HI, just want to share and explain in detail what is call refinance property loan. This is the example show as below :

1. property market value at 500k
2. outstanding loan is 200k
3. margin of finance is 90% of the market value

so, 500k x 90%= 450k.

450k-200k=250k

so after refinance his loan structure will be show as below :

1. housing loan : 200k
2. cash out (OD): 250K
---------------------------
Total loan : 450k

there is some reason why client wanna to refinance their property show as below :

1. standby fund for future use.

2. for education

3. to transfer the existing property ownership to other person

4.to debt consolidation existing loan into one account such as credit card, personal loan or car loan.

5.business use.

I would like to ask also.

If I loan 450k 35years to buy a house, and monthly pay let say RM2.5k.

Next 2 years, the house became 700k. I refinance it. and I got this extra RM250k right?

So my monthly repayment will be more than RM2.5k right?

So when is the best time to refinance?

For sure.
The new monthly repayment amount and schedule will be based on the 700K loan.

When interest rate is low.
Eg.
Last time you sign up a housing loan of fixed 7% interest rate.

Now interest rate is 5%, you refinance it, to repay all the old loan of 7%, and start a new one at fixed 5%.
The 2% interest cost saving can mean a lot over the long term.

Refinancing may incur additional documentation fee, range from lawyer fee, admin fee, or old loan penalty charges etc.

the best time to refinance is when your property market value is increase. Also, now is the best time to refiance cash out for standby.

now subsales property market also slow down alot. When the owner wanna sell their property but no buyer wanna buy due to some reason :

1. down payment for deposit

when you buy subsales, you need to pay 10% downpayment from your own pokcet. Nowadays many people prefer to buy under construction project because some developer give discount, so no need use own money and can save it for renovation or buy furniture.

2. house defect

old house surely will have some defect because the age of property is old, so need to folk out money to do renovation.

3. owner sell higher than market value

when the house owner facing the problem above, they can't sell their property, so what they will do? refinance their property cash out first then standby for future use.

based on your case senario,

700k x 90% 630k

630k-450k= 180k

you can cash out around 180k. however, refinance to cash out money got 2 type. one is term loan, another is overdraft.

cash out in overdraft ,you may need to pay your new housing loan installment amount let's said remain at 2.5k. but the cash out portion of 180k, if you didn't use the money at all, there is no interest charge and no need to pay single cents.

cash out in term loan, you may need to pay your new housing loan installment amount let's said remain at 2.5k. And you need to pay the installment for 180k, let's said RM 1k per month even you do not use the money at all.

thanks for your sharing your idea.

another reason of refinance your house is for restructure of your current financial debts.

this is real case from my client,

his salary worker and earning RM 6k per month and his current commitment show as below:

1. housing loan 1k
2. credit card outstanding 100k

for bank calculate of his debt service ratio will be 100k x 5% = 5k

so his current commitment is 6k per month.

Now he is very suffer because high commitment. So i offer him an option to refinance his property.

after refinance, he paid 1k to his housing loan and serve the interest payment only of his 100k ( 594) per month.

so compare the cash flow , he got additional of 4406 cash on hand and he can be relax at this moment.

however, he still have to repay back the 100k in time of reach his age 60.

if you guy's need any advise on refinance , you are welcome to ask and i will try my best to assit you.

Refinancing always confuses me...but I think I'm slowly getting it

Basically getting more money in hand to do those activities mentioned above but at a higher interest over time (which they don't care since present moment is more important), is this correct?

You are correct. some of the client might not be concern on the higher interest rate because they just wanna to get cash out to settle their financial problem or for business capital.

Thanks for the clarification!

you are most welcome. anyone if wanna to inquiry about refinance you may drop the comment here.

I want to ask..... if lets say the person apply loan that time salary is 5K, Now his property market rate is 700K and he wanted to refinance. Lets say 2 years difference and his salary is 6K only....
my question is, is the bank going to re-evaluate base on his debt service ration?

How do we know our property value has increased? check from Iproperty? But iProperty seems not accurate one....
please advise.

I dont really get you of the 4406 cash and 594 per month.
could you please explain?

Bank always reassess the repayment ability of the borrower.

Refinance - Last time you bought house with loan 350K (now appreciates to 700k), you refinance at the outstanding 350k, generally bank won't be questioning too much.

But if want to refinance at 700K, aka extra 350K cash out for other usage, for sure, bank will need to re-evaluate the debt service ability of the borrower as outstanding borrowing escalated from 350K to 700k, and monthly repayment amount escalated too.

Bank get the valuation through registered property valuer, whereby there is fee needs to be paid, if one interested to get the exact market valuation.
Alternatively, one can roughly know the valuation of property if one knows recent transacted price of your adjacent property of similar type and similar location.

Generally, market value - transacted/transact"able" price in the market at time being.

1. bank will check the borrower current income and current commitment to evalute the DSR.

2. normally banker will help client to check the property market value with bank's panel valuer.

3. before the guy do refinance, his monthly commitment is 6k. no matter how he still have to pay his commitment of 6k. After he doing refinance with taking an overdraft facility,monthly he can choose to pay interest only for overdtaft which is 594. so 6k-594=5406, which mean he got cash flow in hand of 5406.

Nowadays some of the Klang valley area like cyberjaya, market value was dropped so much. There is why is advise to do refinance base on ur current property market value to cash out money for standby use.

My current loan at 4. 9%. Loan amount 320k.
What is the interest rate now if I refinance the same loan amount?

You can get as cheap as 4.2%