Buying Guide · Buried Fine Print
Legal Subsidy Clawback: Why Refinancing Early Can Cost You Thousands
What a clawback actually is
Many banks offer a legal fee subsidy or cash rebate when you take up a home loan, often to help offset your conveyancing costs. A clawback clause requires you to return that subsidy in full if you refinance to a different bank within a set period, which varies by bank and package (check your offer letter), even if that period doesn't exactly match your loan's lock-in period.
The important distinction: a clawback is a separate clause from the lock-in penalty, and what triggers it depends on the wording of your offer letter. In many offer letters it is tied to refinancing to another bank; some banks also apply it if the loan is fully repaid within the clawback period for other reasons, including a sale. Do not assume either way: read the clause.
How it differs from a lock-in penalty
These are two separate costs that people frequently conflate:
| Lock-in penalty | Legal subsidy clawback | |
|---|---|---|
| What it penalises | Early repayment of the loan during the lock-in period | Refinancing to a different bank within the clawback window |
| Typical size | A percentage of the loan amount repaid early | The subsidy amount originally given (for example $2,000 in the worked example below); amounts vary by bank |
| Triggered by selling the property? | Often yes, since sale usually means full repayment | Depends on your offer letter: often tied to refinancing to another lender, but some banks also apply it on full repayment within the period |
A borrower who refinances to another bank within the clawback window can face both costs at once: the lock-in penalty for early repayment of the original loan, and the clawback of the legal subsidy, as two separate deductions from what they expected to net.
Worked example
Illustrative example: a borrower takes a loan with a $2,000 legal fee subsidy and a 3-year clawback window matching the lock-in period. At 18 months, they refinance to a different bank chasing a better rate. They owe the full $2,000 back to the original bank, on top of any lock-in penalty specified in their original loan contract for repaying early.
Many new lenders offer their own incentives to help absorb exactly this cost, so it's worth factoring the clawback into the comparison rather than treating the new bank's headline rate as the only number that matters.
Revisit your borrowing limits before deciding to refinance with PropLeh's maximum home loan guide.
What to check before refinancing
- Your current loan's offer letter, specifically for a clawback clause and its exact window and amount.
- Whether the clawback window matches your lock-in period or runs longer.
- Whether moving from an HDB loan to a bank loan triggers the same clawback terms as bank-to-bank refinancing (this generally works differently, but confirm with your current lender).
FAQ
Does a clawback apply if I sell my property rather than refinance?
It depends on your offer letter. Many clauses are tied to refinancing to another bank, in which case a sale would not trigger them, but some banks also apply the clawback on full repayment within the clawback period. A sale within the lock-in period will usually also raise the lock-in penalty question. Read your specific clause before you rely on either answer.
Is the clawback amount the same as the lock-in penalty?
No, they're separate. The clawback recovers a specific subsidy you were given; the lock-in penalty is typically a percentage of the loan repaid early. Both can apply at once in some scenarios.
Can I negotiate the clawback window or amount?
This is set by each bank's offer letter at the time of loan approval. It's worth raising when comparing loan packages upfront, since terms can differ between banks and between loan products.
Where can I find my own clawback terms?
In your original loan offer letter from your bank. If you no longer have a copy, your bank's mortgage service team can provide the relevant clause.
This article describes common Singapore bank lending practice rather than a specific government regulation, so there is no official IRAS or MAS page to cite for the clawback mechanic itself. Specific clawback amounts, windows, and trigger conditions vary by bank and loan package. Always confirm against your own loan offer letter rather than relying on the general structure described here.
Comparing loan packages or thinking about refinancing? Message us on WhatsApp and we'll help you weigh the clawback and lock-in costs against the savings before you commit.