Home refinancing is the process of replacing an existing home loan with a new loan—either from the same bank or a different financial institution. The new loan typically comes with better interest rates, lower monthly repayments, or extra cash-out benefits.
Homeowners often refinance to reduce their loan costs, consolidate debts, or unlock property equity for other financial needs.
Apply for Refinancing – The homeowner submits an application to a bank or lender.
Property Valuation – The bank assesses the current market value of the property.
Loan Approval & Settlement – Once approved, the new bank pays off the existing loan.
New Loan Agreement – The homeowner starts repaying the new loan with better terms.
' Lower Interest Rates – Switching to a lower rate reduces your monthly installment and overall interest payments.
' Lower Monthly Repayments – A longer loan tenure can reduce monthly repayment amounts, improving cash flow.
' Cash-Out Refinancing – Borrow additional funds based on your home’s current value (for investments, renovations, or debt consolidation).
' Debt Consolidation – Combine multiple debts (e.g., personal loans, credit cards) into your home loan at a lower interest rate.
' Switch to a Better Loan Package – Some banks offer better flexible repayment plans, lower fees, or extra benefits.
1. Interest Rate Refinancing
Main goal: Get a lower interest rate and reduce total loan cost.
Suitable for homeowners who qualify for a better rate due to improved financial status or market conditions.
2. Cash-Out Refinancing
Allows homeowners to borrow extra funds using their home equity.
The new loan amount is higher than the remaining mortgage balance, and the excess cash can be used for investments, renovations, or emergencies
Example:
Current Home Value: RM500,000
Remaining Loan Balance: RM250,000
New Refinancing Loan: RM400,000
Cash-Out Amount: RM150,000
3. Loan Tenure Adjustment
Extending the tenure (e.g., from 20 to 30 years) reduces monthly repayments.
Shortening the tenure (e.g., from 30 to 15 years) helps you pay off the loan faster with less interest paid.
4, Debt Consolidation Refinancing
Merges multiple debts (personal loans, credit cards, car loans) into one home loan with a lower interest rate.
Helps improve financial management by reducing monthly commitments.
Examples of Savings from Home Refinancing:
If the interest rate of a RM400,000 mortgage is reduced from 4.5% to 3.5%, the monthly payment and total interest will change as follows :
|
Loan Amount |
Loan Interest Rate |
Loan Term |
Monthly Payment Amount |
Total Interest Expense |
|---|---|---|---|---|
|
RM400,000 |
4.5% |
30 year |
RM 2,027 |
RM329,560 |
|
RM400,000 |
3.5% |
30 year |
RM 1,796 |
RM246,479 |
Savings:
RM231 saved per month
RM83,081 saved in total interest over 30 years
' Property Must Have Sufficient Equity – The home’s current value should be higher than the remaining loan balance.
' Good Credit Score (CCRIS/CTOS) – Banks assess your repayment history before approving refinancing.
' Stable Income – Lenders check your Debt Service Ratio (DSR) to ensure affordability.
' Existing Loan Status – The current loan should not have excessive arrears or legal complications.
Advantages:
' Lower interest rates reduce total loan costs
' Lower monthly payments improve cash flow.
' Access extra cash for investments, renovations, or emergencies.
' Consolidate debts into a single loan with lower interest.
Disadvantages:
' Refinancing may come with legal fees, valuation fees, and early settlement penalties.
' Extending tenure may lead to paying more interest in the long run.
' Approval depends on creditworthiness and bank policies.
1. How long does the refinancing process take?
It usually takes 2-3 months, including application, valuation, approval, and loan disbursement
2. How much cash can I get from a cash-out refinance?
The cash-out amount depends on your home’s market value and loan balance. Most banks allow up to 80%-90% of the property value.
3. Are there fees for refinancing?
Valuation Fee (RM500-RM1,500)
Legal Fees & Stamp Duty (~2%-3% of loan amount)
Early Settlement Fees (if your current loan has a lock-in period)
4. When is the best time to refinance?
When interest rates drop significantly.
When you need extra cash for investment or renovation.
Want to reduce your monthly payments and increase your financial flexibility.
If you want to consolidate debts into a lower-interest loan.
Is Home Refinancing Right for You?
Home refinancing is a great option if you want to reduce interest costs, lower monthly repayments, or unlock extra cash. However, it’s important to consider fees, loan tenure, and long-term affordability before refinancing.
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| ¹ | Ϣ֧ | |||
|---|---|---|---|---|
|
RM400,000 |
4.5% |
30 |
RM 2,027 |
RM329,560 |
|
RM400,000 |
3.5% |
30 |
RM 1,796 |
RM246,479 |
ʡ:
ÿ¼RM231
30ڽʡRM83,081 Ϣ
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Malaysia
