Refinancing your existing home loan can save you a lot of mortgage interest. In certain cases, you can easily save more than a hundred thousand ringgits if you borrow a substantial amount of money to buy your residential house.
The reason to refinance mortgage:
- to save interest cost with better home loan package offered by other banks
- to reduce monthly payment
- to reduce or prolong loan tenure
- to cash out the home equity for emergencies or other needs such as children education and business venture.
- maybe it’s just simply to enjoy better flexibility in managing cash flow
- to consolidate all other debt into one with the lowest interest charges
How much can you save by refinancing home loan?
For illustration purpose, I will use an example of an engineer to calculate how much he can save by doing refinancing
Home loan details:
- Start paying monthly installment on 1st January 2004
- loan tenure 30 years
- mortgage interest rate with his existing bank: first year 2.5%, 2nd year 7%, 3rd year 7.5%, 4th years onward 7.75%
Refer the schedule of payment below:
After the lock in period of three years with the existing bank, I adviced him to refinance his mortgage to OCBC bank on January 2007. There will be no penalty on early settlement after the lock in period of first three years. Currently OCBC is offering fixed rate package of
- 1st to 5th year 6.18%
- BLR – 1.55% thereafter ( BLR or base lending rate = 6.75%)
- moving fees is absorbed by bank
To compare apple to apple, I calculate using the remaining tenure of 27 years and only refinance the principle of RM191,204.55
The new schedule looks like below:
Before refinancing, he would have to pay RM1410/month installment.
After refinancing to OCBC bank, he only pays RM1214.67/month, providing him a positive cash flow of RM200/month.
Compare the total amount of installment paid after 30 years:
1. No refinancing: RM498,625.39
2. With refinancing on 4th years: RM408932.28
Total saving is RM89,693.11.
He can save even more by doing refinancing after serving OCBC mortgage loan installment for five years, which is the lock in period practiced by bank at this moment. It is a simple strategy to always refinance your home loan after the lock in period. This will definitely save you a lot of mortgage interest cost.
If you are interested to get an amortization table or loan schedule for your current mortgage, feel free to contact me.
For more information and tricks on mortgage loan, read my other related articles:
Save interest on homeloan
Mortgage: the cheapest debt
Buy House before Car
Malaysia Home Loan Resources
Information needed to calculate cost savings for refinancing
- outstanding loan
- installment amount
- interest rate
- current loan tenure
- lock in period at existing bank (normally 3-5 years)
If you find it hard to get the information above, maybe you lost the offer letter or loan agreement, you can call your bank customer service center:
Customer Service Call Center of the Banks in Malaysia:
- AmBank 03-2178 8888
- AIA 03-2056 3207
- Alliance Bank 03-5516 9000
- CIMB Bank 1300 88 0900
- Citibank 03-2383 0000
- EON Bank 03-2148 8077
- HSBC 03-2050 7878
- Hong Leong Bank – 03-7626 8899
- Maybank 1300-88-6688
- OCBC 1300-88-5000
- Public Bank 03-2176 6000
- RHB Bank 1800-88-9922
- Standard Chartered Bank 03-7711 8888
- United Overseas Bank 03-2612 8121
Home Loan Calculators:
- Refinance calculator by YKConsultancy
- Loan Amortization Calculator by Malaysia Real Estate Portal
- Loan Calculators by Standard Chartered bank
- Loan Calculator by Maybank
- Mortgage calculators at Fiscal Wise
- Loan Calculator by OCBC
- Compare loan at EMYGHT
- Simple loan calculator by Meshio
Other relevant articles about buying house in Malaysia:
- Home loan FAQ by iProperty
- Home loan by Malaysian bank at Property Malaysia
- Mortgage category at My Home in Malaysia
- Buying a house at Alloexpat
Technorati Tags: home loan, mortgage, refinancing, save interest
{ 34 comments… read them below or add one }
A lot of people who took out their mortgages a number of years ago may not be getting the best deal possible. I think that probably the tow most significant changes in the industry in this regard in recent years.
I certainly feel that refinancing can be a great idea as long as people understand the process and the potential pitfalls. It never ceases to amaze me how a lot of people don’t understand the details of what is the single largest financial undertaking for most people.
I run a mortgage information site and I always try to explain clearly to give people a better understanding of what’s available out there.
Thanks for visiting my blog, Tom.
I found this http://www.mortgage-refinancing.be website useful when I wanted to know some quick informations about the reasons why to refinance. I think now it is the time for that.
mortgage loan installment for five years, which is the lock in period practiced by bank at this moment. It is a simple strategy to always refinance your home loan after the lock in period
Hi, I just receive two proposal from two different
banks. One bank propose BLR -1.75% for whole tenure. The second bank propose 1st 2 years -2.30% thereafter BLR -2.05%. Lock in period 5 years for both banks. I found the proposal from the second bank too good to miss. What do you say?
@ Caryn,
The second offer is definitely better. But I wonder why is there such big differences between two offers?
Is it zero moving cost?
Read the offer letter. How can we know without reading the offer letter?
I am considering refinancing,
currently i am having 2 home loans.
1. Affin bank
-after lock in period (loan started from 2002)
-loan amt RM73948 (including MRTA – RM1948)
-now paying at around RM490 (blr+0.65%) per month
(1st year – 3%, 2nd year – blr-0.5%, there after – blr+0.65%)
-property market value -rm120k
2. Standard C. bank
-still under lock in period (loan started from 2005)
-loan amt RM101732 (including MRTA – RM1732)
-now paying at rm668 (blr+0.38%)
(1st year – 3.50%, 2nd year – blr + 0%, 3rd year – blr + 0.38%)
-property market value – rm240k – 250k
now Hong Leong offering this package.
-1st year – 2.88%
-2nd year – 3.88%
-there after – blr-1.2%
– 5 years lock in
my plan is to do refinancing for Standard C. bank for rm175000( loan amt 170000 + penalty 3000 + MRTA 2000)
So, every month,
– 1st year rm726
– 2nd year rm823
– 3rd year rm971
Obviously after refinancing, it does provide some positive cash flow, but my questions are:
1. Is the package offered by Hong Leong a good package? (compared to currently available n market)
2. If im considering to do refinancing again after the lock in period, does this package look better?
3. For MRTA, im planning to go for 15 years only, is it save? (covering 100% for myself and wife)
4. Hong Leong bank will settle the outstanding amount in Standard C. bank(rm100k) and for the extra rm70k, i will do an early settlement for Affin bank, is it OK for this plan?
Many Thanks!
Hi ckreds,
About your questions:
1. Hong Leong’s package is very competitive. I can’t say that it is the best because I didn’t compare all the banks.
2. You can pretty much do anything after the lock in period. I think nowadays, there are package that lock only for 2-3 years. HSBC offers one on 3yrs lock in, due to the low interest rate.
3. You can choose not to MRTA if you want. There is no ruling that you must buy MRTA from the bank. You can use your own insurance policy to cover the liability. But some bank do offer better rate if you take up MRTA at the same time. There is a way to work around it – buy only 5 years MRTA. You should know whether it is worth it.
4. Consolidating your loan (two become one) as you plan will save some interest charges because the more you borrow, the better rate you are offered. Another thing to consider is the tax issue. If your renting out the property on Affin Bank loan, the interest can be calculated to reduce your net rental income.
Happy CNY!
Dear KC,
Been reading your “Money Tips” book and finding it great. Are there still banks giving 3 year lock in period? So far
Alliance, Maybank, CIMB, OCBC, EON, Ambank all imposing 5 years lock in.
I haven’t tried the bigger international ones like HSBC and CITI because they are too far away to make payments and I don’t have the advantage of constant online access (I frequent Cyber cafes). What is the drawback of having a longer lock-in period other than not being able to take advantage of deals that come along the way?
Also, Between zero moving cost and non-zero moving cost, I have been calculating and there is a rough 1k difference in the final value. Which has the potential to incur more interest? Some banks offer to include the non-zero moving costs (i.e. the legal, valuation).
BTW, I’m taking a 30 yr loan with a 10 yr MRTA which comes up to RM 6320 in extra costs on top of my loan amount (which I intend to pay up front to not incur any interest). The package I’m considering is a non-zero moving cost type. If I consider the zero moving cost, I’ll pay roughly an extra RM 20 in premiums per month, which comes to about RM 7200 in total after 30 years. I don’t see the benefit in taking a zero moving cost option.
Hope to pick your brain on this. Thanks in advance.
To Caryn,
The bank which is offering you -2.3%, -2.05% is good. Which bank is it? Mine is only giving me -2.2%, -2%. It could be your loan is >200k, thus the extra deduction in %.
@TG,
HSBC provides 3 years lock-in package. Normally, if you choose Zero-Moving-Cost (ZMC) package, banks will charge a bit higher interest rate. I know that banks pay the lawyer less compared to if we are going to pay the lawyer directly. If you want to compare the real cost involved between ZMC and Non-ZMC, you will need to use financial calculator. Simply comparing the end result of the total difference is not really a fair comparison – thinking of paying RM2000 upfront, or pay extra RM50/month for 5 years. Which is better? You would need a financial calculator to really calculate the rate of return. Which one is worth it? It is also different between you and me. Let’s say the rate of return you calculated is 7%. I may think that 7% is not high, and I would choose ZMC, so that I still keep the lawyer fees which is supposed to be paid upfront. As long as I can generate >7% return on that money, I am winning here. But for someone who is going to put the money in FD anyway, 7% is worth paying upfront.
BTW, I always choose the ZMC package. I like to keep the money with me.
For MRTA, I don’t buy from banks. I would recommend that you top up your own life insurance. You will get more flexibility and probably pay less in premium. Talk to a life insurance agent to find out how.
i need & interested to do a refinance for my “personal loan”. Do you have any recommend and suggestion on : how & which bank give the best offer ? im currently using Aliance bank.
@ Paun,
Talk to at least 3 bankers. I bet you will learn a lot in the process.
Need your advise on whether i should refinance.
Currently i am having 1 home loan.
1. Standard C. bank
-still under lock in period, currently in third year (loan started from Jan 2006)
-loan amt RM169000 (including MRTA)
-now paying at rm1035 (blr+0.38%)
(1st year – 3.70%, 2nd year – blr + 0%, 3rd year – blr + 0.38%)
-property market value – rm240k – 250k
I approached HLB agent , and this was her offer.
– 5 years lock in
– BLR – 2% for tenure of 30 years
Apart from that, I’ve some debts with credit cards due to the
furniture and renovation fees. Therefore now
I wish to consolidate them into this loan so that I can avoid
paying higher interest for the credit card.
So the final loan structure would be like below:
Outstanding amount: 163k
Penalty: 3% of Original169k = 5.1k
MRTA: Another 5k for 2 persons(Is this expensive)?
Others: Another 10k for me to service the credit card debt.
My questions are:
1. Is the new package competitve enough compare with others
available in the market.
2. Should i refinance?
3. Can you tell me or list out what other fees that are possible need to pay
out if i opt for the new package beside the loan and MRTA?
As far as i concern, I was informed when I had approached them during last visit.
a) Penalty
b) Legal Fee, Stamp Duty
c) Valuation Fee
d) Monthly maintenance fee(RM10)
e) One time setup fee(RM200)
4. How to know ZEC or NZEC which one is better?
Thank you!
@ Brian Ng,
1. I think you may be able find offer better than BLR-2%. Try Public Bank.
2. It make sense to refinance because you can settle your credit card debt much earlier.
3. You can save on the new MRTA. Just ask your Standard C. officer to help assign it to your new mortgage providers.
4. For better cash flow, go for ZEC.
@ KCLau
I actually had approached 4 banks branches nearby my house.
The highest I can get then was BLR-2% for the whole tenure
by HLB or PBB. They told me that because the amount I wish to
borrow is less than 200k or 250k, therefore the highest they can
offer were this rate. I would actually prefer PBB ior HLB over
the other local banks. No idea though on the rest foreign banks.
The other banks I had approached were CIMB and Alliance, but the
offer i got from them were less appealing comparing to the one I’ve
mentioned on top.
I am considering to refinance my property. Currently, I have a home loan with HLB.
* After lock in period
* Outstanding loan amount @ RM317,000.00 (with MRTA)
* Monthly installment @ RM2309.00
* Property market value @ RM550,000.00
Requested lower rate from HLB and they have approved by offering BLR -2.00% (whole tenure) with 5 yrs lock in period. 5% penalty for early settlement within the lock in period. I think the bank a bit too harsh on this!
Another one from OCBC, they have offering BLR-2.4% (whole tenure) with 5 yrs lock in period. MRTA is optional. NON Zero moving cost. 3% of loan amount OR RM5K penalty whichever is higher for early settlement. Please advise.
Thank you.
@ Sam
Oh man … the HLB 5% penalty for early settlement is too much.
OCBC offer seems reasonable.
Just got a proposal from Standard Charted Bank.
>MOA Finance Entry Cost Package
>Loan amount above RM300,000.00 @ BLR – 2.35% without MRTA
>Loan amount above RM300,000.00 @ BLR – 2.40% with MRTA
>Lock in period 5 years
> 3% penalty of total loan amount for early settlement
What do you think of this proposal?
Hello KC,
I just got an offer from HSBC Flexi Loan(1st.yr BLR-2.5%,2nd BLR-1.75%,3rd yr onwards BLR-2.1%).This package is NZEC.Their ZEC rate is higher than the other banks.
This is 3yrs Lock-In.One thing concerns me is that the Penalty is too high.They charge admin fees 1200 + 3.5% from the Total Loan amount.This is outrageaously high compared to other banks.
Since I have a current account HSBC for the last 5yrs and using their Credit Card for the last 13yrs and bought an Insurance policy 300K with them some 7yrs back,I tried to nego for better rate and less penalty rate but they are refusing to consider.I got disappointed with the Branch Manager and their shallow consideration for the existing clients.Since I’m footing the legal fees, surely they can consider a better rate and penalty clause to be amended..
So, now do you think I can still have a room to nego at their HQ in KL ?Is there are any other Banks offers better package?I’m considering Std Chart and OCBC.If their offer is good, then I would want to close all my accounts with HSBC and move my assets to other banks.A very bad customer Service by HSBC Management .
Pls offer your advice .Thanking you in advance.
Hi Visva,
You can try other banks. If they offer better package, you can always go back to HSBC to ask for a counter-offer.
I like HSBC because of their efficiency and good customer service.
Hello KC,
I am trying to refinance my home for RM100K frm HSBC. The refinance amt is just 50% of the current market value. My application was rejected. The reason given by HSBC was i have a 1 month lapse (actually less than a month) of car loan not paid thus has affected my application. They ask me to resubmit my application again in probably 6 months time or 1 year. Is there any other way that I can overcome this issue. Will it also affect if I tried with other bank for refinance ?
Wld appreciate if you advise what shld i do next.
Thank you.
Dear KC,
In addition to my earlier message, fyi my house loan has been fully paid since last early of last year. I am prompt in paying 2 of my credit cards. I was not aware of the lapse amt until HSBC advice.
Dear KCLAU,
First of all, thank you for outstanding financial blog.
I am sure many visitors have benefited and educated themselves greatly.
I would like to ask you on the following current scenario with my home loan Alliance bank mortgage.
I have taken housing loan loan of RM297,500 plus MRTA 16,790.00 , in December 2006
The tenure 348 months ( 29 years)
The interest structure rates were stated as below :
For 1st year at 3.80% p.a on daily rest
For 2nd year at BLR + 0.00 % p.a. on daily rest
For third to 15th year at BLR + 0.30 % p.a. on daily rest
For 16th to 20 th year at BLR – 0.35 % p.a. on daily rest
Thereafter at BLR – 1% on daily rest
At time the BLR was 6.75 %
Which projects to the following repayment amounts accordingly :
1st year RM1,492.00
2 Year – RM 2,044
3 year – 15th year _ RM 2,102.00
16th – 20th year – RM 2,023.00
Subsequent year – RM 1,969.00
Due to overall BLR reduction at the current time ( BLR 5.55%) my current monthly 3 rd year installment amounts to RM 1,865.00
Could please comments on the following :
On my June 2009 appeal for the reduction of mortgage loan rate , bank has responded by the following as :
to the outstanding amount of RM301,544.85 as at June 2009 and remaining tenure of 319 months :
Interest rate : First 24 months BLR -0.7% ( Amount per installment RM1,684.00)
Thereafter RM1,474.00
I have been reading through your post titled ” Beware of the Lock-in Period of your Home Loan Offer Letter”
http://kclau.com/wealth-management/beware-of-the-lock-in-period-of-your-home-loan-offer-letter/
where the main conclusions were summarized in another post http://kclau.com/wealth-management/question-you-should-ask-before-you-sign-the-home-loan-offer-letter/
Dear KCLAU ,
Except those highlighted points in those posts , which ones shall be considered thoroughly or renegotiated regarding my particular case :
1. What do you think on new offer , at my opinion rates structure may be acceptable ?
2. at what other crucial points shall be my response to be focused ?
Thank you in advance for any valuable suggestion generated .
Best regards,
Amakash
Hi Amakash,
There are offers of BLR-2.0 or more for the whole tenure at this moment.
1. Try appeal again to get the offer compatible to other bank
2. You can also talk to mortgage officer from other banks to see what is the offer they can provide.
I have my house loan with eonbank still in lock in ( just paid in 3 years only . actual in 5 years ).
Can i refinance this loan with another bank ( please suggest which bank ) . How much is this possible for Eon bank charge penaty ? If they not agree , which way i should do to less my loan , Because i want to make the new loan for another house
7% is high. You can refinance it. Talk to a mortgage officer to find out the option.
Hi ,
P/S : Now my loan from 3 year is 7 %
Refinancing your mortgage is not a bad idea if is viable to accomplish can still afford the repayments on the mortgage. Some people have jump into doing this without fully thinking of what needs to be done and just assumed it’s a way out of a bad mortgage to a good one. When refinancing talk to a financial advisor and find a mortgage company ‘will’ offer a better interest rate as you don’t want to charge more than previously. Good article.
Hye Kc.
plz give me ur mobile no for help me to refinance my house.
Hi KC,
Just wondering in case you know after refinancing, can we sell the house before exit the lock-in period? Is the lock-in period apply to selling house also?
Hi Lina,
When you sell a house, you need to settle the loan. In this case, the buyer will get the money to settle your housing loan. That’s known as early settlement as well. So the lock-in period still applies.
I’ve written an article about such so called “Mortgage Reduction Company” on my website : http://peterlim80.blogspot.com/2010/05/company-that-offers-ways-to-reduce-your.html
I personally think you can do without those company.
what are the spread margin of banks in malaysia from year 2000-2010????????????? help me!!1
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