The changes in Refinancing Home Loan Margin will be felt by many homeowners when they try to dip into their homes equities during refinancing.

People do refinancing all the time. Mostly because they need money quickly, and nevertheless, they want a loan with low-interest rates.

The reason for Refinance can be varied from one person to another. But the most common will be to settle a pile of debt.

I know it is not easy being an adult, especially when you have a family to feed and old parents to care for.

As we walk through different life stages, being single, married, children, old age, et cetera. We can’t help pilling those debts. That’s when dipping into the house equities can be handy.

REFINANCE HOME LOAN

WHY THE CHANGE IN REFINANCE HOME LOAN MARGIN?

As we know, this year, we all hit badly by Covid. When I said “we,” I do mean we: the rich, the poor, the middle, all in all, EVERYONE.

Due to Covid, we have to change, BIG ONE. Wear a mask, wash hand regularly, no more handshakes, reduce physical contact – in the name of social distancing.

Our world does not thrive doing social distancing, but we have to work hard to abide by it to fight this common enemy – Covid.

The economy has shutdown and slowdown, unemployment keeps rising, many businesses shut down, and the market doesn’t look good in a nutshell.

This may trigger the banks to re-evaluate their policy. Instead of being lenient on giving out a loan, the bank started putting hand break on their policy.

And one of the changes in the bank policy is reducing Refinance Home Loan Margin.

It is not unusual for the bank to take this extreme step. Usually, it happens before or during an economic recession.

Guess what? I think we’re in one right now.

REFINANCE HOME LOAN MARGIN

WHAT ARE THE CHANGES?

In the last few weeks, we have received a few updates on the refinance home loan margin from several banks. We think from now on; many banks will do the same.

The Refinance home loan margin used to be up to 90%+3% or 5% but all that had changed.

Check out the changes.

BANK MARGIN CHANGES
RHB Bank up to 85% + 5% (5% to cover MRTA and Entry Cost)
Alliance Bank up to 85% + 5% (5% to cover MRTA and Entry Cost)
Standard Chartered Bank up to 85% (included Entry cost)
CIMB Bank up to 80% + 3% (3% to cover MRTA and Entry Cost)* Preferable location can get higher financing
Maybank up to 80% + 3% (3% to cover MRTA and Entry Cost)
Hong Leong Bank up to 70% (included Entry cost)
OCBC Bank up to 70% (included Entry cost) *Existing OCBC Client can get up to 80% margin. And Privilege Banking Client up to 85%

Note:

a. Entry cost is inclusive of Loan agreement Legal Fees and Valuation Fees.

b. MRTA is Mortgage Reducing Term Assurance.

c. The above refinance home loan margins are applicable during the time of writing this article. The banks can change them from time to time.

In conclusion, most banks have reduced the Refinance home loan margin to the range of 80%-85%.

REFINANCE

HOW DO ALL THESE IMPACT US?

For a starter, this will reduce the chances of getting more from your house equities.

I give you an example.

Let say the current house value is RM500,000.

And The normal loan margin is 90%. This mean the maximum loan you can get is RM500,000 x 90% = RM450,000.

If the loan margin reduces to 80%. Then you are getting RM500,000 x 80% = RM400,000.

The difference is about RM50,000.

It means you will get a lower loan amount. Therefore the cash out you get from refinancing also will reduce.

Instead of hoping for RM50,000 more, you will get RM50,000 less. And for some people, this can be a significant amount.

THE SOLUTION

The only way to beat this policy is by getting a higher property market value, and hopefully, it will be enough to cover the differentiated amount.

We also learn from the last few weeks, getting a fair value property market value during this challenging time can be extremely difficult as the property market is also hit badly by the economic slowdown.

However, we do have many clients who manage to get refinancing despite the policy changes.

So, if you’re interested in getting Refinancing, feel free to reach us at 012-6946746 or fill-up the form below.

Before you go, check out this Refinancing article.

Cost of Refinancing Malaysia

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