What is home refinancing?
Home refinancing means replacing an existing mortgage with a new loan under new terms and conditions to lower your monthly instalments or/and to get a better interest rate. Take note that refinancing can be expensive and time-consuming because you will need to do some research about which bank offers you the best interest rates. Having said that, it can really save you money and you may be able to pay less each month.
What should I do before applying for a refinance loan?
First, you need to figure out what is your purpose of refinancing: It could be to get your hands on some extra cash to do renovations on your home or to consolidate other debts, or you want to get a better interest rate than you have now.
Second, you will need to know how much is the outstanding balance of your current loan and make sure your lock-in period is over to avoid paying a fee. You can clarify this with your bank to assure that it has ended. If the period has not ended, check with your bank how much you need to pay for proceeding with a refinance and ask if the lock-in period is over.
After that, make sure you know how much refinancing will cost you because there will definitely be costs involved (like Stamp Duty which is 0.5% of the loan).
Additionally, get to know your credit score before you apply for a refinance loan. If you have had all your information straight and know what you can get out of your refinance, then apply for the refinance loans we offer on Loanstreet!
When can I refinance my loan?
You should consider refinancing your loan after your lock-in period is over because otherwise, you will have the risk of paying fees for early termination for the loan you have now. Aside from that, you can also look at refinancing if your credit score has improved over the years. If you first took a home loan with a high-interest rate because you had a bad credit score, it may be a good idea to refinance now and settle for a lower interest rate.
On top of that, if you have a lot of home equity and would like to renovate your home but currently do not have the funds in your account, it is also a good opportunity to take a refinance loan because you could take a higher loan than your actual current repayment is and choose for a cash-out refinance if you have a good credit score. This would help you to get more funds to pay for your needed renovation.
What’s the purpose of refinancing?
This really depends on what you need. It can be because you needed the extra cash now for personal use, to get a lower interest rate and a lower monthly instalment or which can free up cash in your budget each month. Also, you could take a loan valued higher than your current outstanding balance. With this, you could consolidate your debts into one.
Can I cash out my home loan?
Assuming that you have a good credit score, a cash-out refinance would be possible. It is a way to refinance your loan and borrow money at the same time if your home has equity higher than your current payable loan.
For example, if your home is valued at RM250,000 and you have an outstanding mortgage of RM150,000 that means there is RM100,000 in home equity. You could then loan RM200,000 which leaves you with some room to pay off other debts like a credit card which generally have a higher interest rate.
Can I consolidate my mortgage with my other debts in a refinance loan?
Yes, it would be possible to consolidate your other debts with a refinance loan if you have a good credit score and enough home equity. You would be able to ask for a higher loan to consolidate your outstanding debts into one big loan, this could save you a lot of money on interest and you can keep track on one loan rather than remembering different due dates on several monthly instalments.