Question:
Hi, I have a house. The house is fully paid for. Now, I want to get financing for the home. What is the cost that I need to pay?
And what is remortgage vs refinance?
Answer:
A remortgage is when your house has fully paid up, and now you want to get new financing for it.
Refinance is when your house is still sitting on a bank loan, and you decide to transfer the loan to another bank by getting new financing.
Remortgage and refinance are almost similar, except with a bank loan and another without a bank loan.
For remortgage, the cost involved will be the same as refinancing. Below is the cost you need to pay when doing a remortgage.
Loan Agreement
When you get home loan financing from the bank, the bank requires a loan agreement preparation. And as a borrower, you need to pay for the preparation of the Loan Agreement.
Loan Agreement fees included lawyer fees, stamp duty, disbursement fees and service tax.
The good thing about Loan Agreement fees is that you can finance the costs with your loan most of the time. Therefore, you don’t need to take out money to pay upfront.
However, do note that a particular bank is only financing part of the amount or not at all.
So, it would be best if you chose your bank wisely.
Valuation Fees
Typically, people remortgage or refinance a completed house. A completed house requires a valuation report by the bank.
Usually, the cost of valuation report is in the range of RM1000-RM1500 for house value around RM300k-RM400k. The more pricey the house is, the higher the price will be.
Valuation cost is allowed to be financed with the loan.
Typically, the cost of Loan agreement Fees and Valuation fees are about 2-3% of the loan amount. However, for a loan of less than RM200k, usually, the estimation comes up to around 3-4%.
Mortgage Insurance MRTA/MRTT
MRTA or MRTT is mortgage insurance. The mortgage insurance covers the borrower and NOT the house, and I find people usually confused about this.
For the most bank, MRTA or MRTT is not compulsory; you can refuse to purchase it. However, when you do so, you will get higher interest rates.
Most of the time, MRTA or MRTT can be finance with the loan, and you can request a reasonable amount to finance.
Bonus point:
In the past, I realised people are confused between MRTA/MRTT and MLTA/MLTT.
MLTA/MLTT is a standalone policy for the borrower.
You are NOT required to buy this policy by the bank. Usually, it was proposed to you by a third party, like a middleman or agent.
You can say no to this.
However, MLTA/MLTT is good for you if you don’t have the insurance coverage yet and look for something long term. It will give you additional protection.
It’s all up to you to decide.
Good luck!
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