I previously wrote about saving interest charges on your mortgage. I refinanced my mortgage last year and saved a few thousand ringgit on the first year mortgage interest alone! But when should you refinance your mortgage?
- When the lock-in period is over – normally there is a lock-in period of 3-5 years. If you got your mortgage 3-5 years back, your mortgage lock-in period is probably 3 years only. That is the time when Base Lending Rate (BLR) is low. Nowadays, banks normally lock-in your mortgage for 5 years. If you settle your home loan within the lock-in period, you will be penalized for doing so. If the penalty is 2%, and your loan amount is $100,000, you would have to pay $2000 for early settlement. Refinancing is considered an early settlement too.
- When the amount of interest saved by refinancing can recover the lock-in period penalty – Ask your mortgage officer to prove this to you before you decide to pay the penalty.
- When there are more attractive refinancing package available in the market – this will happen when the BLR is lower. More competitions amongst the banks will trigger better offers too. Banks normally only recoup their business acquisition fees (loan agreement fees, administration fees, commission etc) after a few years you serve the loan. So take advantage of the initial few years by refinancing whenever it is worth it!
You can learn more about home loan mortgage refinancing from SecureLoanConsolidation.com who sponsored this post. There are other informative and practical articles at the site regarding mortgage refinancing.