Refinancing your home loan remains one of the most effective ways to reduce interest costs and improve long-term cash flow for homeowners in Singapore.

In 2026, with mortgage rates stabilising and banks continuing to compete for quality borrowers, refinancing opportunities are still very much available, provided homeowners approach the process strategically.

Many homeowners hesitate to refinance due to uncertainty around penalties, legal costs, or the belief that the savings may be insignificant. In practice, even a modest reduction in interest rate can translate into tens of thousands of dollars in savings over time, particularly for larger loan sizes. The key lies in understanding when refinancing makes sense, how the process works, and how to properly evaluate costs versus benefits.

This step-by-step guide explains how to refinance your home loan in Singapore in 2026, highlights common pitfalls, and shows how to maximise interest savings without unnecessary risk.

What Does It Mean to Refinance a Home Loan?

Refinancing involves replacing your existing home loan with a new loan from a different bank. The new bank redeems your outstanding mortgage with your current lender, and you begin servicing a new loan under revised interest rates, tenure, and features.

This differs from repricing, which refers to switching loan packages within the same bank. While repricing is simpler, refinancing typically offers access to more competitive rates and better features across the broader market, though it involves legal documentation, valuation, and coordination between multiple parties.

Why Refinancing Still Makes Sense in 2026

Interest rates in 2026 are expected to remain relatively stable and lower as compared to the previous years, with floating rates potentially easing slightly and fixed rates remaining competitive. This environment creates opportunities for homeowners whose loans have reverted to higher floating or board rates after their lock-in period.

Refinancing is particularly relevant if your lock-in period has expired or is nearing expiry, your current interest rate is above prevailing market rates, your loan size remains significant, or you want improved loan features such as free conversion or penalty waivers. Refinancing should be viewed as a strategic financial optimisation exercise rather than a reactive decision.

Step 1: Check Your Lock-In Period, Penalties, and Undisbursed Loan Amounts

The first step is to confirm whether your existing home loan is still within a lock-in period and whether penalties apply. Most home loans in Singapore have lock-in periods ranging from one to three years. Refinancing during this period typically triggers an early redemption penalty, commonly around 1.5 percent of the outstanding loan amount. If your lock-in period has expired, refinancing can usually be done without penalty.

For owners of private properties that have just attained Temporary Occupation Permit (TOP), there is an additional consideration. At the TOP stage, approximately 15 percent of the loan remains undisbursed, commonly referred to as the Construction Stage Sum (CSC). Refinancing at this point usually triggers a cancellation fee on the undisbursed amount, typically ranging from 0.75 percent to 1.5 percent, depending on the bank.

While these fees may seem significant, they should not automatically deter refinancing. If other banks are offering materially lower interest rates or more attractive features, the long-term interest savings may still outweigh both redemption penalties and CSC cancellation fees.

Step 2: Review Your Current Loan Structure Carefully

Before comparing new loan packages, you should understand your existing mortgage in detail. This includes whether the loan is fixed or floating, the current interest rate, remaining tenure, and any clauses such as conversion options, clawback provisions, or step-up rates.

Many homeowners overlook the fact that after a lock-in period ends, their loan often reverts to a significantly higher floating rate. Remaining on these reversion rates for extended periods can result in unnecessary interest costs, making refinancing particularly compelling.

Step 3: Assess Whether Refinancing Is Financially Worth It (Including Penalties and Cancellation Fees)

Refinancing should be evaluated holistically, not based on interest rates alone. In addition to legal and valuation fees, homeowners must account for early redemption penalties and, where applicable, CSC cancellation fees.

Early redemption penalties are commonly around 1.5 percent of the outstanding loan, while CSC cancellation fees generally range from 0.75 percent to 1.5 percent of the undisbursed amount. While these costs may appear substantial upfront, they should be weighed against the total interest savings achievable over the intended holding period.

If the new loan offers a meaningful reduction in interest rate, improved flexibility, or better long-term suitability, the cumulative interest savings may still exceed all associated costs. This is especially true for larger loan sizes or homeowners intending to hold the property for several years.

Step 4: Compare Fixed and Floating Packages in 2026

Choosing between fixed and floating rates remains a key refinancing decision. Floating rate packages may offer lower initial rates and greater flexibility, particularly if they include free conversion options. These are suitable for homeowners who expect rates to remain stable or who value flexibility.

Fixed rate packages provide certainty and protection against future rate increases. They are often preferred by homeowners who prioritise budgeting stability or plan to hold the property long term. The choice should be guided by financial comfort and risk tolerance rather than headline rates alone.

We will advise clients based on the market outlook and their risk appetite as well. 

Do check out the lastest home loan rate offered in 2026

Step 5: Compare Loan Features, Not Just Interest Rates

Interest rate is only one component of a refinancing package. Features such as free conversion options, penalty waivers upon sale or refinancing, cash rebates, and lock-in conditions can significantly affect long-term flexibility and cost.

In many cases, a slightly higher rate paired with stronger features may offer better overall value than the lowest advertised rate.

Step 6: Check Your Eligibility and Regulatory Limits

Even though refinancing involves an existing property, banks still reassess borrowers under prevailing regulations such as the Total Debt Servicing Ratio. Changes in income, employment status, age, or liabilities since the original loan was taken can affect eligibility.

This step is particularly important for self-employed borrowers, older borrowers, or those whose financial circumstances have changed.

Step 7: Apply for the Loan Through a Fairloan Advisor

Applying for your refinancing loan through a Fairloan Mortgage Advisory ensures that the application is structured correctly from the outset. We assess your full financial profile, identify suitable banks, and ensure all criteria are met before submission.

More importantly, we monitor the entire process, from loan application through to approval and eventual loan disbursement. This reduces the risk of delays, misunderstandings, or last-minute issues that can arise when managing multiple parties independently.

Step 8: Review the Letter of Offer Carefully With Your Banker or Advisor

Once the bank issues a Letter of Offer, it is important to review all terms carefully before acceptance. This includes interest rate structure, lock-in period, penalty clauses, conversion options, and any special conditions.

At this stage, your banker or Fairloan advisor will walk you through the Letter of Offer, explain any technical jargon, and ensure there are no unfavourable clauses or hidden conditions. This step is critical, as the Letter of Offer forms the legal basis of your new loan.

Step 9: Accept the Loan and Appoint a Law Firm Under the Bank’s Panel

After accepting the Letter of Offer, a law firm from the bank’s approved panel will be appointed to handle the refinancing legal work. This includes valuation, redemption of the existing loan, and preparation of new mortgage documents.

Proper coordination at this stage ensures that timelines remain aligned and documentation proceeds smoothly.

Step 10: Serve Notice and Await Loan Disbursement

The law firm will serve the required redemption notice to your existing bank. This notice period typically ranges from one to three months, depending on your current loan terms. Fairloan will assist in monitoring this process to ensure deadlines are met and the transition remains seamless.

Upon completion of the notice period, the new bank disburses the loan, fully redeeming the existing mortgage. You then begin servicing your refinanced loan under the new terms.

Common Refinancing Mistakes to Avoid

Common mistakes include focusing only on headline rates, ignoring penalties or cancellation fees, refinancing too frequently, or delaying refinancing while remaining on high reversion rates. Another frequent oversight is assuming penalties automatically make refinancing unattractive without assessing net savings.

Each refinancing scenario should be evaluated individually.

How Much Can You Save by Refinancing?

Savings depend on loan size, interest rate reduction, and remaining tenure. For larger loans, even a reduction of 0.3 to 0.5 percent can result in substantial interest savings over time, improving both monthly cash flow and long-term affordability.

Conclusion

Refinancing your home loan in Singapore in 2026 remains a practical and effective way to save on interest, but the benefits depend on timing, proper structuring, and selecting the right bank and package. Decisions should be based on overall value rather than headline rates or penalties alone.

Before refinancing, it is advisable to compare options across multiple banks and secure an In-Principle Approval.

At Fairloan Mortgage Advisory, we assess your full profile, compare refinancing packages across banks, and guide you through each step of the process, ensuring you refinance confidently while maximising long-term interest savings.