Solving Mortgage Difficulties through Refinancing

Modern life is about taxes and bills. Among the regular routine of current lifestyle is the constant need to pay for taxes and, more notoriously, monthly charges that include an extensive list of obligations: electricity, water, cable television charges, credit card bills, internet subscriptions and other utility expenses. And then there are amortizations, life, health, travel car and other insurance plus the dreaded bank and loan liabilities.

Of these modern financial obligations, the mortgage is a constant yet often misunderstood economic idea. Most average people use mortgage as a tool to acquire houses, condominiums, and other properties which they often do not have large cash in hand to avail. In the US, even college education can be secured through a mortgage through student loans. Often enough, people simply see mortgage as a short term solution to acquire property or services and fail to understand its complex system that has consequential effects over time. More often still, people only begin to understand the complexity of mortgage and loan systems once bills start to pile up.  Simply put, they suddenly realize how much they did not understand about the loans they made once they encounter difficulties in payment and realize they did not anticipate factors like unforeseen interest rate hike or sudden inflation surges that significantly increases their monthly charge.

The Basics of Mortgage

Mortgage refers to a type of loan in real estate property. It is a loan secured through a bank or financing institution for a real property purchase When a person or business applies to a bank for a real estate loan, the bank or lending institution determines the maximum amount that can be loaned by an applicant using various indicators including annual income or other existing outstanding balances and through a collateral, another real estate property that the applicant offers the bank as assurance that if he, she or they fail to pay the loan, the bank or financial institution can legally claim the collateral. In real estate mortgage therefore, houses, land, cars or businesses can serve as collaterals.

Once an application is made, the bank or lending institution determines the value of the collateral and loans 80% of the total value of the collateral to the applicant. The resulting amount is then referred to as the principal which is the total value of the loan which the applicant needs to pay over a specific period, usually 5-10 years, plus interest rates, usually 2-8% of the principal loan amount. In Singapore,this mortgage rate may change during the payment period due inflation and other economic factors. This means, the original monthly amount that a lender has secured may increase at any time during the payment period. And this is where problems usually begin.

Mortgage Difficulty and Refinancing

Sudden increase in interest rates often causes problems for a lender who did not anticipate such increase. This is a common case for failure to pay for mortgages.  Fortunately, there too are modern solutions. Mortgage refinance in Singapore is a means in securing a loan to pay for another loan. Often enough, some banks and financing institutions offer cheaper interest rates than the original lender. Singapore’s mortgage refinance rates today usually range from 3.88% to 4.88% and can extend to as many as 30 years. In Singapore today, there are banks and lending institutions that even offer as low as 1.33% refinance rates for real estate property depending on the type of property.

Under the mortgage refinancing system, a debtor can ‘restructure’ the loan program by either reducing interests or changing number of years for repayment. For debtors who wish to be free of obligations early, they can shorten the payment period which will result to higher monthly amortizations but in less number of years. On the other hand, those who wishes to reduce monthly amortization can extend payment period as a way of easing regular financial payments.