What is the lock-in period?
In the mortgage industry, it is typical to have a lock-in period. This means you must stick with a lender for a certain time as a prerequisite for obtaining a specific interest rate, discount, or promotional benefits.
This period typically lasts two to five years, during which you cannot pay off or refinance your loan without incurring a penalty fee.
What is the penalty fee for breaking the lock-in period?
Banks usually impose a penalty fee of 1.5% based on the outstanding loan balance or the redeemed loan amount when refinancing, selling a property, or paying off your mortgage before the lock-in period ends.
For instance, suppose you have a home loan of approximately S$800,000, of which you have already paid S$140,000, leaving a balance of around S$660,000. If you refinance your loan before the lock-in period expires, you will be charged a penalty fee of approximately S$9,900, equivalent to 1.5% of the remaining balance.
Do HDB houses have lock-in periods?
In the case of HDB loans, there is no lock-in period, and as a result, there are no penalties for early repayment. This implies you can refinance your loan with a bank anytime to take advantage of lower interest rates.
Nevertheless, if you choose to refinance with a bank, you cannot return to an HDB loan.
