Cory Diary : Repricing Home Loan Package

In a few more months time, my current package will be available to be repriced which was on package based on 2.38% Fixed for 2 years after which FHR8 + 1.88% (0.6%+1.88% =2.48%) where FH is the Period 8 months reference to the column above.

The current DBS Fixed Deposit is as follow.

Since May, DBS announced the FHR8 revision, my total loan repayment has not been reduced s it is fixed package and instead will increase to 2.48% if I do nothing.

What-if I Reprice ?

Per DBS website, home loan accounts are out of lock-in or will be out of lock-in in 3 months’ time are allowed to do repricing. I do not like floating package so will only look into the new reprice Flexi-Fixed package as follow. There is a re-price cost about $300 for Promo.

Fixed in years at 1.5% depending on the flexi-Fixed package which I am interested, follow by FHR24 + 0.9% = 1.8% thereafter. So should I go for 3 Year or 5 Year ? 

That's depend how soon we get over Covid aftermath I guess which could take 2 years. Since there is a free conversion I could ask for contract change per table above if the ever decreasing rate happens once I sign up on the new Contract.

However, if the rate increases then I would want to continue the new contract as long as possible. So looks like 5 years Lock is better option. The 5 years contract states " We will waive the Commitment Fee if such full repayment is made upon the sale of your entire interest in the Property, and no event of default under the Conditions has occurred." (updated).

With the new contract, monthly saving will be $293. That's $3,518 annually. Most importantly is the peace of mind. That's the key point of the plan other than the saving.

Cory

2020-1015

Cory Diary : DBS FHR8

I have the opportunity to re-price my housing loan with DBS. There are 2 options currently other than doing nothing which will be paying more.

Additional Information

For the first 2 years, the gap all-in is about 0.345% between Fixed and Floating package.
FHR is tied to DBS Fixed Deposits 8 months rate. The rate is kind of "Board Rate". I read somewhere that there is limits on how much a bank can change as there is some MAS oversight. Not sure is true and how stringent will MAS allows though. Nevertheless there is more transparency in how the final loan rate is charged.


Rationale for Fixed Package

This 0.345% gap can be closed within a year of rate rise which could make the Fixed package more attractive however the spread for year 3 and 4 will be wider and to floating method. Since the lock-in period is 2 year, i could re-price again but there is some work and fees to consider. I think DBS structured this way so that they can manage their fixed package risk.


Rationale for Floating Package

If there is no significant upward moves for the first 2 years in FHR8 rate, the floating package could be cheaper than fixed. This is especially so with Fed recent rate hike that invited some quarters of criticism. And they may stay low for Year 2019. Not sure about 2020 though. However with SSB limits up from 100k to 200k the bank may up the rate to make themselves more attractive. This won't matter much if there is no one to lend to with property curbs on-going or recession strikes. So if all goes well, there aren't need for a re-pricing exercise after lock-in period unless we like to do a refinance to other banks or there is a better re-price package like FHR4 ? :)


Seems like either options will work fine as they do not offer significant advantage over one another. I would probably choose the later.


Cory
2019-0112