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Why Refinance: 6 Reasons to Refinance in Malaysia

Most homeowners are probably aware that buying a property may be the biggest investment they will ever make. That is why you should review your home loan from time to time. But, you may be wondering, why refinance your current mortgage?

With changing life circumstances and equity built up, you can refinance to a loan with better terms to meet your current or future needs. If you’re still on the fence about refinancing, read on to know how it works and the common reasons for refinancing.

How Does Refinancing Work?

When you refinance your home loan, you are essentially closing off your current loan and replacing it with a new one. It is usually done to get better interest rates or terms.

The new home loan, which may be from the same or different lender, can reduce your monthly repayments or shorten your loan tenure.

The entire process is similar to getting your original home loan, where you are required to provide your personal details, financial information and other documents.

As the processing and approval may take anywhere from a few weeks to months, you should plan and adjust your timeline accordingly.

Top Reasons to Refinance Your Home Loan

There are several benefits to refinancing your home. Depending on various financial needs, current home value and opportunities with new home loan options, here are some of the top reasons people choose to refinance.

Top Reasons to Refinance Your Home Loan

1. Take advantage of lower interest rates

If you qualify for a lower interest rate than what you are currently paying, you can save a significant sum over the life of the loan.

The interest rates for home loans tend to fluctuate. By securing a lower interest rate, you might lower your monthly repayment amount.

Otherwise, you could use the extra money to make larger repayments to settle your home loan faster and save more on the total interest costs.

2. Reduce home loan tenure

If your financial situation allows, you can shorten your loan tenure and pay off your loan faster. Typically, shortening your mortgage tenure will increase your monthly instalments.

With a shorter tenure, financially stable individuals can get out of debt quicker and save substantial money from total interest paid.

But, homeowners also have the opportunity to refinance to another loan with a shorter term and almost the same monthly repayments should the Base Rate (BR) or Base Lending Rate (BLR) fall.

3. Extend home loan tenure

On the contrary, you can refinance to extend your home loan tenure in exchange for a lower monthly payment.

Homeowners facing financial difficulties during unexpected life events (e.g. medical issues, reduced income, new family member, etc.) can readjust their monthly loan instalments according to their affordability.

However, doing so can increase the total cost of the home loan as you will be paying for interest longer.

4. Consolidate your debts

Another reason why refinancing can be a smart financial move is debt consolidation. Individuals overrun by multiple loans and credit card bills can simplify their debts under a single roof by refinancing.

For instance, you can consolidate debts under a new home loan by refinancing. With that, you no longer have to worry about making multiple repayments to different lenders and the varying interest rates. Here are some examples of debts you can consolidate by refinancing:

  • Credit card bills
  • Personal loan (link to ‘Personal Loan Malaysia’ article)
  • High-interest debts
  • Medical fees
  • Bankruptcy
  • AKPK status

5. Change to different loan type

There is more to home loans than just owning property and interest rates. Some borrowers may opt to refinance and switch to a different housing loan type altogether.

In doing so, you can access additional features of the latest home loan offerings in the market. Designed to help you save on interest and pay off your loan sooner, refinancing can help you to:

  • Switch from fixed rate to variable rate
  • Have more flexible repayments
  • Access redraw facilities
  • Have an offset account

For example, you may want to refinance to a flexi loan that provides more flexibility, such as the ability to make additional repayments, which can be used to reduce the principal loan amount. What’s more, borrowers can withdraw the extra payments made without lengthy procedures or fees.

6. Tap into home equity for funds

Is your current home value considerably higher than its initial value? With a cash-out refinance, you can tap into your home equity to free up cash for various purposes.

While some may advise against doing this, there are key advantages to cash-out refinancing when done right. The extra cash can be used to:

Read More: Business Investment Tips Malaysia: 5 Essential Steps to Consider When Refinancing for Business

When Should You Refinance?

Before refinancing your housing loan, consider if the tradeoff is worth it and whether the benefits outweigh the cost. Homeowners should crunch the numbers and see if refinancing makes sense by considering these factors:

  • When the need arises (e.g. emergency funds, education, etc.)
  • Refinancing can help you unlock more savings and better terms
  • If you can afford the monthly instalments on time
  • When the bank accepts your application

Where to Apply for Refinancing?

Where to Apply for Refinancing

If you’re unsure of where to refinance your housing loan (link to ‘Best Bank to refinance’ article) in Malaysia, here are your options to apply for refinancing:

Refinance with the same bank or lender

  • If you’re satisfied with the service or terms, you can choose to refinance with the same lender. There are some benefits to refinancing with your current lender, including potentially faster processing and lower fees.

Refinance with a new bank or lender

  • It is also wise to search and compare different banks or lenders to get the best rate. Even a small amount makes a big difference in the long run and affects the total costs of your refinancing housing loan.

Mortgage brokers or bankers

  • If you’re unsure how to go about refinancing your home loan, you can hire a professional and experienced mortgage broker to sort things out for you. They can help you find home loans that suit your eligibility, affordability and needs.

A rejected mortgage loan specialist

  • Instead of applying again and again when your loan application gets rejected, you can engage a rejected mortgage loan specialist like Bluebricks.
  • With their expertise in the loan industry, they can identify problems in your refinancing application and help ensure that your resubmission has a higher chance of approval.

Read More: Refinancing Housing Loan Malaysia: All You Need to Know

How Bluebricks Can Help You

As a one-stop loan solutions provider, Bluebricks can help you negotiate for better refinancing home loan terms and avoid issues that may hamper your loan application.

With our refinance housing loan rejected services, we provide consultation and efficient solutions for your current or future refinancing application.

A Trusted Loan Specialist in Malaysia

Bluebricks is a professional loan specialist with years of loan consultancy experience and extensive loan rejected services up its sleeve.

Whether 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. 

Why Refinance — FAQs

We hope that this article answers your question, why refinance my current home loan in Malaysia. Furthermore, we have compiled a short guide to help you better understand how you can make refinancing work for you.

How soon can I refinance my home loan?

Before you take the step of refinancing, be sure to check your loan’s lock-in period. The lock-in period defines a penalty of 2-3% (charged on your original loan amount) that will be incurred should you end your home loan (whether by full settlement, refinance or sale) within the first 3-5 years.

Will refinancing affect my credit score?

Typically, refinancing will not affect your credit score significantly. At first, you may see a dip, as you have not proven your capability of paying it off. You should see a recovery in your credit score once you make consistent monthly repayments.

When should I not consider refinancing?

Refinancing may not be the best choice for you, if:

The refinancing costs are higher than the savings
You are refinancing unnecessarily (e.g. personal spending)
You are unable to make the monthly repayments
You cannot afford the total cost of refinancing

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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!

I want to know about bank loans
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!

I want to know about bank loans



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 loan agency company, we have extensive knowledge and experience in mortgage, personal loans, and business loans, and this enables us to help our customers to get the deal that is best suitable to them.

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