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Thread: With the slowdown of the economy, are you going to refinance or sell your investment

  1. #1
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    Default With the slowdown of the economy, are you going to refinance or sell your investment

    By: Zeng Han Jun, CPCG, Singapore

    Economy is slowing down and contracting, and such a scenario can create a bit of confusion and inconfidence for home owners and investors alike. We have been receiving an increase of inquiries, asking for advices for making a decision to sell a house or to refinance it. Friends who are intimate with me knows that I like to observe and keep track of trends in my daily life, but I really do not know the number of such inquiries within a time period so I cannot provide any percentages here at all. All I can say is that, there is an upsurge, and I hope my writing can help you to make a more informed decision.

    The question is, should you sell off your properties or refinance right now. It really boils down to your own financial profile. Do you think you are strong financially to hold out for your properties? If you are highly leveraged in all kinds of credits, especially in margin calls. Plus your cash flow is not that strong and stable, it might be a good idea to let go some of your investment properties. The investment game in property requires one to have a long term outlook, and in order to have that kind of outlook, you need to be strong financially. Retaining an investment property while having a weak cash flow can be financially draining on anybody.

    If you happened to belong to the financially strong category, and your projection for your own future personal finance is pretty much strong. I would suggest that you refinance your properties instead. Currently, Singapore is in the south of the interest rate cycle and it makes much sense to refinance right now. Yes, we are seeing a spike in the short term interest rates for these couple of weeks, but remember, technically the rates have a higher possibility of having an upward trend in the coming quarters. Refinancing your housing loans right now, allow you to make use of the current relatively lower interest rates and restructure your payments. You will be able to free up more cash which allows you to grab any opportunities that come along, or you can use the freed up cash for a holiday.

    The main factor of your decision right now, is actually your current financial profile and your forecast for your future financial profile. Do take note that any forecast for your own financial profile might be inaccurate and subjected to market forces, so I hope that you will include some safety factors when forecasting. Do hope that the above information helps you in making a decision.


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  2. #2
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    Hi Mr Zeng,

    Would like to seek for your professional advise,do you think the SOR rate will increase tremendously?

    Thanks

  3. #3
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    We are now currently at the trough of the interest rate cycle. Even if the credit crisis doesn't happen, the technical possibility of it moving upward is there. I do not know if the changes will be tremendous, as no one can accurately predict the level it can reach.

    However, do take note that mortgages pegged to SOR have higher correlation to the USA market, as compared to rate like SIBOR.
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  4. #4
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    Quote Originally Posted by Zeng Han Jun
    We are now currently at the trough of the interest rate cycle. Even if the credit crisis doesn't happen, the technical possibility of it moving upward is there. I do not know if the changes will be tremendous, as no one can accurately predict the level it can reach.

    However, do take note that mortgages pegged to SOR have higher correlation to the USA market, as compared to rate like SIBOR.
    Thanks for your advise.Since US market is not doing well now,is SOR a better option as compare to SIBOR now?

  5. #5
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    Hey C.X. i have my own preference with regards to this issue. My preference is in the following order:

    1) Bank's Board Rate - depending on which bank
    2) Sibor
    3) Sor

    People who ask so much about such rates normally want to go for a floating rate package. In fact, a lot of bank officers tell their customers to go for floating packages as well. I have a different opinion on this issue as I recommend fixed rate packages instead.
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