Many people refinance for many reasons, I will share the common reasons why people refinance their property.
1) Expensive Interest Rates
We can presume every year, housing loan interest rate become lower and lower because of the competitive market.
If you have the existing housing loan for a long time and never adjusted your interest rates, you should start asking for it.
Your existing bank will not call up and say. “Hey, do you want to reduce your interest rates?” NO, they won’t do that.
They will stay quiet because if you did not ask, they earn more profit from you.
Normally, for existing bank, if you request for reduction in interest rates. They will not give the market interest rates.
If that the case, what should you do?
You should contact us and we will help to explore your BEST option. The service is FREE!!
2) Need Additional Cash
How you can get extra cash by refinancing?
Let’s me explain here by giving you an example.
Mr Joe bought a terrace house in Year 2005. Purchase price is RM200,000. He got financing from CIMB Bank. His loan amount is RM180,000.00 .
In year 2013, Mr Joe decided to refinance his property. His estimate property market value is RM400,000.00. While, normal refinancing margin is 80-90%. So, Mr. Joe expected to get a new loan with RM400,000 x 90% = RM360,000.00. His latest Outstanding Amount is RM160,000.00.
If his current outstanding amount is RM160,000.00. He will get additional cash of RM200,000 (RM360,000 ( new loan amount ) – RM160,000 ( Current Outstanding) = RM200,000)
He can use this RM200,000 for any personal purpose.
So, what you can do with the cash out money?
a) Settling Your Existing Debts, Starting With The Highest Interest Rates Debts
If you have high utilisation of credit card and personal loan. You may want to fully settle these loan facilities. Because, these facilities have known to be high in interest.
Tips : If you are interested to do refinancing now, you are advise to lower down your credit card utilisation , to at least 70% of limit. High Usage of credit card utilisation, may affect the loan application approval.
b) Deposit in Amanah Saham Berhad/ Tabung Haji And Earned Dividend
For Bumiputra, you have the luxury to deposit the cash to Amanah Saham Berhad ( ASB ). As you know, ASB average dividend is 8-10% per year. While, housing loan is 4 to 4.60%*. By deposit here, you can gain 4%-5% dividend. (e.g ASB dividend 8% Less Housing Loan Interest 4.60% = 3.40%) . You still making profit 3.40% even after paying the loan.
Alternatively, if your ASB quota is full. You can deposit to Tabung Haji account, which give quite comforting dividend per year about 5-6%.
c) House Renovation
Yes, renovation is one of the most common reason people refinance. Maybe, you would like to extend the kitchen or remodelling the house for the coming festival season like Hari Raya, Deepavali or Christmas.
Based on our advice you should start now, because the disbursement may take average 3-6 months. The disbursement is depending on your property title and status.
– Tips: You are not advisable to renovate the house prior to receiving the additional cash from bank. It is safer to make sure the money in your hand before started any renovation works. In addition, you should not renovate the house before the bank valuation report is submit to the bank.
d) Children Education/ Further Education
Children Education fees sometimes can be unexpected expenditure for the family. With the cost of education at high peak, you may need this cash to support your children future investment. Or even, if you or your spouse need to further study, this cash can serve the purpose.
e) Medical Fees
Medical Fees or Medical Treatment fees can be absolutely pricey nowadays. These fees come unexpected. Medical Fees had been increase on yearly basis. If you do not have Insurance, refinancing definitely another way to pay for it. Of course other than Employee Provident Fund (EPF).
3) To Change Housing Loan Product
There are many housing loan product in the market. You can be confused with the names given and the features.
However, we have narrow down to 5 basic housing loan products in the market.
You are advice to understand the product before signing any letter offer with the bank.
Because, some housing loan product will have monthly fees charges. If you are not aware, this may become your additional fees.
4) To Change Bank
Some customers will have dispute or dissatisfaction with the existing bank, this will make unhappy customer go other bank.