If you always ask yourself, I have a house and How To Refinance My House Malaysia? Then this article is for you.
MalaysiaHousingLoan.net is a platform where we share knowledge about Refinance House Malaysia 2023.
When you reach certain stages in your life, and that can be at any stages, maybe when you get married, have kids, send your kid to college, and you need that extra money to spend.
Most people will turn to refinance a house. It’s very simple with cash out refinancing Malaysia; you will get that extra money to pay for marriage, kids, education, medical fees, or anything important.
So how to do it?
Today, we’re going to breakdown the steps on How To Refinance My House Malaysia.
# Step 1: Check Your Home loan Penalty
The first thing you need to do is call up your existing bank, and check your penalty period.
You have to make sure your current home loan doesn’t have penalty fees or the penalty period has ended.
The check on the penalty is essential to make sure you are not penalized by refinancing to another bank. Most banks will have a penalty clause, and it’s crucial to check on this.
After checking, if the penalty period has ended, then it’s great. You don’t need to fork out an additional cost for refinancing.
However, if it’s not, then the next question in line is when the penalty period will end?
If the penalty period ends within less than three months, then you can proceed for refinancing first.
You can get approval from the bank, but you have to mention to the banker and loan lawyer to request the redemption statement after the penalty period ended.
If more than three months, then you should ask how much is the penalty fees?
If the answer is not too much and you’re willing to pay for it, then it shall be your refinancing cost.
In this case, you should consider your refinancing cost before you go ahead with refinancing.
#Step 2: Cost Refinance Home Mortgage
Cost Refinance Home Mortgage or Cost of Refinancing is varied in comparison to one person to another.
Hence, we will discuss the Cost Refinance Home Mortgage here today.
1. Penalty Fees
In my earlier point, I pointed out the need of checking your penalty fees upfront. In the event, after checking and satisfy with knowingly the penalty fees as such, you should consider this as your refinancing cost as well.
2. Loan Agreement Legal Fee, Stamp Duty Fee, Disbursement Fee & Valuation Fee
Loan Agreement Legal Fee, Stamp Duty Fee, Disbursement Fee & Valuation Fee are compulsory fees that you have to pay when refinancing your property. Sometimes, people in the industry will call it as entry cost.
Most time the banker doesn’t call it Loan Agreement Legal Fee, Stamp Duty Fee, and Disbursement Fee because the term is too long. In short, they will inform you that legal fees for refinancing Malaysia.
So, how much is this Entry Cost?
The general rule of thumb is about 2-3% from your approved loan amount with the exception with loan less than RM200,000.
For the loan amount below RM200,000, it might come up to more than 3.0% to 3.50% range. It seems like the lower the loan amount; it gets a little pricier.
If the loan amount is RM500,000. Here how you can estimate the Entry cost.
RM500,000 x 2% = RM10,000
RM500,000 x 3% = RM15,000
So, the entry cost should be in the range of RM10,000 to RM15,000.
There are three types of entry cost packages offered by banks but bear in mind that not all the banks have all three types of packages.
The three types of packages are as below.
a. Non-Finance Entry Cost
Non-Finance Entry Cost is when the borrower pays the entry cost. Usually, the entry cost has to settle when a borrower signs their loan agreement and when the valuer site visits their property.
b. Finance Entry Cost
Finance Entry Cost is when the borrower finances their entry cost with the loan.
Let said, if the entry cost is RM15,000 and the loan amount approved RM500,000, then the RM500,000 + RM15,000 = RM515,000 being the total loan amount.
The RM15,000 will be disbursement by the bank to the respective loan lawyer and valuer company.
This is the most popular option as you don’t need to fork up such a massive amount before getting your cash out refinancing Malaysia money.
If you want to save on interest, you can pay back the entry cost anytime you like after the disbursement. Therefore, we always encourage a client to go for finance entry cost even they have money to pay upfront.
c. Zero Entry Cost
Zero Entry Cost is rare and used to be controversial. But it is not now.
Zero Cost is when a bank pays for your entry cost.
Is it sweet, right?
Wait for the catch.
The catch is interest rates is slightly higher in comparison with other finance entry cost packages.
Also, the terms and conditions are quite strict for Zero Entry Cost packages client.
So, even it sounds terrific, and all, not many want to go ahead with Zero Entry Cost.
Remember earlier; when we mentioned that not all banks offer the three type of packages.
Some bank like Public Bank Refinance Housing Loan only offers Non-Finance Entry Cost.
While another bank like Maybank Housing Loan offers Non-Finance Entry Cost and Finance Entry Cost to customer.
Other banks or financial institution offering Zero Entry Cost are AIA Refinance Rumah and Standard Chartered Bank House Loan.
So, make your wise choice, okay?
3. Bank Processing Fee
A bank processing fee is a fee that bank charge for handling or processing your application. The bank will charge you after the acceptance of the loan application.
Some bank might use a different term like an account set up or opening account fees, but it still comes to the same; which a cost that you need to pay.
Typically, this fee is not much; it’s in the range of RM50-RM200 at one time charged.
Mosts bank doesn’t charge you unless you’re taking their Full Flexi loan.
4. Mortgage Reducing Term Assurance ( MRTA ) or Mortgage Level Term Assurance (MLTA)
Mortgage Reducing Term Assurance ( MRTA ) is insurance that covers the borrower in the event of death or total permanent disability (TPD).
When unforeseen circumstances happen, per se the death or TPD; under Mortgage Reducing Term Assurance ( MRTA), the insurance company will cover the outstanding loan.
Depending on how much you buy the Mortgage Reducing Term Assurance ( MRTA ), they have a diagram for you to refer. The coverage solely follows the diagram.
On the diagram, they have years after servicing the loan and how much the coverage amount will be, and it will be on reducing amount.
Sometimes, the amount will not sufficient to cover the loan, and sometimes it will. So, check carefully with your banker or agent, ask for the diagram to understand better.
Mortgage Reducing Term Assurance ( MRTA ) usually is encouraged to buy by all the banks. But, most banks have a flexible policy on this. It is not compulsory and only optional.
Generally, you will get a lower home loan interest rates when you buy a Mortgage Reducing Term Assurance ( MRTA ) policy.
For someone who doesn’t buy any Mortgage Reducing Term Assurance ( MRTA ) policy, the interest rate is usually higher.
As our knowledge, only one or two banks, we know that make it compulsory to buy Mortgage Reducing Term Assurance ( MRTA ).
On the other hand, Mortgage Level Term Assurance (MLTA) is not part of the bank product.
Usually, Mortgage Level Term Assurance (MLTA) sells by a mortgage loan broker, insurance agent, or a banker to provide as an alternative to the Mortgage Reducing Term Assurance ( MRTA ).
In reality, Mortgage Level Term Assurance (MLTA) is a life insurance policy. Period.
Many people repackage life insurance to become Mortgage Level Term Assurance (MLTA).
MLTA has better cash value return compare to MRTA because it has level term coverage. This means the coverage amount is the same from the first year until the end of tenure.
If from the first year the coverage is RM100,000, after the end of tenure, the coverage still RM100,000.
While for Mortgage Reducing Term Assurance ( MRTA ), the first-year coverage is RM100,000, and by the end of tenure, the coverage amount is ZERO.
Besides, Mortgage Level Term Assurance (MLTA) is a stand-alone policy. You don’t need to transfer the policy from one bank to another when you refinance or sell your property. You can easily use it for your next property.
The down part about Mortgage Level Term Assurance (MLTA) is it’s slightly expensive compared to Mortgage Reducing Term Assurance ( MRTA ). However, If you pay promptly until the end of tenure, you might get back whatever you have paid or even up to 80-90% of what you have paid.
Over the years, Mortgage Level Term Assurance (MLTA) has evolved. Some people no longer sell Mortgage Level Term Assurance (MLTA) under a life insurance product.
They might mix things up with an investment-linked product with some life insurance features.
The thing about the investment-linked product is the cash value in the policy might increase or decrease over the years, depending on the performance fund.
Life insurance has a more steady cash value increase over the years, and by the end of tenure, the cash value in the life insurance policy will increase.
By the end of the day, both Mortgage Reducing Term Assurance ( MRTA ) and Mortgage Level Term Assurance (MLTA) is a good product. Both products have advantages and disadvantages.
It doesn’t matter whether, Mortgage Reducing Term Assurance ( MRTA )or Mortgage Level Term Assurance (MLTA), choose a product that suits you the most.
#Step 3: Check Your CCRIS Report
Before applying for any loan in Malaysia, we would advise a visit to Bank Negara Office to print your CCRIS Report.
CCRIS report will show all the loan you have in Malaysia and 12-month loan conduct.
If there are more than two months arrears on your CCRIS report, this is what you need to do.
You are advised to clear the arrears and apply for the home loan when the arrears don’t appear anymore on your CCRIS Report.
If your CCRIS report is clear, then you are good to go for applying for refinance house.
#Step 4: Check You Loan Eligibility & Cash-Out Refinancing Malaysia Entitlement
You have two ways to check your loan eligibility. One walks into a bank and asking a bank officer to do so.
Secondly, you can reach out to us at MalaysiaHousingLoan.net or call us at 012-6946746.
Our professional consultant will help to calculate your eligibility and cash-out entitlement.
From here you can decide to proceed to apply for refinance house Malaysia or vice versa.
If you agree to proceed, we will introduce our respective banker to help with your refinancing home loan application.
No worries, our consultation is FREE to you, we don’t charge any fees. Call us today, 012-6946746, and you know how friendly we are.
#Step 5: Get Your Documents Ready & Apply For A Refinance House Malaysia
The bankers probably will reach out to you within one or two days. You need to get ready your documents to proceed for refinancing.
Or you can provide some details on the property and ask the banker to check the market value for your first.
Once they have checked the market value and you’re satisfied with the cash out refinancing, then you can go ahead and send your documents to the banker for application.
The loan approval took about 1-2 weeks. Once the banks approved your home loan, compare the offer, and choose the one you comfortable the most.
#Step 6: Sign Your Letter Offer and Loan Agreement Documents
Now, you have made up your mind, so you will sign the bank letter offer with the one bank you comfortable the most.
Then, the bank loan lawyer will reach out for the signing of a loan agreement.
If you have finance in your legal fees, then you don’t need to pay the lawyer. But, if you don’t, then you need to pay the lawyer during the signing.
#Step 7: Valuer Site Visit
Meanwhile, the bank valuer will call and set an appointment with you to visit the property.
You have to allow the valuer to enter the house and take some pictures. Typically, it’s quick and straight forward. Usually, it only takes about 10-15 mins max.
The valuer will also advise you on the payment of valuation fees if you didn’t finance the valuation fees in the loan.
Usually, they will not release the valuation report to the bank until they receive your payment.
#Step 8: Fully Settle Your Current Bank
After a long few months, the bank lawyer is ready to advise the bank for the first disbursement.
The first disbursement usually will be to settle your existing bank fully.
After your existing bank receives the payment, they will release the old documents to your lawyer.
Then your bank lawyer will do the necessary discharge of charge or receipt and reassignment procedure before advising the bank for the second and final disbursement.
#Step 9: Cash Out Refinancing Malaysia
The second disbursement will be to you. You will receive the cash out money. And this is when most of you are truly happy. ( LOL)
# Step 10: Use Your Money Wisely
Once you receive your money, don’t forget to use it wisely. Use it to grow your money or to lessen your debts.
Okay, that’s the end of our article How To Refinance My House Malaysia.
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