Building an Education Fund in Malaysia by Refinancing Your Mortgage

As a parent, planning ahead is a high priority, including accounting for your child’s education fund in Malaysia. A family’s financial demands are onerous enough even in the early years: credit card debts, retirement funds, mortgage rates, etc.

Now, fast-forward a decade or two and factor in the price of a college education. This task could seem impossible because inflation rates are endlessly unpredictable and the rise of prices unremitting.

With tertiary education so central in today’s working world, you can see how urgent it is to manoeuvre finances for posterity.

The Costs of an Education Fund in Malaysia

A recent study estimated that the average working parent spends 55% of their income on their child’s higher education fund in Malaysia. And that’s the amount for one child alone!

After considering yearly price increases, the estimated tuition fees for local and private universities are RM15,000 and RM110,500, respectively. However, the funds that go into an overseas education far outweigh that without even considering living expenses.

More well-to-do families often prefer that their children pursue higher education abroad. Some favoured nations include Australia, the United States, and the United Kingdom, which have significant exchange rates.

Consequently, the required tuition fees tend to exceed RM200,000. On top of that, we all know the living costs overseas do not alleviate the financial burdens.

So, what are the financial solutions you can apply?

Ways to Save for Your Child’s Tertiary Education

Various avenues can help you attain your financial objectives in paying for your child’s university. Based on your economic standing, you may incorporate different plans to cater to your needs.

Long-Term Savings Plan

1. Endowment/Education Plans

An excellent way to finance higher education is through insurance plans that mature as your child goes to college. These education policies by insurance companies offer endowment alongside insurance coverage.

You would then have ample opportunities to invest in multiple investment-linked funds at your own risk. Eventually, you can allocate these savings to your child’s education fund in Malaysia, or anywhere you see fit.

2. Fixed Deposits (FD)

Some parents don’t wish to burden their child with a hefty loan upon graduation, which is understandable. In this case, you can build your wealth through financial instruments such as Fixed Deposits (FD).

Opening an FD account is a safe and convenient way to accumulate funds in the medium- to long-term. You can deposit savings every time you receive unexpected windfalls, including tax refunds, annual bonuses, etc.

Although gaining returns is slower, FD provides virtually no risk and has higher dividends of 3.5% than a regular savings account.

3. Unit Trusts

Another way to save up is by investing in equity or balanced equity unit trusts, which offer at least a 10% return. This form of investment accepts small-scale deposits compared to alternate investment products.

Plus, you can monitor your equity online as your situation changes throughout the investment period.

4. National Education Savings Scheme (SSPN)

Courtesy of the Malaysian government, there are also tax relief schemes to encourage the pursuit of higher education. One popular scheme is the Skim Simpanan Pendidikan Nasional, or SSPN, which could help you save up to RM14,000 annually!

Unfortunately, these dividend returns and tax reliefs are only applicable if your child studies locally and the public or private institutions are approved.

Immediate Solutions to Finance an Education Fund in Malaysia

In the event that you need immediate monetary funds, you can consider the following options. However, keep in mind that these plans may obstruct your child’s future finances.

1. Employees’ Provident Fund (EPF)

Worst comes to worst; you may dip into your EPF Account II and make an Education Withdrawal. While you will have less money saved for retirement, you can still finance your children’s studies locally or abroad.

2. National Higher Education Fund Corporation (PTPTN)

PTPTN loans allow college students to fully or partially pay for their tuition fees, depending on their household income. The loan even covers the necessary living costs so that parents can relinquish financial responsibility for the time being.

But PTPTN could leave your child in debt as they must repay loans six months after graduation with a fixed interest rate of 1%. Moreover, not all tertiary education courses are eligible for this loan.

What About Refinancing Your Housing Loan?

Yes, refinancing your home can be a smart tactic to fund your child’s education! After all, refinancing your mortgage loan lets you free up cash while allowing you to use your asset to your advantage.

Here’s a sample scenario to illustrate this:

Current property market valueRM600,000
Outstanding loan balanceRM150,000
Refinance loan amountRM480,000 (80% loan margin)
Cash-out earnedRM330,000
Monthly repaymentRM2,500

In this case, the initial value of your property was RM300,000, and now, it is valued at RM600,000. With an 80% loan margin, you are given a loan amount of RM480,000. The outstanding amount owed on your housing loan is RM150,000.

The amount of cash-out earned is RM330,000 after deducting the outstanding RM150,000 from the RM480,000 loan. The cash-out refinance of RM330,000 can help secure your child’s academic future, pay for college tuition and more.

Let’s say you’re renting out your property for RM1,800 monthly. Deducting your rental income (RM1,800) from the monthly repayment (RM2,500), you’ll only need to pay an additional RM700 to cover the monthly loan repayments.

Is Refinancing Loan Right For You?

There are several questions to consider before refinancing your home to pay for your child’s education fund, such as:

  • Does your credit score suffice to qualify for a lower interest rate, subsequently lowering your monthly payments?
  • Can you still pay off your mortgage before retirement if you extend the mortgage term to reduce monthly payments?
  • Would refinancing your housing loan produce enough savings to fund your child’s college education before it comes time?

Of course, parents should ensure that they are on the right track concerning their retirement savings above all else. It is not ideal to continue struggling in retirement while all your money goes towards your mortgage.

But if you are all set for refinancing, BlueBricks’ refinance housing loan rejected services can help you get your loan applications approved.

How BlueBricks Can Help You

Refinancing your home is a highly viable option to secure education funding, but accounting for application rejection is a must. Loan approval is never a guarantee, no matter how knowledgeable you are in the process. Fortunately, BlueBricks is here to offer you a helping hand.

A Leading Loan Agency Company in Malaysia

BlueBricks is a professional loan specialist with years of loan consultancy experience up its sleeve. We provide comprehensive loan rejected services that never fail you.

So, if you are submitting or resubmitting a new loan application, BlueBricks offers FREE consultations alongside CTOS and CCRIS reports to heighten your chances of approval. Additionally, there will be no upfront fees for our services until you’ve secured your loan.

Education Fund — FAQs

Despite the enticing low mortgage interest rates, homeowners must examine all the facts before deciding to refinance their housing loan.

Here are some commonly asked questions about building an education fund in Malaysia.

How do I plan for my child’s education fund?

Planning and saving up for an education fund requires ample planning and, most importantly, time. Here are some things you need to consider:
The cost of education
Your current financial status
Inflation and cost of living
Choose a suitable investment vehicle
Balance funds for retirement, education and emergencies

Should I withdraw from my retirement fund to support my child’s education?

Parents with insufficient money for their children’s education fund in Malaysia may use other available funds, including their Employees’ Provident Fund (EPF). However, this should only be considered a last resort as parents will need their EPF to sustain them during retirement.

Can I generate enough savings to pay for my child’s education in Malaysia?

Those with higher credit scores tend to get more attractive interest rate offers on their mortgages or refinancing loans. With lower interest rates, you will be making smaller loan repayments (which translates to greater savings) each month.

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About Bluebricks

BlueBricks Holding is one of the top ten leading loan agency companies in Malaysia in terms of loan approval rates. As a leading licensed loan agency company, we have extensive knowledge and experience in mortgage and business loans, and this enables us to help our customers to get the deal that is best suitable to them.

Picture of Wilson Wai Kit

Wilson Wai Kit

Senior Consultant

With extensive banking experience, notably as a mortgage sales officer at UOB Bank, Wilson leverages his understanding of loan applications and approvals to offer financial insights and support to empower individuals to make informed decisions regarding their financial futures.

Feel free to contact him for assistance with your financial needs!

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