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.


Personal finance author and trainer

    32 replies to "Save Interest Charges on your Homeloan by Refinancing"

    • Han Chongsen

      Whats your recommendation if this is the scenario .. i have 4 houses that still serving loan amounting 1,047,000 and having 2 houses fully settled. what should i do to reduced the loans asap ? now market isn’t that good and some rents cannot covers the mortgages for some. Whats you recommendations for such ?

    • Jeffrey

      As you have said that the current situation is different from the past, do you reckon that the two steps you mentioned still workable, particularly writing email to banks and ask for a reduced interest rate? Furthermore, in line with the government’s effort to curb speculation in real estate industry, refinancing of your existing loan tenure can only be max 10 years, if i understand it correctly. So how the refinancing can help us?

      • KCLau

        Hi Jeffrey, if your existing rate is higher than the market, you can definitely write in to ask for reduction.
        The refinancing calculation is based on 10 years installment on the top up to evaluate using your current DSR. If it passes, the loan can be refinanced but to the max tenure.

    • Serene Ng


      I would like to do the refinancing but I have MRTA which cannot carry to another bank. May I know do you have any advice on this? Thanks

      • KCLau

        For the MRTA, you can request the bank to assign the MRTA to the new bank.
        Or you can terminate for some surrender value (not much).

    • leesp

      thanks KC for your earlier input.

      Is that the only way to compare ? 6.6% versus 4.65% ?
      I have heard that it is better to put as much money in the home loan account to save on interest rate esp during the beginning of the loan tenure because the effective rate is actually way higher that 4.65%.
      Is this true?
      if yes, do you know how to calculate the effective home loan rate?

      • zulfi

        I do not have the formula to calculate the effective rate but I downloaded free online software and keyed in the data and could see details of the loan based on interest rate,amount outstanding,amount settled,installment amount,loan period etc.
        You can adjust the input data and see various different scenarios.
        You are correct that generally, we pay more interest charges in the early years of the loan settlement.


      Hi, 20years old can get loan tenure 40 year or up to 70years old? And easy to approve full loan?

      • KCLau

        @Steven, I think you can. Talk to a banker to confirm.

        • leesp

          Hi KC,

          Seek your advice on this.
          Total loan amount : RM 327,500.
          My loan outstanding is 315,000.
          Interest on homeloan : BLR – 2.2 : 4.65%
          I have RM60k in ASM with divident of avg 6.6 % pa.
          Should i put the RM60k into my home loan account?
          Will it save more interest as compared to the dividend earned from ASM?

          • KCLau

            Your ASM is giving better return than the cost of interest you are paying on home loan. So if it remains unchanged, it will be better to keep the fund in ASM. By the way, you have more flexibility and you control your fund, rather than settling the loan.

    • PC

      Anyone knows which bank still has zero moving cost for refinancing and the rates are competitive.

    • BT

      I read that we can apply Overdraft facility for house loan. How does it work? What is the advantanges compared with conventional house loan and who is qualified to apply. Any idea? Thanks.

    • BT

      Hi KC,

      Heard that bank is standardised the rate to BLR-1.9% (non zero cost package) now. My bank is currently offer BLR-0.75% and holding period end 1 more year from now. Penalty is 3.5%.

      Do you think is good time to refinance my house?

      • KCLau

        there is only one more year, you may wait until the penalty period is over.
        Anyway, you can always talk to a mortgage officer. Ask him/her to analyze whether it is worth refinancing.

    • Janelle

      I purchased a landed property recently and plan to sell off once the price appreciated. Bank offer me BLR-1.5% with no lock in period & BLR-1.9% with 3years lock in period (penalty 2% will be charged if sell within lock in period)… which one should I get? if I want to sell off in 2years time.

      • KCLau

        0.4% difference for 100k loan is only RM400.
        But the penalty of 2% will be RM2000 within the first three years.
        According to this comparison, the “no-lock-in period” offer is better.
        If you sell in two years, you will have paid additional RM800 interest charges only compared to RM2000.

    • SLK

      Hi! Thanks for sharing all your personal financial tips, i truly enjoy reading them all and find it very practical. Wish to consult this case in point, i got RM257k housing loan from MBB for 30 yrs, the 5 yr locked in period will be over by this mth end, and the interest rate charged moving fwd will be BLR+0.35%. It surely make sense for me to seek refinancing since everywhere else is offering BLR-1.8% (just last week Std Chartered closing offer period was BLR-2.2%). Ive submitted a refinancing appln for Std Chartered Mortgage One loan for a higher amount of RM270k (the retirement of MBB loan is RM230k, the excess will be a flexi loan at rate of BLR-2.2%, which we thought is a good deal), and is now pending approval. Apart from the interest savings i could benefit from the refinancing, i wish to know whether i shld continue to seek for the same 30 yr tenure (longest repayment plan, i.e. at age 65 yr) or the shortest possible tenure (by maintaining the same repayment amount to MBB with Std Chartered). Wld the choice of property here a factor for consideration for how long the tenure of loan repayment is? I actually have plans to move in to landed property in medium term, but not sure whether ill be selling this current condo. Hubbys view is to seek longest tenure possible since we may sell off this current condo and hope to make a gain OR we could always seek a better refinancing deal upon expiry of 5 yr lock in period again. But i tot we shld clear off as much obligations as soon as possible? tqs

    • Lennie

      I’ve got an offer for refinance from OCBC, and already signed legal documents. Later, my original bank (Citibank) counter offer me with competitive rate. May I know if there any issue if I want to cancel the refinancing from OCBC, and will there be any additional charges?


      • KCLau

        You will need to find out from the bank

    • Lai

      hi KC,

      i have bought a property of RM300,000, and the interest rate currently is BLR (5.55) – 2.2%, with tenure of 40 years. i was wondering, at what rate should i refinance my loan as it is already a very good deal… unless the reason i refinance is for cashflow purpose, i can’t figure out the idea of refinance after lock in period. please advise and enlighten me, thank you.

      i also heard some bankers telling me that if the interest is low, even if the lock in period is not over yet, we can actually write in to the bank and they may reduce the interest, after all they don’t want to lose us as client to other banks who like in your situation, bank absorb all moving cost… is that possible? thanks..

      • KCLau

        Hi Lai,

        Since yours is already a good deal .. you just need to refinance when there is a good deal offered at the time the lock in period is over.
        You can definitely write in to the bank to ask for a better rate anytime. Some request do work.

    • Joey

      Hi KC, as you mentioned that your loan in within the lock in period, did the saving take into consideration the penalty that you have to pay? As Zero Moving Cost from bank did not cover the penalty of your loan in lock in period.

      • KCLau

        Hi Joey,

        It also depends on the penalty amount. It is best to refinance when the penalty period is over.

    • Yati

      Hi KC,

      I am always interested in refinancing. Just curious to know, if my current loan will finish within 13 years (which I signed for a 20 years period only since 2001), is it recommended to do the refinancing?. If I’m not mistaken, the new refinancing loan will take up many years ahead and the difference of the monthly repayments is not that much difference either. 13 years will pass by quickly (since I’m only in my early 30s). What is your advice? Will refinancing do good for me?


      • KCLau

        Hi Yati,

        Refinancing is to take advantage of the lower interest rate normally offered to new loan.
        Generally, you will save interest paid for your case. You should talk to some bankers to learn more about the possibility.

    • kclau

      Hi Sunny,
      I didn’t deal with fiscal-wise before. Sorry that I can’t give you more info about them.

    • Sunny

      I am currently applying for home-loan. Actually i look up fiscal-wise and they contacted me. Since it was a good deal for consultant to help me meet the banks, and apply for the homeloan, i appointed fiscal-wise.
      However, i am still concern if this is legitamate and if they are trustworthy. Have you used their service before?


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