As competition is heating up amongst the commercial banks for banking on home loans, more new home loan promotions and competitive refinancing packages are available in the market to entice homeowners to refinance their existing loans. Following the latest cut of interest rates by Malaysia’s central bank, most commercial banks have already revised their base lending rates (BLR) from 6.75% to 5.75-6.0%. With interest rates trending lower, it is a good time to review, restructure and refinance your existing loans. There are several good reasons that home owners would benefit from switching their loans to a new loan with lower interest rates.
- Lower your monthly installment payment
- Debt Consolidation
- Using the Existing Equity in the Home
- Shorten the term of your home loan
- Combine a first and second mortgage
- Reduce the interest you pay over the life of the loan
- Switch from conventional housing loan with variable rate to a fixed rate loan or Islamic loan (or vice versa)
- Eliminate MRTA mortgage insurance
Before opting to refinance, it is important for home owners and property investors to consider the savings or benefits of refinancing vis-a –vis the costs of refinancing. Do your own break-even analysis between long term savings and refinancing costs to determine whether the savings really outweigh the costs of refinancing or otherwise.
More at Making sense of mortgage refinancing and Should I refinance now?.
However, there are circumstances whereby refinancing might not give you the maximum savings such as when you have short remaining years to retire your loan etc.
For Malaysia home owner as well as property investors who are uncertain of holding the property for long term or you have plans to sell off the property in the near term, not all refinancing packages will provide you the best refinancing benefits. Refinancing packages with features of “Zero-Entry Cost” or “Zero-Moving Cost” may not necessarily the best option, depending on your financial needs. Under such packages, although you are not required to pay any processing fee, legal fees, stamp duty, valuation fees upfront, the loans are subject to higher interest rates and imposition of exit fees or early redemption penalty up to 5% of the loan amount (vary from bank to bank) in the event that you choose to redeem your loan within the lock-in period of 5 years. Example if a house owner has to redeem his loan of RM200,000.00 within the lock-in period, he has to pay 5% of exit fees ie RM10,000.00!!!
We have come across property sellers who were stuck with loans with lock-in period and only realized that if they decide to take up a good deal offered by interested buyer, they have to pay the exit fees for redeeming the loan prematurely. On the other hand, if they choose to wait until the expiry of lock-in years ie after 5 years to avoid payment of exit fees, they might lose the opportunity of capitalizing gains or losing the sale due to changing market conditions. For investment properties, the better alternative is to look for refinancing packages with no exit fees or shorter lock-in period which give you more flexibility in terms of selling / renting, though initially you may have to pay slightly higher interest rates and documentation costs, it is still better than paying exit fees which could end up diluting your capital gains.
Below is a simple checklist to guide you on home loan refinancing :-
1. Get information on the current mortgage
For the current mortgage, you should be able to get the following information from the bank:
– the outstanding balance or ringgit amount left on the mortgage;
– the remaining number of years on the mortgage; and
– the interest rate on the loan.
2. Get information on the new loan
For the new loan, you should get information on the following:
– the terms or the number of years of the new loan; and
– the interest rate on the new loan.( the latest interest rate can be as low as BLR – 2.4% )
3. Get the costs of refinancing
The costs you are likely to encounter when refinancing include:
– processing fee or application fee;
– credit check fee;
– legal fees;
– stamp duty;
– disbursements fee;
– valuation fees; and
– redemption fees (if applicable)
4. Shop for best refinancing loan packages that suit you.
– Find out the latest home loan promotions by various lenders in Malaysia :-
–Malaysia Home Loans – What’s New (January 2009)
–Conventional home loan packages
–Islamic Home Financing Packages
Get the lowest interest rates when you refinance your home loan with iMoney’s calculator and comparison tool. Apply online and get professional assistance from their expert mortgage consultants. Sign up here to get a free home loan refinancing consultation ->>> http://www.imoney.my/
-other home loan packages offered by non-bank lenders; AIA, ING
Downloads
Home Loan Smart Refinancing InfographicYou might need to "right-click" and "save-link-as" to download this PDF infographic to your computer.
This article is contributed by Sr Tan Chai Liang, a Valuer/Estate Agent/Auctioneer who blogs at www.intproperties.com.
82 replies to "How to Refinance your Home Loans Smartly"
Home loan refinancing can be explained better with the help of an illustration. Let us consider a Mr. X, who is a home loan customer from Bank A. He decides to opt for home loan refinancing in Malaysia. So, here is what he does:
Scenario 1:
Mr. X buys an apartment at a prime spot in Malaysia. The year is 2010.
He gets the apartment with the help of a home loan of RM400,000 with Bank A.
He finds the value of the apartment increasing over the years, yet pays monthly installments with the same interest.
After some years, he has an outstanding amount of RM200,000 with Bank A.
Now it’s the year 2018. Mr. X has different needs now. He wants more financial viability. Here is what he does.
The value of the home he had bought in the year 2010 has now increased to RM800,000. Mr. X thinks that it is perhaps the ideal time to refinance his home.
He opts for a home loan refinancing in Hong Leong Bank (HLB). Also, there is an outstanding repayment amount of RM200,000 with his original loan from Bank A in 2010.
The probable refinancing he gets for his home now in 2018 is 80% of RM800,000 = RM640,000.
Keeping in mind his outstanding loan amount from the 2010 home loan, he gets a refinancing amount of RM640,000 (current value of the property) – RM200,000 (outstanding amount from the previous loan) = RM440,000.
So, that’s home loan refinancing for you. Now, Mr. X can use the RM440,000 amount he receives from HLB for any of his personal uses and pays off the loan at lower interest rates than before in monthly instalments. Also, it has to be noted that the previous home loan gets paid off without taking into account the refinancing amount of RM440,000 that Mr. X receives.
Scenario 2:
Mr X has paid off his home loan and his apartment is now free from encumbrance. He thinks of refinancing his apartment for his child’s education fees.
The value of the apartment he has is now RM100,000.
He decides to refinance his property with Hong Leong Bank (HLB). The probable refinancing amount he gets for his home now is 80% of RM100,000 = RM800,000.
As his apartment is free from encumbrances now, he doesn’t need to pay for his outstanding balance. Hence, the refinancing amount RM800,000 can be fully uses for his child’s education fees.
Hi KC,
Thanks for the information. I would like to ask regarding the refinancing margin in Malaysia Banks. I have approach Public Bank. They inform me that refinancing margin is only 70%. Initially I taught the refinancing margin is 90% in all Banks. Any information regarding refinancing margin in Malaysia Banks that you share. Thank You
If it is 3rd residential property, then it is 70%.
Hi KC,
I would like to refinance my house, our current loan at CIMB Bank and paying off at RM600+ per month. The outstanding loan is RM90K but loan agreement under 2 person and one of the person is under blacklist, can the loan being approve ? Awaiting for your kind advise. TQ ….Sally.
Very hard when someone has bad credit. Unless you refinance to one individual provided that the DSR is qualified.
Hi KC
I want to refinance my house that owned by 3 person, but there are a person who c-cris record was not well at 5 month ago, although we was kept in good record in recent 5 month, but the bank stil reject our application and said we have to wait until next year and the application can only be approve. And all the bank is the same answer he said.
Any other company you can suggest that for more easily to pass application of this refinance housing loan ? Or we just can wait until next year?
I think you will still need 12 months to rebuild your CCRIS record.
Hi KC,
Current Loan amount 0 RM 156k
15 years to go. Will like to go for refinancing.
1. Heard of refinancing package where you can get some cash. How does it work?
2. Currently, i have 2 housing loan under my name, with one joint name (2nd loan). The 2nd loan’s property isnt under my name and im not paying for the loan. Do you know if it will affect my future loan, even with higher salary and joint ownership?
The refinancing process means you take up a new loan with the same property and pay off the old loan with it.
If you take up more loan than needed to pay off the existing loan, you will have extra cash handed to you from the new loan provider.
There is always effect on your new loan application, and it keeps changing depending your income and loan eligibility.
Hi Mr KC
I am having balance home loan for 55k current value 250k should i refinance the house or take o/d facility for investment purpose.
please advise me.
I you know how to invest profitably and get a return way better than 4.5% mortgage interest charged currently, it is a good idea to cash out the equity of your home and invest on your own.
Hi KC,
I would like to refinance my house, can i know what is the actual additional cost will be incurred? Recently i heard from my friend said that some of the bank will bear some of the additional cost, is this statement true?
Thank you.
Hi, is it possible to cash out from refinance to settle off my credit card balance and personal use?
My condo CMV around RM480k, O/S RM 240k…wish to cash out at least RM 100k…is it possible?
If add up current cc os then DSR is super high, but if can consolidate the loan then DSR can be below 70%…i dont mind cancel all cc..
I wish to refinance my existing loan. I have 2 types of loan: 1. Staff loan all at 4% with monthly instalment payment of rm8k and 2. ASB financing all at 5% with monthly instalment payment of rm8k too. I want to reduce my instalment amount and get extra cash for ASB investment. Should I proceed to refinance and which bank giving the lowest refinancing rate?
Hi kc..
If the developer in bankruptcy.. we can’t apply refinancing is it. Please advise
Outstanding balance : RM61,651.33
Interest rate : 6.85%
Monthly instalment amount : RM480.00
Locking Period : NO
Should i refinance?
Hi KC,
1. Normally how long does it take for the refinancing to be approved, and release the funds?
2. What documents do we need to apply for refinancing?
3. Does the process run like this, the new bank will pay off the previous bank loan and remaining funds will be banked into a designated bank account?
Thank you.
Hi Alfred,
1. After your refinancing loan is approved, the whole legal process to redeem your existing loan will take at least 1 month. If it is leasehold and State Consent is required, the process will be even longer. Ask the lawyer who handle this to give you an estimate.
2. It starts with talking to some bankers/mortgage brokers. I think you just need to show your loan letter offer and existing loan statement, and the usual income proof required by banks.
3. Yes… you are right that the new bank will pay off the existing loan first. The remaining will then be credited to you.
KC,
I would like to refinance my house currently.. My house loan in balance is RM220K & I had been paid for 4years. May I know how much can I refinance in this case ?
Have to check your house market price – you can cash out the difference. Bank will do the necessary to determine how much they want to lend you, based on your property market price, and your Debt Service Ratio.
Can an overseas working Malaysian cash-out from existing home loan?
Can try. I don’t see any reason why you can’t.
Reply from OCBC mortgage manager
“Good day, as per Bank Negara Malaysia ruling, we can’t cash out to person who work/ reside outside Malaysia although you are a Malaysian. To eligible for cash out, a Malaysian need to reside/work in Malaysia for more than 182 days.”
Surprised!
oh.. This is really new to me. Did you try other banks and how is their response?
Had approached few other banks, seems like most of them are ok to refinance to me even though I am working overseas. Even UOB (also SG originated bank) approved.
Good to hear that. Thanks for the follow up and update.
Hi Mr kc lau,pls help get me any mortgage for do refinancing my house.tq
You need a mortgage advisor.
Dear KC,
1st my housing loan in Eon Bank. Now Hong Leong Bank, when they transfer to this bank my monthly installment was increased to 1500 to 1817. Now days housing loan increase ready so my installment is RM 2101.00 effective from 1 November 2014.This installment very very high me. so i want to do refinance. which bank better rate. i already tried few bank so the answer unsuccessful. coz last time my payment not nice, so what i should to do. very diffucult to pay this amount. Tq
Hi Kc,
Need your advice on this,
I just done early settlement of my home loan with EPF withdrawal & now thinking to get cash around 60k for renovation.What should I do & which bank offering good deal.
Please advice.Thanks
Yellan
@Yellan, I am not sure what do you need? Are you saying that you want to borrow money for renovation?
In this case, let’s assume that you are thinking of refinancing your mortgage-free house, to get the cash for renovation.
For homeloan comparison, there are a few sites you can check for rate and package: imoney.my, comparehero.my and loanstreet.my
hi ,i just got my homeloan approved by rhb for 80%,can i restructure my homeloan immediately oc obtain? tq
@Callie, you can refinance anytime but there will be early settlement penalty involved. If you do it within the penalty period, you might be paying extra to restructure your loan.
Hi KC.
Need your advice on this.
I plan to pay off my housing loan (remaining 70k, BLR -1.80) in 3 years. the monthly installment is rm535 for 25 years (now 19 years remaining).
Therefore I plan to apply a personal loan of 70k , 2.36%/year (fixed rate) for 3 years, with monthly installment of rm2083. Is it a sound idea? Or should I just continue paying an extra 1500/month off the principal amount for the next 36 months?
My plan actually is to avoid paying high interest on the house since the actual loan amount is only 90k. And I’m reluctant to use my savings to pay off the mortgage.
Thank you in advance for your attention KC.
Hi KC,
I purchased a house in 2010 in Puchong for RM 170,000. We payed a d/p of RM 70,000 and took a loan for RM 100,000 from PBB. Currently the property value has gone up close to RM 400,000. I’m in need of cash now to purchase another property. Would it be a wise choice for me to refinance my existing loan with PBB? I did some research and it seems like AIA is offering much better rates. Also will there be any tax which I need to pay, considering it has only been 3 yrs now?
@Sathiya, you can refinance and cash out the equity. The problem is that there is a new ruling that when you refinance an existing homeloan, it can’t be longer than 10 years. So your installment will be a lot higher each month.
AIA offer fixed rate for the whole term so you will feel more secured knowing that there won’t be increment on your installment if interest increases in the future.
Tax is not required. But you will incur cost for the legal process of refinancing (stamp duty for loan agreement, legal fees, early redemption penalty etc)
Hi ,
1) What is big differences between obtaining loan from Bank and taking government loan to purchase house ( assuming that the buyer is Public sector staff)?
2) if currently the property is under Bank Loan scheme, can the owner ( Public Servant) refinance it under government loan ?
What do you think of those who refinance their property for cash and use them for investment? Is that recommended?
@Ken, that is recommended as long as you can find investment that gives higher return than the interest you pay to bank.
i bought my house in 2011 however, the property price has increased 150k.
i tot of refinancing my house to get some cash to clear debt etc.
im still locked in my mortgage loan (5 yaers)
what u think?
Dear KC,
i need some help on the loan currently i have a loan of RM160,000 and BLR -1.99, the lock-up period if over and i need a top up loan from the same bank RM50,000, the loan have been approved and the top up loan is BLR – 1.3, shall i try a another bank, what about the MRTA, can i claim the MRTA is i go to another bank, do we need to have MRTA please advice.
I have check with another bank and their can offer BLR-2.2 or 2.3 should i ask for better rate or the rate giving to me ok.
Dear KC,
I took a loan with PBB RM220,000.00 and the current balance now is RM160,000, i need a top up of RM50.000 from the same bank, it was approved but RM40,000, with currently i have a loan at PBB with BLR-1.99, but the new top up loan is BLR – 1.30 for RM40,000.00, just iam not very happy, my question is whether i should go to another bank for better rate, what about the MRTA, my old loan we have taking the MRTA, can we claim back the money, do we have to take MRTA for the new loan at the new bank? please advice.
regards,
ravin
Cut it short, I have an loan of Rm299000. My interest rate is BLR – 2.5%. So every month I am charged about 700-800 ringgit just for the interest. I have been very vigilant in trying to clear the amount, solely to cut down the interest. Now I’m down to 160000. But I was just wondering, with my lock in period of 5 years in the background, and if I did have the money to clear it off one time, what would be the best strategy be, minus the penalty of violating the lock in period? Even if I made it up to RM10000, I will still have too make sure that I am ‘able’ to pay the minimum amount per month, being careful not to overpay, thus violating the contract. Does this mean that no matter how much I pay of strategize, I will still have too pay interest every month, maybe smaller amount, but never small enough to be neglected, as there has to a minimum amount per month ‘owed’ times the amount of years left. Can’t I just pay the interest one lump sum and settle the principle at my own sweet tim
i have 75k on loan and period over another 15yrs.my current payback was600 and 43 yrs old.can i have od for investment porpuse.yq.
Hi KC,
I have question in my mind which I have yet to find the proper answer. I really hope that you’ll be able to spend a moment to help me out.
I read your post about understanding more about our current loan. I did. In fact I’ve gone through a couple of times the pages laden contract, though I must say most of the time I have not much clue of its content.
Cut it short, I have an loan of Rm299000. My interest rate is BLR – 2.5%. So every month I am charged about 700-800 ringgit just for the interest. I have been very vigilant in trying to clear the amount, solely to cut down the interest. Now I’m down to 160000. But I was just wondering, with my lock in period of 5 years in the background, and if I did have the money to clear it off one time, what would be the best strategy be, minus the penalty of violating the lock in period? Even if I made it up to RM10000, I will still have too make sure that I am ‘able’ to pay the minimum amount per month, being careful not to overpay, thus violating the contract. Does this mean that no matter how much I pay of strategize, I will still have too pay interest every month, maybe smaller amount, but never small enough to be neglected, as there has to a minimum amount per month ‘owed’ times the amount of years left. Can’t I just pay the interest one lump sum and settle the principle at my own sweet time?
Would be great if you could help.
A thousand thanks
BG
hi, i want top-up my housing loan around rm20,000.00 for renovation , currents balance rm4000.00, and current value house now around rm300,000.oo (terrace house) at batu caves
Hi,
Is there any possibility to refinance a house when the applicant failed the
credit checking? Fyi, the intention is to settle all the finance related matters.
Tq.
Hi There,
I would like to check related on refinance my apartment whereby my outstanding around RM106000 after check current value which is RM190000 from iproperty. how much i can go for? and if cics listed by bank negara can i do refinancing?
Thanks
Hi KC,
Chanced upon this and thought you site was very helpful. I have an outstanding amount of RM214,000 on my housing loan. Lock in period of 5 years completed. My interest repayment now is 5.45% (BLR – 1.15%). My current bank says I might get a BLR – 1.8% if I write in and they may waive the processing fee. I have another 25 years on my loan. I am thinking of refinancing. Is this a good idea?
Thank you in advance & looking forward to hear from you.
Hi KC,
I have a refinance question to hope that can get your advice and info. I would like to refinance my house with the value at RM130K and aid to get 20k , the installment has been 5 years, if i prefer to do the re-financing with no EPF, will bank appoved on my application? What are the required documents that i have to submit to bank? Waiting for your kindly reply, thank you.
Hi KC,
Im seeking an advice on this below situation, pls advice, thanks in advanced..
Situation:
2 land tittle is charge in public bank for the amount of rm70k. (both land belong to Mr.A)
As agreed Mr A get 1 land tittle
And Mr B get 1 land tittle
Due to Mr. A cannot service his loan.
Mr. B intended to get the 1 land for his own refinancing with government loan/ commercial loan.
The question is:
1) Can Mr B, settle the outsanding land for the 1 tittle only and not the another 1 tittle.
2) what will happen to the refinancing loan with public bank, will the bank lower the monthly payment or will they proposed to get another new loan. What is generally the terms and condition of public bank.
3) when mr B wanted to get a fresh loan from government/ commercial loan should he make his own valuation on the land.
Hi Ann, I think it is best to consult the banker regarding this scenario.
Hi KC,
Is it possible to refinance my home loan with the same bank or must it with another different bank? My current loan is with hongleong and I find that they’re one with the lowest rate.
Rgds
It can be the same bank. Depending on the banks, some do not offer great competitive package to existing customers. Shop around.
Hi KC,
i would like to refinance my house but our developer is already bankrupt, what should i do?
I don’t really get it. I heard that to refinance home, we will need to know the current value of our property. Is that true? what’s the use then?
Hi Jie,
If you know the current market value of your property, you will have an idea of how much money you can borrow from through mortgage by doing refinancing. The banks will need to evaluate your property anyway.
Hi KC,
My current home loan outstanding is rm55000. BLR is 6.6 + 0.2%. I plan to refinancing the home loan, but most the bank minimum required borrow rm100000 above. is it worth to refinance? Can you advise me? Thank you
Then you may need to refinance for a higher amount. If that is not your intention, you may need to keep status quo.
Calvin,
It is possible to refinance your property of 55,000, but the rate is BLR – 1.9%. If you are interested, you may email me at jamestanel@gmail.com.
Cheers,
James
Hi KC,
I have outstanding balance for my home loan for RM130,000 with public bank. And i have to pay for another 5 years.
Recently i decided to do some restructuring and approach CIMB, who offered -BLR minus 2.2%. .
But with same installment amount, CIMB is worked out years to be paid is 7 years.
I’m confusing on refinancing .
Can you render some thoughts on how to do it.
Hi Balachandar,
It shouldn’t be that way if the rate offered by CIMB is lower, on the same amount of loan RM140,000 and paying the same amount of installment. It should be less than 5 years.
Or maybe there are hidden charges involved? Ask your mortgage officer to explain how can this be so?
Hi KC,
I don’t understand much how loan repayment works and appreciate any guide you can give. I have been paying for a home loan (BSN girohome) for 10 years and have another 10 years to go. I consider to sell the home (its a piece of land actually) and ask the bank how much I would have to pay to settle the loan. They are telling me that it makes no different whether I want to settle the loan on a lump-sum basis now, or continue to pay monthly over the next ten years as planned – the total amount is still the same (or slightly less) . That doesn’t seem to make sense to me considering the time value of money. Thanks for your help.
Not sure where this is coming from. I mean the bank. Should you opt for early exit, there should be a reduction namely in interest mainly for instance is you are left with 50k to go and charge with interest of 4% then if multiply by 10years means an interest of (4%*50k)*10years = 20k of interest. then this should not be taken into accountable. I think BSN (mainly is just playing dumb). You should go to the HQ and make a hassle about it. Someone has to explain unless its written in the fineprint.
Hi KC,
Recently, i am reviewing some options for the possibility to either re-finance or get a top up loan option for my apartment unit which meant for investment purpose. Do i need to take MRTA insurance package or i should consider to get a general life insurance package. Appreciate for your advice and feedback. Thank you.
[…] presents How to Refinance your Home Loans Smartly posted at KCLau’s Money Tips, saying, “Lists several reasons why home owners would […]
When you purchased your dream home, the financial environment dictated interest rates. While certain factors, like your credit rating and the amount of the down payment that you were able to afford, influenced your interest rate, the single most important factor was the prevailing rates at that moment. However, interest rates fluctuate. When the Federal Reserve enters a rate-cutting period, the prevailing rates may become significantly lower than when you originally purchased your home.
My outstanding in current bank is less than RM5000 , shall i direct do refinancing or settle off first the loan , thereafter only do refinancing. How much different of the legal fees charges. The apartment is still under master title.
It also depends on the lock-in penalty period of your current home loan.
Nice article on refinancing. I was wondering if I refinance my home loan and i’m out of the lock-in period. Will my previous bank still charge me any redemption fees if I refinance to another bank?
Bank shall not charge redemption fees when the lock-in period is over.
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