Dear all,

I'm in mortgage line for years and nowadays more and more homeowners refinance their properties for BETTER FINANCIAL PLANNING. WHY? Good reasons for refinancing are:

1.) Save interest
Switch to other bank for lower interest rate and lower monthly installment.

2.) Standby cash for Emergency use
When you need some cash incase of emergency like sickness or business turnover, there's some standby cash in the bank and you don't have to go for borrowings from family member or bank. On top of that, if you do not utilise those standby cash, no interest incurred.

3.) Settle debts e.g credit cards, personal loan
Extra cash out from refinancing can be used to settle your credit card debts or personal loan. This is due to home loan interest rate (~5%) is a lot more cheaper than credit card interest (~18%) and personal loan (~ 10%)

4.) Investment
Those money can be used to invest in shares, unit trusts & etc.. which could  give you higher profits.

5.) Children education
When it comes to children education, It is not easy to fund this much of money and refinancing seems to be a great idea. E.g. 10 years ago you bought a property with 150k and you took 100k home loan from bank A. After 10 years your children has grew up and ready to go for higher education.  Your home loan outstanding may left 50k but your property is now worth 300k, based on this if you refinance your property with bank B, the bank could lend you 270k. Which means you'll have 220k (270k - 50k for bank A) for your children education.

Most importantly, if you don't use the 220k, the bank will only charge you interest based on 50k (which has been paid to bank A).  If you only use 100k for children education, then the interest charged will be based on 150k. (50k + 100k)

6.) Indirectly convert your EPF fund from account II into CASH for your own financial planning!
How can it be done? Are you complaining that dividend (5.15%) given by government in EPF is too low? shares, properties, unit trust & etc is giving higher return comparing to EPF dividend? Let's talk!

7.) Better flexibilities and accessibilities in payment mode.
You can decide how much you want to pay, how much you want to save on interest, and how long you would like to settle the loan at your own. Combine all your salary + bonus + savings + FD + current account  into 1 account to offset the loan principal. What's more, redraw those monies whenever you need it at no cost, anytime, via ATM, internet banking & cheque book.

8.) Better experience & better services in a better bank.
It is difficult to judge which bank is good or bad. If you have a bad experience in your current bank e.g: no internet banking, bad customer services, delay in loan release, long queue, ATM machine malfunction, no 24 hours banking & blah blah blah.. It's time to switch!
The above opinions are based on my client's needs when they decided to refinance their property. Anything else you like to add or comment, you're welcome to voice up And if you have any enquiries about home loan, I'll try my best to share my opinion.

Thank you & have a nice day!

Mate, excellent write up, although one sided. Perhaps it would be good if you could also highlight what are the downsides of refinancing as well, like cost invloved, tur around time etc.

Downsides of refinancing:

1.) Penalty
Most of the banks are offering zero entry cost means you could switch to other bank with F.O.C! But still there might be some penalty inccurred: 3% for early settlement within lock-in period (normally 3-5 years) from previous bank.

2.) Again, to be locked for another 3/5 years
For those people who buy property for investment purpose, if you refinance your property, you can't sell within the lock-in period.

However, the above disadvantage can be counter off:

1.)Penalty
what if the interest saved when you refinance can be easily off set the penalty?
E.g : existing loan in bank A since 2004, initial loan 120k and current outstanding 100k, penalty 3%, lock-in period 5 years.

Put in this way:
Existing
installment: RM700
total penalty 3.6k
remaining lock-in period : 2 years.

After refinancing
installment: RM 500
interest saved during the 'remaining' 2 years comparing to prevous loan : RM 200 * 24 months = RM 4,800
In this case, the interest saved could easily off set the penalty.
2.)investment property
I believe when you're selling off your property, you must have a minimun price in mind. just take the penalty into consideration and add up to a total price that you want to sell.

if my house is still under construction, and only upto 75%. Is it not possible to refinance to get better interest rate ?

if my house is still under construction, and only upto 75%. Is it not possible to refinance to get better interest rate ?