Are you planning to reduce your monthly housing loan instalments or get better loan terms? Mortgage refinancing in Malaysia could be the answer. Many homeowners refinance their existing loans to benefit from lower interest rates or access extra cash. However, before applying, it’s important to understand the requirements of mortgage refinancing in Malaysia and the process, costs, and key things to consider.
What is Mortgage Refinancing?
Mortgage refinancing means replacing your current home loan with a new one, usually from a different bank. The new loan pays off the balance of your existing loan. You’ll then start paying the new lender under new terms. The goal is to enjoy lower rates, reduce monthly repayments, or change the loan structure to suit your financial needs.
Types of Mortgage Refinancing in Malaysia
There are 3 main types of mortgage refinancing in Malaysia:
- Rate-and-Term Refinancing: This is the most common option. It allows you to change the interest rate, loan tenure, or both without increasing the loan amount.
- Cash-Out Refinancing: This option lets you borrow more than your outstanding loan balance and get the extra money in cash. The amount you can cash out depends on the current market value of your property.
- Islamic refinancing: This follows Shariah-compliant banking principles and is offered by Islamic banks in Malaysia. It may involve profit-sharing or rent-based repayment structures.
Benefits of Mortgage Refinancing
Here are the common advantages:
- Lower interest rate: Save more in the long run
- Lower monthly repayments: More room in your monthly budget
- Cash-out option: Use the extra funds for renovation, education, or other purposes
- Flexible repayment: Adjust the loan tenure based on your affordability
- Bank switching: Move to a bank offering better service or features
How Much Does Mortgage Refinancing in Malaysia Cost?
Before refinancing, you should know the upfront and hidden charges involved. Here’s a breakdown of typical costs:
- Legal fees: RM2,000 – RM5,000
- Valuation fees: RM300 – RM1,000 (depends on property type and value)
- Stamp duty: 0.5% of the outstanding loan amount
- Processing fees: Can differ depending on the bank
- Disbursement fees: For registration, land search, etc.
Requirements of Mortgage Refinancing in Malaysia
Not everyone is eligible for refinancing. These are the basic requirements of mortgage refinancing in Malaysia:
- Malaysian citizen or permanent resident (PR)
- Minimum age: 21 years old
- Maximum age at loan maturity: Up to 70–75 years old, depending on the bank
- Income proof:
– Salaried workers: 3 months’ salary slips and bank statements
– Self-employed: 6 months’ bank statements and business documents
- Good credit history: Banks will check your CCRIS/CTOS report
- Property value: Must be sufficient for the new loan amount
Loan-to-Value (LTV) Ratio
Most banks offer up to 90% refinancing based on the property’s current market value. For example, if your property is worth RM600,000, you can refinance up to RM540,000.
Process of Applying for Mortgage Refinancing in Malaysia
Refinancing involves a few steps and can take between 4–8 weeks. Here’s how it works:
- Compare loan offers: Research interest rates, fees, and lock-in periods.
- Apply for property valuation: Banks will appoint a valuer to assess your home’s worth.
- Submit application: Provide your income documents, ID, and property details.
- Loan approval: The bank will review your credit and property value.
- Legal documentation: A lawyer will prepare and sign the new loan agreement.
- Loan disbursement: The new bank will settle your loan and begin your new instalment.
Things to Consider Before Mortgage Refinancing
Besides the requirements of mortgage refinancing in Malaysia, here are a few important factors to evaluate before refinancing:
- Lock-in period: Some loans have a lock-in period (e.g., 3–5 years). Exiting early can trigger penalties.
- Break-even point: Will the savings from lower interest outweigh the refinancing costs?
- Long-term plans: Refinancing may not be worth refinancing if you plan to sell your property soon.
- Credit score: A poor repayment history can lead to rejection or higher interest.
- Financial goals: Are you refinancing to save, invest, or consolidate debt?
Tips for Choosing a Mortgage Refinancing Service
Choosing the right refinancing option can save you thousands. Here’s what to look for:
- Compare at least 3 bank offers
- Check for hidden fees and early settlement charges
- Consider packages with no upfront cost (ZEC)
- Read the fine print carefully
- Work with a trusted mortgage advisor to avoid mistakes
Why Choose Chu Yao?
At Chu Yao, we specialise in helping Malaysians find the best mortgage refinancing options.
- Access to top refinancing packages across major banks
- Transparent advice tailored to your financial goals
- Fast application and professional support
- Assistance with paperwork and legal coordination
Mortgage refinancing in Malaysia is a great financial tool if done right. Refinancing can offer real benefits if you want to reduce your monthly instalments, shorten your loan tenure, or cash out for other purposes. But it’s essential to understand the requirements of mortgage refinancing in Malaysia, compare your options, and work with professionals you trust.
Ready to explore mortgage refinancing? Contact Chu Yao today for a free consultation and let our experienced team help you get the best deal for your home loan.