Refinance .This year Bank Negara had increase twice the overnight policy rates (OPR), we will know tomorrow whether the OPR will increase again. Half of the 20 economist in a Bloomberg news survey predict Bank Negara Malaysia will increase its OPR to 2.75% from 2.50%, while the other half expect no change. The central bank raised borrowing costs by a combined half percentage point in March and May.
So, with the hike of OPR this is definitely will increase Base Lending Rates (BLR).Are we ready for an increase in our housing loan installment?
Normally, housing loan will stand of 40% – 50% of monthly income. Therefore, It is really a big deal when the bank interest rates increase.
The question is should I refinance my mortgages now?
The answer to the question “Should I refinance?” is a complex one, since every situation is different and no two homeowners are ever really in the exact same situation.
There are many reason for house owner to refinance, one of many reason is to save money.
Some ways of saving money through refinancing can be achieved by:
1) Obtaining a lower interest rate that causes one’s monthly mortgage payment to be reduced.
2) Take cash out for debt consolidating or home improvement. Consolidating debts such as credit cards with the refinance so overall monthly payments towards debt are greatly reduced. If you need cash for house renovation, this is one of the solution. Housing loan have lower interest rates compare to personal loans or credit card cash advances.
3) Reducing the term of the loan, thus saving money over the life of the loan. For example, refinancing from a 30-year loan to a 15-year loan might result in higher monthly payments, but the total amount of the payments made during the life of the loan is reduced significantly.
4) People also refinance their homes to convert their floating rate loan to a fixed loan.
If you have been paying on your conventional housing loan (CHL) for several years, the current fixed interest rates may be slightly higher than the current interest rate on your conventional housing loan (CHL). Ask yourself if the security of a fixed rate is worth a slightly higher payment. If you think interest rates are going up soon in future, you may want to wait until your next adjustment. If the fixed interest rates are lower than your current conventional housing loan (CHL) interest rate, ask yourself where you might be in 2 years? 5 Years? Evaluate your Break Even Point. If your Break Even Point is a long period, ask yourself if the security of a fixed rate is worth the cost?
5) Some of the banks offer no lock-in clause for your home loan. This will allow flexibility to settle or sell the house anytime without additional cost incurred. This is definitely, favourite among the property investor.
6) Refinance your property without any entry cost such as legal fees, stamp duty, valuation fees, processing fees and disbursement fees. Meaning, you can refinance your property without any cost incurred. However, the choices for the bank to offer this Zero Entry Cost packages is limited. Most of the banks have financing your entry cost or customer paid entry cost packages.
Before opt for refinancing, it is important for house owners and property investor to consider the saving or benefits of refinancing. Do your own breakeven analysis between long term savings and refinancing costs to determine whether the savings really outweigh the costs of refinancing or otherwise.
Refinancing isn’t something you should enter into lightly. But once you run the numbers, you may find that the long-term savings will offset the costs related to refinancing. Then you can take the money you save each month from your reduced payments and put that to better use.
The best way to check if you are suitable for refinancing is to contact our professional consultant.
We can help you get the right home mortgage refinancing.