Refinancing your home is a smart way to lower your mortgage payments, save money and stretch your cash flow. Refinancing also gives you the opportunity to upgrade or remodel your home as well as take advantage of more favorable financing terms. However, with so many people seeking refinance options, not everyone will get through that process easily. Here are 5 reasons after consulting more than 2000 Malaysians why people want to refinance their homes
1. Debt Is Out Of Control
Many Malaysians believe that because they already have a home loan, they don’t need to refinance. But that’s not the case. According to the Bank Negara Malaysia, debt levels in Malaysia have reached 77.2% of GDP and are expected to increase over the next few years. The government has recently increased the minimum income requirement to qualify for a home loan and this has only added to the rising cost of debt. It’s clear that many Malaysians are struggling, and refinancing your home can help you reduce your monthly payments and save money.
2. You’re Paying Too Much In Interest
Many home loan contracts have an early repayment charge (or an exorbitant interest rate) so that the bank can recoup the money it lent you. But when you have a large amount of debt and a high interest rate, it’s easy to end up paying much more than you should. A refinance will allow you to reduce your monthly payment and help you chip away at your debt faster. By refinancing your home, you can reduce your interest rate, save money on your loan and refinance at a lower rate than you could before. This means you can pay off your debt even faster and with less money. Additionally, when you refinance, you can sometimes adjust the interest-only portion of your mortgage to a full repayment plan that will save you even more money.
3. Your Loan Term Is About To End
As most home loans are for 25 years, you may find that your loan is about to end. In this case, refinancing your home can give you more time to make payments and pay off your loan. Generally, lenders charge a fee for refinancing a loan that has gone beyond the loan term and interest rates for shorter loans tend to be higher. But you can find lenders who offer home loans for shorter terms that have lower rates and no early repayment charges. When you refinance your home, you can choose a shorter loan term with a lower rate and pay off your loan faster. When the loan is shorter, you can also repay your home loan at a faster rate, saving you even more money.
4. You Can Still Refinance A few months later
A few months later is a long way off but it’s also the perfect time to refinance again. Many home loan contracts allow access to refinancing a few months before the loan expires, which allows you to take advantage of lower interest rates and a shorter loan term. You can refinance at a lower rate to reduce the amount you’ll have to pay back and refinance again to shorten the length of your loan. You can also refinance and choose to repay your loan over a shorter period of time, which is a great way to improve your cash flow.
5. You Want to Buy New Property
When you refinance, you can choose to pay off your existing loan and use the money to buy a new property. When you have existing debt, you can use a lower interest rate to purchase a property and have the cash available to make it a reality. This is a great way to buy a property at a lower interest rate and have access to more cash. It’s also an opportunity to refinance your existing home and pay off your loan so that you can have more money for the purchase of your next property.
6. Refinancing is a Good Investment Decision
For some people, investing in their home is a great way to create some extra income and increase your financial security. When you refinance, you can reduce the amount of your loan, refinance again to a shorter term and pay off your loan over a shorter period of time. This means you can refinance your home twice without increasing your total loan amount. When the loan is shorter, you can repay the loan more quickly and have more money available for investment. Refinancing can be a smart financial decision for some people. This is especially true for people who want to save money and pay off debt. However, it’s important to remember that refinancing is not right for everyone and you should do your research first.
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