I was paying $4.50 in interest (1.1%) a day for my mortgage since December 2021. Given the aggressive Fed moves over the past few months, I am not surprised that this good time will not last. I am pleasantly surprised how long it took the bank to increase the interest rate. The new rate of 1.5% (capped due to the package I took) will take effect from July 2022.
I enjoyed the low 1.1% rate for 7 months and barring major disruptions (that is, interest rates fall), most likely 1.5% for the remaining 17 months of the refinancing package. 1.5% is still low by today’s standards. The major banks are all close to 3% now and HDB rate is of course 2.6%.
I was lucky to lock in the low rate – refinancing timing as well as low prevailing interest rate in 2021. Who can foresee the Russian invasion of Ukraine? Or the record inflation we are witnessing now? Without the cap, the new interest rate would be 1.65% and rising based on the whims of the bank. I don’t think the banks are offering any caps now.
Of course, I will still be subject to the bank’s mercy come end 2023. By then, my mortgage balance should be around $100k. If interest rate is still crazy (anything more than HDB rate of 2.6%) by then, I may simply choose to pay off the entire balance and be debt-free.
This is only possible because we bought a HDB flat and borrowed conservatively. I will not be so happy-go-lucky if I have a $500k or $1m or more loan.