By MoneyBees
Work out the penalty and subsidy clawback for paying down your home loan early, the interest the prepayment saves, and whether to prepay now or after the lock-in, with what DBS, OCBC and UOB publish.
It is a fee your bank charges when you repay part or all of the loan during the lock-in. It is set in your letter of offer. DBS gives about 1.5% of the remaining loan for exiting during the lock-in, and one OCBC package charges 1.5% for paying down in the first year.
Usually as a % of the amount you prepay. At 1.5%, prepaying S$100,000 costs S$1,500. Check whether your letter of offer applies it to the amount prepaid or to the loan outstanding.
Often, if you have years left on the loan. Prepaying S$100,000 on a 3% loan with 25 years left saves about S$42,000 of interest, far more than a S$1,500 penalty. If the lock-in ends in a few months, waiting can save the penalty for little lost interest.
Banks often pay your legal or valuation fees when you take or refinance a loan. If you repay within the clawback period in your letter of offer, often about 3 years, you must pay that subsidy back. DBS's terms say this applies to a partial prepayment too.
Yes, once the lock-in ends, and with some packages during it. UOB lets the first prepayment each year, up to 20% of the original loan, go through with no penalty. One OCBC repricing package allows prepayments in the lock-in if at least 50% of the repriced loan remains.
DBS, OCBC and UOB ask for a month's written notice for a partial prepayment and two months' to redeem the loan in full. Without enough notice, you may pay interest in lieu.
DBS asks for at least S$10,000, in multiples of S$1,000. OCBC asks for at least S$5,000, in multiples of S$1,000.
Keeping the instalment and finishing sooner saves more interest. Lowering the instalment keeps more cash free each month. The calculator shows both.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).