We are always in the dilemma of deciding what is the best option for us in our daily lives. From deciding on simple things such as what to have for our next meal, to deciding on more complex matters such as finding the job that fits us, we should always decide based on our own objectives or goals. The same applies when deciding whether to sell or refinance your property. Refinancing involves replacing an existing loan with a new loan with better terms that pays off the debt of the existing loan. Think of it as shopping for any other loan or mortgage. There is no absolute answers when it comes to selling or refinancing as the circumstances and financial situation of each individual is different.
How to identify the timing to sell?
You need to first identify the localized market condition in your area, whether it is a buyer's market or seller's market. If there are many recent transactions in your area and transaction prices have been rising in recent years, there’s a good chance you’re in a seller's market. If these criteria, you are in a strong position to sell and yield a handsome profit.
Tip: you can go to www.brickz.my to compare the price trend and transaction activity for the past 2 to 3 years to see if you area favors the seller's market.
How to identify the timing to refinance?
The reliable indications to refinance is when the current market value of your property is considerably higher than the original market value of your property and your outstanding loan amount when you purchased the property, pairing with a low interest rate environment.
Things to take note of when deciding to refinance
Before you even think of refinancing, you should first make sure that your credit score is as high as possible to qualify for the lowest interest rates. After that, you will have to identify the purpose of refinancing, such as:
The opportunity to obtain a lower interest rate
The chance to shorten mortgage loan tenure
The opportunity to tap on the property latest market value in order to finance a new purchase
Debt consolidation
The desire to convert to a different mortgage product type (Fixed Mortgage term loan, Flexi-mortgage loans or semi-Flexi mortgage loan)
You should also factor in the cost associated to refinancing such as moving costs and lock-in period to determine whether it is worth to do so. Moving costs refers to money you would need to spend when taking up a new loan, such as valuation fees, loan agreement legal fees, disbursement and loan agreement stamp duty. If you are refinancing to save on interest, take note of this amount and compare it against the savings in interest you would obtain through refinancing. The costs are illustrated as below:
Note: Loan Agreement Stamp Duty is calculated at 0.5% of Loan Amount
When you want to pay off your existing loan early, check if your existing loan has a lock-in period and if you are still bounded by it. Banks normally charge a penalty of 2% to 5% (on your original loan amount) if you fully pay off your mortgage within the first two to five years.
The Final Touch
Contact a few banks to find out the best deals. Get at least three or four quotes from other banks before inquiring with your current lender. The things that need to be taken into consideration will be the Effective Lending Rate (ELR), the moving cost, whether it is zero moving cost or partial moving cost is absorbed, and lock-in period. Evaluate all these deals based on your objectives. For example, if you want to convert from a Flexi-mortgage loan to Fixed Mortgage Term Loan, be sure to look out for banks that offer the lowest interest rate along with other terms and conditions.
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Jasone Gan: +6017-6018899
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