There are so many different kind of homeloan package offered by bankers nowadays. No matters what kind of loan package we are getting, just remember to do refinancing when the penalty period is over.
There is no such rule that bank cannot offer refinancing for their existing client. However, most banks don’t counter offer when we want to refinance. At least I faced this situation before.
I took the HSBC homeloan package in 2003. The contract says that I can only settle the entire loan amount after 3 years. If it is within 3 years, there will be a penalty incur ( normally a percentage from the loan amount). After the initial years lock-in period, I send the banker a letter to apply for refinancing. But HSBC didn’t offer a refinancing package. All they gave is a reduction of 0.3% (if not mistaken).
Leaving no choice to refinance at the same bank, I switch the mortgage to Alliance Bank with flexible payment, and linked to a current account. They absorbed all the moving cost e.g. legal fees, valuation fees etc.
The strategy is to take the advantage of the competitive offer of the low 1st year interest. It is normally 2.5%-4% interest rate at the initial year of the mortgage.
From my calculation, I save at least RM6000 of interest cost this year by doing the refinancing work. It is simple, just look for a good mortgage officer and sign a bunch of documents. Then you already save a few thousand ringgit!
UPDATE 16 October 2013
Nowadays, banks no longer offer the best rate only on the initial year. It is more like having a rate that is BLR-2.x% for the whole tenure. So the refinancing tricks doesn’t really work anymore, unless you are still serving the higher rate on your home loan that’s ages old.
However, you might want to consider refinancing to cash out extra money from the equity you’ve built up over the years – from the principle reduction and also the property appreciation.