Refinance

Refinance is to replacing existing loan with a new loan that holds different terms and conditions. It basically means to borrow money from other bank (or existing same bank) under a new loan package to settle the current loan account.

Why refinance?

  • To leverage on property capital appreciation – to cash out the amount of increase in property value after a certain period of time. Cash out amount is the difference between the remaining loan balance you owe to bank and your entitled new loan amount based on current market value.
  • To leverage on current interest rate offer – Interest Rates is determined by respective bank Base Rate (BR) or Base Lending Rate (BLR) which this cost of borrowing is set by Bank Negara Malaysia (BNM). Due to the pandemic of Coronavirus faced on year 2020, the basis point had dropped to the lowest since year 2011. Resulting Banks offering attractive interest rates as low as 3.30%!
  • To convert loan packages – there are numerous loan packages available. Conventional loan, Islamic Loans, Full Flexi, Semi-Flexi, Term Loan, Overdraft and many more. You have to take time to go through each package in detail to determine which is the most suitable package that is aligned with your objectives and long-term strategies.

Cash out Entitlement Calculation:

Current Property Valuation

 Current Property Valuation = RM 450,000 (Keywealth offers free valuation from Bank Valuers)

Bank Maximum Margin

 Bank Maximum Margin = 80 – 90% (depending on Banks policy)

New Loan Amount to Apply

 New Loan Amount to apply = RM 450,000 X 90 % = RM 405,000

Existing Outstanding Balance

 Existing Outstanding Balance = RM 210, 000

Cost of Refinance

 Cost of Refinance = 2- 3% (comprised of legal fees, stamp duty & valuation fees)

Cash Out Amount

 Cash Out Amount = RM 405, 000 – RM210, 000 – RM12, 150
= RM 182, 850

Interest Rates Variation Saving Calculation:

(Based on Existing home loan RM 450, 000 for loan tenure of 35 years):

INTEREST RATE EXISTING 4.80% REFINANCE 4.30% REFINANCE 3.80%
MONTHLY INSTALLMENT (RM) 2, 214.02 2, 074.26 1, 808.04
TOTAL INTEREST PAYABLE (RM) 479, 888.40 421, 189.20 309, 376.80
SAVINGS (RM) – 58, 699.20 170, 511.60

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