Thursday, April 8, 2010

Benefits of Refinancing

Benefits of refinancing

Lower interest rate & with shorter loan tenure

How many of you still attached to the same bank for financing especially for your commercial or residential properties? Do you ever write to the bank to ask for rate reduction? When I entered banking industry 7 years ago, the interest rate for housing loan was at higher level i.e. BLR +0.3% to BLR + 0.8%. At current BLR of 5.8%, you are merely paying more interest to the bank. Why I say so?

Are you burning your hard earn Money?
Most of the banks now are offering BLR – 1.8% to BLR-2.4%. How much will you save if new rate:

With assumption remaining your housing loans amount and tenure is RM250K and 25 years. This is what you going to save if you refinance to other banks!!

Before After
Tenure 25 years 25 years
Interest Rate-Whole Tenure BLR+0.3% BLR-1.8%
Monthly Installment $ 1,627.00 $ 1,320.00

Saving of RM 307 per month
Shorten the loan tenure by 7 Years!!

So are you clearer now? Of course your major concern for refinancing including legal fees, stamp duty, valuation report, and hassle of submitting new income document for loan processing. But think twice, is that worth more in the loan term by saving RM307 per month @ RM 3684 per year or 7 years repayment period!! That means you going to settle your housing loan 7 years earlier. Don’t you think it’s worth it?

Revalue of your asset

During the refinancing period, normally banker will updated the latest value of your asset through license valuer. At this stage you will know whether your property has increase in value, stagnant or the worst dropping in value.

Revalue your asset
But most of the time, people outside don’t want to know how much is their current property value simply because they think they don’t need to know as they are not selling it. But for me I always ask my business associate to revalue their asset as this is one of the best motivations that I ever use to motivate myself. Imaging if you revalue your asset and find out that every 3 years you’re net worth rising above your expectation, don’t you think you are more motivated to buy more? One of my friends just revalued his bungalow at Lintas area and surprisingly the value has increase by 23% @ RM400K within 2 years. Yes, that is almost net gain of RM200K per year or RM 16.6K per month and the best part this is TAX FREE!! Please tell me what business can help you to earn so much per month? Not many my dear friends except properties. Last year when I revalue my Api-Api apartment measuring 1320sf for refinancing purposes, it was really motivating to know the value has rise 83% over my purchase price. So what about you? Have you revalued your asset?

Top up additional facility

A lot of times additional facility can be get through refinancing of property. Additional facility here might refer to fixed loan or overdraft facility for standby purposes. Why you need such facility?

As property investor, additional facility against your appreciated property value is very important as this is one of the main tools that you can use to leverage further in acquiring more solid asset.

Your Home Equity for Reinvestment
Banks are much more willing to grant you additional loan provided your property equity is there. A lot of time people trying their very best to settled their property loan as there will be interest charge. But for me, as long as bank willing to grant additional facility to me I will take it for good. Yes…leverage further getting additional good property into my portfolio to grow further. I just get additional facility of RM50K from my property which I bought 4 years ago with additional monthly installment of RM223 per month. After the loan was release, I’m committing another property together with few of my friends which generating rental incomes. I hope this property will continue to appreciate while receiving steady rental income few years from now.

Benefits of refinancing can be more than what I mention above. My advice to those who have high equity in their property, please do something with it. Don’t keep it there and do nothing out of it. Like I always say, please capitalize all your current resources as this will definitely help in improving your month cash flow and building your endless future income. Happy Investing.

You cannot Grow Land..CK Wong & MY DAD


About This Blog

Was established since 20th Rejab 1430.
Just to educate myself.
`Sharing is Caring-The more you give,the more you get``

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