With mortgage rates remaining relatively attractive in 2026, many homeowners are once again exploring whether it makes sense to refinance their home loans. Over the past year, we have seen an increasing number of property owners reviewing their mortgage packages as lock-in periods expire and banks continue to compete for refinancing customers.

One of the biggest misconceptions surrounding refinancing is that it is expensive. While there are certainly costs involved, many borrowers are surprised to discover that the savings generated from a lower mortgage rate can far exceed the associated refinancing expenses.

Before deciding whether to refinance, it is important to understand exactly what fees may be involved, what potential penalties to look out for, and whether refinancing still makes financial sense in the current interest rate environment.

What Is Mortgage Refinancing?

Mortgage refinancing refers to replacing your existing home loan with a new mortgage package, usually from another bank.

The objective is typically to secure a lower interest rate, reduce monthly repayments, obtain more favourable loan features, or improve overall financing flexibility.

Unlike repricing, which involves switching to another package within the same bank, refinancing requires a full redemption of the existing loan and the creation of a new mortgage with a different lender.

Because a new bank is taking over the financing, there are legal and administrative processes involved. These processes give rise to several costs which homeowners should understand before proceeding.

Legal Fees

The most common cost associated with refinancing is legal fees.

Whenever a mortgage is refinanced, lawyers are required to discharge the existing mortgage, prepare the new mortgage documents and complete the transfer of financing from one bank to another.

Legal fees vary depending on the law firm and complexity of the transaction. In many cases, refinancing legal costs may range from several hundred dollars to over a thousand dollars.

The good news is that many banks provide legal subsidies or cash rebates specifically to offset these expenses. Depending on the loan size and promotion available, borrowers may find that a significant portion of the legal fees are covered by the incoming bank.

As a result, legal costs are often much lower than homeowners initially expect.

Valuation Fees

When a property is refinanced, the incoming bank may require a fresh valuation report to assess the property’s market value.

This valuation helps the bank determine the loan-to-value ratio and assess the overall risk profile of the financing.

Valuation fees vary depending on property type and valuation requirements. Private properties generally incur higher valuation fees than HDB flats.

Similar to legal fees, valuation costs are frequently subsidised by the incoming bank through refinancing promotions and cash rebates.

For many borrowers, the actual out-of-pocket valuation expense is therefore minimal or fully covered.

Cancellation Fees

One of the most important areas to review before refinancing is whether your existing loan is still within the lock-in period.

Most mortgage packages impose cancellation penalties if the loan is redeemed before the lock-in period expires, at 1.5% on the outstanding balance.

These penalties are typically calculated as a percentage of the outstanding loan amount and can be significant for larger loans.

Borrowers should therefore verify their lock-in expiry date before proceeding with any refinancing plans.

Another commonly overlooked area involves Building Under Construction (BUC) properties.

Many banks provide preferential rates for BUC projects on the assumption that the loan will remain with the bank until full disbursement. If the borrower chooses to refinance before the project is fully completed and all loan tranches have been disbursed, cancellation penalties may apply even if the lock-in period has technically expired.

This is why reviewing the original Letter of Offer remains an important first step before considering refinancing.

Clawback Clauses

Apart from cancellation penalties, homeowners should also pay attention to clawback provisions.

Most banks provide legal subsidies, valuation subsidies or cash incentives when the mortgage is first taken up. To protect themselves, banks often impose a clawback period, which is typically three years.

If the mortgage is redeemed during this clawback period, the bank may require the borrower to repay some or all of the incentives previously received.

For example, a borrower who received legal subsidies and cash rebates upon taking up the mortgage may be required to refund those benefits if the loan is terminated prematurely.

While clawback amounts are often smaller than lock-in penalties, they should still be factored into the overall refinancing analysis.

Interest Reset Date (IRD) Misalignment

Another refinancing cost that is frequently overlooked involves Interest Reset Date misalignment.

Many fixed-rate mortgages have specific dates when the interest package resets or transitions into a floating rate package.

Some borrowers assume they can redeem the loan at any point after the lock-in period ends. However, depending on the loan structure, redeeming the mortgage before the applicable Interest Reset Date may be treated as an early cancellation.

In certain situations, this can trigger penalties or additional charges that could otherwise have been avoided with proper planning.

For this reason, homeowners should always review their loan documents carefully and coordinate refinancing timelines with their mortgage advisor before submitting redemption notices.

Cash Rebates Can Offset Most Refinancing Costs

One reason refinancing remains attractive is that banks continue to compete aggressively for quality mortgage customers.

To attract refinancing business, many lenders offer cash rebates, legal subsidies and valuation subsidies.

Depending on the loan amount, these incentives may cover part or even all of the refinancing costs.

In some situations, borrowers may find that their out-of-pocket expenses are minimal while still enjoying substantial savings from a lower mortgage rate.

This is one of the reasons refinancing remains popular among homeowners despite the existence of legal and administrative costs.

Is It Worth Refinancing In 2026?

The answer depends on the individual circumstances of each homeowner. However, in many cases, refinancing remains financially beneficial.

The primary reason is that a new bank is often willing to offer a more competitive interest rate than the homeowner’s existing lender.

Once a mortgage exits its promotional period, the interest rate frequently becomes less attractive. Refinancing allows borrowers to secure a fresh promotional package and potentially reduce their monthly interest costs.

For larger loan amounts, even a modest reduction in interest rates can translate into thousands of dollars of savings over a few years.

Refinancing Can Also Provide Better Loan Features

Interest rates are not the only reason homeowners refinance.

Many borrowers choose to refinance because newer mortgage packages offer features that better suit their needs.

One increasingly popular feature is the Waiver Due To Sale clause.

This provision allows borrowers to avoid certain penalties if the property is sold during the lock-in period, providing greater flexibility for homeowners who may upgrade, downgrade or relocate in the future.

For property owners who anticipate changes in their housing plans, this feature can be just as valuable as a lower interest rate.

Refinancing May Help Certain Borrowers Avoid Income Reassessment Issues

Another advantage of refinancing relates to loan assessment requirements.

When borrowers reprice within the same bank, the bank may request updated income documents and conduct fresh assessments depending on the circumstances.

For some homeowners, particularly those with fluctuating income profiles, self-employed income or changes in employment status, refinancing alternatives may sometimes provide more flexibility depending on the bank’s policies and the structure of the transaction.

As lending policies differ across banks, it is always worthwhile to compare available options before making a decision.

What Is The Current Interest Rate Environment?

As of 2026, some of the most competitive fixed-rate mortgage packages are available at approximately 1.40%.

These rates remain historically attractive despite the gradual upward pressure seen in recent months.

Following recent FOMC meetings, market expectations suggest that the US Federal Reserve may adopt a more hawkish stance towards the end of 2026 if inflation remains persistent.

This outlook is broadly consistent with what many market participants have anticipated. While inflation has moderated significantly from its previous peaks, central banks remain cautious and continue to monitor economic conditions closely.

As a result, mortgage rates may experience modest upward adjustments if inflationary pressures prove more persistent than expected.

Why We Recommend Two-Year Fixed Rates in 2026

For many homeowners refinancing today, we are generally favouring two-year fixed-rate packages over longer fixed-rate commitments.

The primary reason is flexibility.

A two-year fixed rate provides repayment certainty in the near term while preserving the ability to reassess market conditions again in two years’ time.

By then, inflation trends, energy prices and broader economic conditions should be significantly clearer.

Should interest rates decline in the future, homeowners will be well-positioned to refinance again and benefit from a more favourable rate environment.

Conversely, if rates remain elevated, borrowers will still have enjoyed the protection of a fixed-rate package during the interim period.

This balanced approach provides both certainty and optionality, which remains valuable in today’s evolving interest rate landscape.

Our Thoughts

Refinancing is not free, but the costs are often far lower than many homeowners expect. Legal fees, valuation fees, cancellation penalties, clawback provisions and Interest Reset Date considerations should all be reviewed carefully before proceeding.

Fortunately, many banks provide cash rebates and subsidies that can offset a substantial portion of these expenses.

For homeowners whose lock-in periods have expired, refinancing can still deliver meaningful savings through lower mortgage rates, improved loan features and greater financing flexibility.

Rather than focusing solely on refinancing costs, homeowners should evaluate the overall savings opportunity. In many cases, the long-term benefits of securing a more competitive mortgage package can outweigh the short-term expenses involved in making the switch.

Do check out Singapore’s latest home loan rates here. We have the lowest rates 2026 for you to compare across all 16 banks in Singapore, for free.