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What is a mortgage? In the financial sector, a mortgage is a secured loan in which real estate property is used as collateral. Among all the services you have from your bank, your mortgage is a one-of-a-kind deal in which the property's worth grows over time while your loan depreciates.


If you’re thinking about refinancing your home, there are three types of mortgage refinancing in Malaysia that you should consider:


Rate-and-Term Refinance

This is the most typical refinancing option. The initial mortgage is repaid, and a new loan agreement that has lower interest payments takes its place.


With this refinancing package, your interest rate is improved without affecting the size of your loan. Consequently, you will have a cheaper monthly repayment and as a result, paying off your loan will become an even simpler process!

Cash-Out Refinance

You can take advantage of the equity you've built up in your house and assess the difference between the two mortgages — your current mortgage and the new one — in cash by cash-out refinancing, which swaps your current home loan with a bigger mortgage.


The funds may be used for practically any objective, including house renovations, debt consolidation with high interest rates, or other financial objectives.

Cash-In Refinance

If you want to refinance but also want to make a sizable principal payment on your current mortgage, you can do so with a cash-in refinance. By doing this, you can bargain for a new mortgage with a lower interest rate and more agreeable monthly payments.


You can use your house to leverage your investment by refinancing. You may need to refinance for a variety of reasons, including obtaining cash from your house, lowering your monthly commitments, or reducing the length of your loan.


So now that you know what to expect, let's go over how mortgage refinancing works.

Benefits of Mortgage Refinancing

  • Savings on your interest cost


When you lock in a lower interest rate, you might potentially save thousands on your loan repayments. A lower interest rate often translates into a reduced monthly mortgage payment. This interest savings could be used to pay off additional high-interest debt, add to your savings account, or contribute money to your retirement account.
  • Lower your monthly commitments


Reduced monthly payments are possible with a lower interest rate, especially if your refinanced mortgage has the same repayment date as your original house loan. You can also reduce your monthly mortgage payments by extending your repayment date past what it is now, so you pay less in principle each month.
  • Mortgage refinancing allows you to change the tenure of the loan as per your needs


With a refinanced mortgage, you can tweak the loan's tenure to meet your needs. If your income and financial capability improve, you can choose a shorter loan tenure and pay off the mortgage faster by making larger monthly payments.


Why Should I Refinance?


You can consolidate debt, adjust loan terms, lower your monthly payments through refinancing, or even take some cash out of the equity in your house to pay bills or make improvements.


Let's analyse some of the causes for possible refinancing in more detail:


  • Consolidate your debt


Consolidating your debts entails taking out a new loan to pay off two or more of your current loans. Your past debts are consolidated, so you no longer have to worry about paying back numerous loans with various interest rates and costs.


Perhaps the most alluring of all of its advantages is the financial relief that comes from drastically lowering monthly instalments. In general, debt consolidation can decrease your payback duration and help you save money on interest.


  • Able to tackle any emergency situation with increased cash flow


The amount of money you must pay toward your mortgage each month in instalments is mostly influenced by the interest rate on your loan. That is the main reason why mortgage refinancing is popular. Depending on your goals, you can use the cash flow you get from refinancing your property for a variety of things.


This includes making the most of the current buyer's market and using the extra money to buy an investment property, investing in your own education, raising the value of your home through renovations, or saving for any emergency situations. You will be better equipped to handle any emergency circumstance with the extra cash flow that comes with refinancing your loan.


  • Can unlock a better future for your child


As a borrower, you can do a cash-out refinance to access the equity you’ve built up. This money can be used for a variety of purposes such as saving up for your children's education.


Rumah ku, syurga ku. Browse our property financing solutions or contact us to discover the best mortgage refinancing plan for your house. 


This article is for informational purposes only and CIMB does not make any representation and warranty as to the accuracy, completeness and fairness of any information contained in this article. As this article is general in nature, it is not intended to address the circumstances of any particular individual or entity. You are advised to consult a financial advisor or investment professional before making any decisions based on the information contained in this article. CIMB assumes no liability for any consequences arising from your reliance on the information presented here.