, shortening the loan tenure or using their home equity (the difference between the market value of the property and the outstanding mortgage balance) to cover large expenditures (e.g. home renovation).

Explaining Home Loan Refinancing

The best way to explain how home loan refinancing works is by using an example:

Let’s say you took out a mortgage of S$500,000 at 2% to finance a property worth S$650,000. After a certain period of time, your outstanding loan ...