3 Ways Mortgage Refinancing Could Make An Impact On Your Finances
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When it comes to buying a property, there’s so much information available on how to find the best home loans, great deals, and recently, the benefits of the Home Ownership Campaign. 

Well, that’s all good for those who are looking to purchase a property; but what about the individuals who already own a property and the mortgage that comes along with it? What options do they have if they’re looking to gain better interest rates or even leverage their property to ease other financial burdens?

This is where mortgage refinancing can be an option. With mortgage refinancing, you are essentially signing a new home loan, under different terms with the same or a different bank, to pay off your existing home loan while gaining a few extra perks.

However, like most money matters, refinancing your mortgage comes with its advantages and disadvantages – both of which can impact your finances. So, let’s dive into three situations where you might consider opting for a mortgage refinancing loan.

1. If the interest rates offered by the mortgage refinancing loan is lower than your existing home loan interest rate.

Since July 2020, Malaysia has experienced historically low OPR rates. OPR rates have dropped from 3.0% in May 2019 to 1.75% in July 2020 and since then have held steady. 

As OPR rates usually determine the interest rates for savings and loans offered by the banks, this has translated into lower interest rates for home loans, providing a unique opportunity to potential property investors — and existing property owners.

Refinancing your mortgage can allow you to take advantage of the lower interest rates offered during this current time, by transferring your existing home loan to a different bank that offers lower interest rates. This potentially reduces your total interest costs over the loan tenure and perhaps even lowers your monthly repayments to give you more savings.

Even a reduction of 0.5% on the interest rate can make a difference in monthly repayments and total savings. For example, assuming your property loan is for RM500,000 and the mortgage tenure is 30 years, with a 5% Effective Lending Rate (i.e. interest rate) your monthly repayments will be around RM2,685. However, if you choose to refinance your mortgage at an Effective Lending Rate of 4.5%, the monthly repayments drop to RM2,534 — that’s RM151 saved per month and over 30 years, it adds up to almost RM54,360 in savings for you!  

But before deciding to refinance your mortgage, it’s important to be aware of your current loan’s “lock-in” period. Banks usually charge a penalty fee or other bank charges if you choose to fully pay off your existing home loan within the first 2 – 5 years.  If you have high charges that outweigh the benefits, it might be a better idea to wait until the lock-in period is over before considering refinancing your mortgage.

2. When you want to take advantage of your property’s appreciation 

If your property value has appreciated, you can take advantage of that by refinancing your mortgage with the purpose of getting extra cash in hand. 

When you refinance an appreciated property, you stand to gain a higher amount of financing. A portion of this refinancing will go toward paying off your existing home loan and the excess will become your extra cash in hand. 

This excess amount will differ for everyone depending on how much of the previous loan was already paid up and also how much the property value has increased. If you want to see if your property’s value has increased, you can check out websites such as mudah.my and EdgeProp to gauge the current selling price of similar properties in your neighbourhood.

Now, you can use this extra cash in hand to build your emergency fund, pay for renovations, personal usage, investments, emergencies, and other situations where you want large sums of money but don’t want to turn to other means that could result in high-interest payments. It’s advisable to use this extra cash for assets that potentially increase in value since, at the end of the day, you are still paying the interest on the sum. 

3. You want to consolidate your debts with a lower interest rate

The second way to take advantage of your property’s value appreciation is with refinancing for debt consolidation. Debt consolidation allows you to pay off several debts at the same time. Once your other debts are paid off, you are left with only one loan to pay and at a lower interest rate. 

As such, refinancing for debt consolidation allows you to use the additional financing gained on an appreciated property to settle higher-interest debts such as credit card debt, personal loans, and hire purchase loans.

For example, with credit cards, the interest rates are between 15% – 18%. So, regrouping your debts under mortgage refinancing, where interest rates average between 3% to 5%, can help you save on your total interest costs. When utilised appropriately, this can have a positive impact on your finances and potentially save you thousands of Ringgits. 

However, before making this long-term commitment, it’s essential that you have a clear understanding of the refinancing options that are available to you. Some factors to consider before signing a mortgage refinancing loan are your personal financial situation, the purpose of refinancing, and the terms and conditions of your existing home loan. If you have the time, don’t be afraid to shop around and ask as many details as you need to make an informed decision.  

Explore Standard Chartered’s MortgageOne Refinancing Solutions

If you find that mortgage refinancing sounds appealing to your financial situation, why not take a closer look at Standard Chartered’s MortgageOne Refinancing Solutions: Just Transfer and Debt Consolidation Plan.

Just Transfer, as its name suggests, is a fuss-free mortgage refinancing solution that allows you to transfer your existing mortgage to Standard Chartered Bank while enjoying exciting interest rates from 2.88%*. If you find yourself in a similar position as Situation 1, where you’re looking to save more on your overall interest costs, why not take advantage of the low-interest rates offered here and enjoy lower monthly repayments and more savings. The good news is that Just Transfer is applicable for non-Malaysians too. 

Alternatively, with the Debt Consolidation Plan, you can utilise your property’s value appreciation to pay off high-interest debts, such as credit cards and personal loans. Just as in Situation 3, this will allow you to save on total interest costs while enjoying the added convenience of single monthly payments and improved cash flow. The Debt Consolidation Plan financing option is applicable for Malaysian only.

To give you more perspective, a property loan worth RM500,000 can have legal fees and documentation fees (such as stamp duty and valuation report) that could cost up to an additional RM8,500. With Standard Chartered’s refinancing solutions, you’ll be able to reap the benefits of all that extra savings. Do note that these financing solutions are available exclusively for properties in Kuala Lumpur, Selangor, Penang, and Johor Bahru.

If you’re interested in learning more about Standard Chartered’s MortgageOne Refinancing Solutions, click here to check out the Just Transfer and Debt Consolidation Plan product page for the full details and terms and conditions.

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