Home loan refinancing refers to the act of replacing an existing home loan with a new loan under differing terms and conditions. In layman’s term, think of it as borrowing money again to pay off the debt you owe in your current home loan account.
Reduce your home loan interest
Example:
Say your home loan has a fixed interest rate of 6.6% p.a., and the current refinance interest rate is 4.4%; you’ll be paying 2.2% less interest every year for the rest of your loan period if you go with refinancing.
To put things into perspective, 2.2% of RM400,000 (i.e. value of a mid-range condo unit in Cheras) is a staggering RM8,800!
Extend your loan period
Remortgaging enables you to alter your loan period depending on your existing needs. If you have monthly cash flow issues, taking up a refinancing plan with a longer loan period allows you to pay less in monthly installment, hence freeing up a greater part of your monthly income for personal use.
This comes in very handy especially when you have a sudden increase in commitment, such as buying a new car or paying for a child entering tertiary education.
Shorten your loan period
As a continuation from the previous point, say you are now more financially stable compared to when you first took your home loan, and you’re thinking about reducing your loan period (eg. from 30 years to 10 years) in order to save on your interest cost; home loan refinancing is a viable option for you to do that.
Especially if you’re currently stuck on home loan package without flexible prepayment options.
Consolidate your debts
Owners of multiple properties would attest it’s a real hassle to keep up with each and every one of your home loan accounts.
If you too are repaying several differing home loans all at the same time, a once-off refinancing plan might allow you to consolidate everything into one single account, so you’ll only be getting one statement and making one payment every month. To some: the convenience alone is worth considering the option.
