Many people envy you if you have one or more properties. This is especially true if your properties have appreciated in the last few years. That got you thinking: “Is it a good idea to refinance your mortgage so you get more?” “How much can you save?” “How much will you pay?”

Continue reading to learn more before making a decision.

Here are the differences between regular refinancing and cash out refinancing. How they work

A cash-out refinance allows you to pay off your existing mortgage and get a new one that is larger than the amount you currently owe. The lump sum money (minus any moving expenses) will be yours to use as you please.
For those who want to modify the loan term, their monthly payment or their interest rate, regular refinance is better. You won’t even see the money. It’ll be part of your monthly payment.

What are the few things to keep in mind before opting for cash out refinancing?

FYI: Terminating your loan early could result in early exit penalties. This usually ranges between 2% and 3.5% of your original loan amount. If your home loan amount exceeds RM500,000, the penalty would be RM17,000. (3.5%) This is a lot of money!

It is possible to believe that you will get away with Zero Entry Cost Packages (e.g. Bank fees, legal fees and valuation fees. There are possible clawback fees.

2. Current financial health (CTOS/CCRIS)

How long ago was it since you last checked your credit score? Refinancing is a new loan application that you must submit. Lenders will still do due diligence, even if you have been a customer for a while.

If you want to get the lowest rate and increase your chances of getting a loan approved, improve your credit score and your debt-to-income ratio prior to refinancing your mortgage.

3. Refinance costs

You will need to pay the same moving costs as when you purchased your home. These include bank processing fees and legal fees, stamp duty, disbursement fee, a new MRTA, and S&P.

Consider the cost of a cash-out refinance. It might not be worthwhile, especially if it isn’t a large loan amount. You can expect to pay between 2% and 3% on your refinance amount. Our Home Loan and Stamp Duty Calculator can help you estimate the cost of refinancing. Keep within your budget, people.

4. Refinance with cash: Motives

Cash-out refinances let you borrow your home equity to purchase anything you need. However, you don’t have to use this cash just because you can. Our observations show that most homeowners use the proceeds to pay for the following:

  • Home renovations: It can be difficult to build up savings for home renovations or repairs. You may find cash out refinance a better option to help you achieve your home improvement goals.
  • For investment purposes: Cash-out refinances allow you to access capital to help fund your retirement savings and purchase investment properties/businesses. It is worth it only if the investment returns exceed the loan interest rate.
  • Child’s Education: Because education is costly, tapping into your home equity can be a smart way to finance college.

How can I apply to a cash-out refinance of an existing home loan?

Similar to buying a house, the cash-out refinance process works in the same way. Make sure you have all the required documents and that the lender meets your financial needs before you apply. FYI: You don’t need to stay with your current lender. We recommend that you shop around. Get at least three quotes, and then choose the one that is most cost-effective.
Bank Of China Malaysia Berhad’s Flexi Housing Loan is a great option if you are looking for cash-out refinancing options. It can save you interest. How does it work? This product combines a Home Loan and a Current Account to make it easy to plan your repayments.

To reduce your loan interest and to clear the loan balance, you can deposit any excess cash from cash out refinance into the Current Account. The bottom line is that the more you deposit, the lower your loan interest will be (subject to the bank’s maximum set-off limit). BOCM offers a great promotion rate starting at 2.85%* per annum. For more info about BOCM Flexi Housing Loan, call their Sales Team at 03-23878232/03-23878815 or visit any of their branches nationwide!

To compare all of your options, Loanstreet’s home loan refinancing comparison tool can be used. For the best and fastest results, submit an application to Loanstreet once you’re confident about a mortgage refinance.

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