- Redemption means repaying the loan in full so the bank's security over the property is released.
- Refinancing involves discharging the old mortgage and registering the new bank's mortgage.
- Banks require the legal work to be done by a firm on their approved panel.
- Check the lock-in period and notice requirements before you act.
What a mortgage and its redemption mean
When you borrow from a bank to buy property, the bank does not own the property, but it holds a mortgage over it as security. If repayments are not kept up, the bank can enforce the loan against the property. Some mortgages are 'all-monies' mortgages, which also secure other borrowing you have with the same bank.
Redeeming the mortgage means repaying everything owed so that the bank's security is released. The release is recorded by lodging a discharge of mortgage with the Singapore Land Authority (SLA).
Who needs a lawyer
If your loan is from HDB, HDB can generally handle the discharge itself. If your loan is from a bank, you will need a lawyer to deal with the discharge, whether the property is an HDB flat, a condominium or a landed home. The same applies if you refinance an HDB loan with a bank.
Redeeming a loan in full
Where you are paying off a bank loan without selling, the steps are typically:
- Your lawyer gives the bank a redemption notice, with the notice period the bank requires.
- The bank confirms the firm's appointment to act on its behalf and provides the title documents and signed discharge.
- The bank issues a redemption statement showing the amount payable, including interest up to the redemption date.
- You pay the amount from your own funds, CPF savings or both.
- Once the bank confirms receipt, the discharge is lodged with the SLA and the updated title is released to you.
CPF Ordinary Account savings can be used to repay a housing loan, subject to CPF's limits and the bank's approval. For a full repayment, CPF Board will usually need the bank's redemption statement and the lawyer's invoice.
Refinancing with a new bank
Refinancing replaces your current loan with a new one, either with the same bank or a different one, often to obtain a lower interest rate or change the loan tenure. Legally, it involves:
- Accepting the new bank's loan offer, which starts the legal process.
- Your lawyer obtaining redemption figures from the existing bank and preparing the new bank's mortgage documents.
- The new bank releasing funds to repay the old loan.
- Discharging the old mortgage and registering the new mortgage with the SLA.
- Dealing with any CPF requirements, where CPF savings are being used.
The new bank will want the work done by a law firm on its panel. If the property is jointly owned, all owners will normally need to take part.
Costs and timing
Costs can include legal fees, a valuation fee if the new bank asks for one, and any charge for redeeming during a lock-in period. A lock-in period is a stretch of time after the loan starts during which repaying or refinancing triggers a penalty, either a fixed sum or a percentage of the loan. Once it ends, you can usually redeem or refinance without that penalty.
Missing the bank's notice requirement can also add interest or charges. Before switching, it is worth comparing the expected savings against these costs.
A lawyer can review your situation and explain your options.
This article is general information on Singapore law and is not legal advice. Rules and agency policies change, and every situation is different. For advice on your own circumstances, speak with one of our lawyers.
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