Most mortgage content focuses on why and how to refinance. Less often discussed is when refinancing is actually the wrong move. As a brokerage, we get paid the same referral fee by every bank regardless of which package you choose — which means we have no reason to push you into refinancing when it does not genuinely benefit you. Here are the situations where it usually pays to stay put.
1. You are still within your lock-in period
Most home loan packages carry a two to three year lock-in period. Refinancing or fully redeeming the loan during this window typically triggers a penalty of around 1.5 per cent of the outstanding loan amount. Unless the new package offers savings large enough to absorb that penalty and still come out ahead, it rarely makes sense to switch mid lock-in.
2. You plan to sell within the next year or two
Refinancing comes with real costs — legal fees, valuation fees, and sometimes a penalty — that take time to recoup through lower monthly payments. If you are planning to sell your property in the near future, the interest savings may never catch up to the upfront cost of switching. In this case, it is often better to ride out your current package until the sale.
3. Your outstanding loan amount is small
The savings from refinancing scale with your loan quantum. If your outstanding balance has paid down significantly, or your remaining tenure is short, the absolute dollar savings from a lower rate may be small relative to the legal and processing costs of switching — even if the rate difference looks attractive on paper.
4. You are on an HDB concessionary loan and might need the safety net
Switching from an HDB loan to a bank loan is a one-way move — HDB will not let you switch back to a concessionary loan for the same flat, even years later. If your income is unstable, you are early in your career, or you simply value the predictability and protection of the HDB loan structure, it may be worth keeping it even if bank rates look more attractive today.
5. Your income has changed since you took the original loan
Refinancing requires re-qualifying under current Total Debt Servicing Ratio rules based on your present income and obligations. If your income has dropped, or your debt obligations have grown, you may not qualify for as large a loan as before, or you may not qualify at all. It is worth checking your eligibility with an advisor before assuming refinancing is even an option.
The honest answer: run the numbers first
Refinancing is a numbers exercise, not a reflex. The right question is always: do the savings over your realistic time horizon outweigh the switching costs and any penalty? If you are unsure, that is exactly the kind of question an advisor should answer honestly — including telling you when it is not the right time.
Not sure where you stand? Talk to an advisor for a free, no-obligation assessment, or read our refinancing guide if the numbers do work in your favour.