Refinancing

Refinancing usually involves obtaining new loans with lower interest rates, which can be done through the original bank or a different one. Reasons for refinancing include high interest rates from the original bank, expensive additional fees, unsatisfactory services, or difficulties in securing a new loan for a new property from the original bank. Fees to both banks and the government are incurred when the new bank pays off the original loan after the refinance loan is approved. During refinancing, you may increase your loan amount, switch loan products, or extend the loan period if necessary.

Pros of Refinancing

• A new bank can offer better rates, leading to long-term savings that offset refinancing fees. Investors gain more options with lower interest rates and higher loan amounts. Lower interest means paying less to the bank, and higher loan amounts mean accessing more capital, which is a smart move for investors.
• Multiple valuations provide more choices. Investors can secure a larger loan from the bank offering the highest property valuation. This also helps in better understanding the market value of the property and offers flexibility in repaying principal and interest. It’s ideal for investors focusing on interest payments as it allows for reinvestment.

Cons of Refinancing

• Early termination of the contract with the original bank may result in fines.
• Additional fees such as application and processing fees may apply when switching to another bank. Overall, refinancing can increase the value of a property more effectively than a simple top-up, although selling the property may ultimately offer the best value.