Yesterday we completed the refinancing of the mortgage on our home. This was the last of the three refinancings we undertook to take advantage of the reduced interest rates on offer. The refinancing involved four changes:
1. changing banks. Standard Chartered Bank offered the best terms;
2. a reduced interest rate. Our interest rate fell from Prime - 2.75% (works out at 2.25%) to one month HIBOR + 0.7% (works out at 0.95%);
3. drawing down additional principal. I need to put some capital into my firm next month and decided that borrowing against my home at 0.95% pa was a better option than spending my residual cash and/or selling some of my equities/funds;
4. reducing the term. Our old mortgage had about 16 years left to run. The new mortgage is for a 12 year term. While the net effect of a shorter term and additional principal (partly offset by the lower interest rate), will increase the monthly payments by about 60%, this is still well within my comfort zone.
Legal fees were HK$6,000 which is less than amount of interest saved in a single month at the reduced rate.
All I have to do now is make sure I earn more than 0.95% pa on my investments.