By Fahri Ahmed
The Home Ownership Campaign (HOC) was first introduced by the Malaysian Government on January 1, 2019, and ran until December 31, 2019.
It essentially catered to new homebuyers looking to buy a beautiful home for their family.
After Covid-19 made its mark on the country’s economy, it was reintroduced under Penjana as an initiative to revitalise the property market. It is set to end on May 31, 2021.
The main attraction of HOC is that it provides stamp duty exemption on the instruments of transfer and loan agreement for the purchase of residential homes priced between RM300,000 to RM2.5 million.
The exemption on the instrument of transfer is limited to the first RM1 million of the property price, while full stamp duty exemption is given on loan agreement effective for Sales and Purchase Agreements (SPA) signed between June 1, 2020, to May 31, 2021.
Best of all, the HOC also offers a minimum 10% discount on houses bought under the scheme!
For those looking to purchase a second home or build their property portfolio, there is no better time than the present.
The property market is currently a buyer’s market, which means there is more supply than demand, thus raising your chances to snag a property below market price.
Even potential investors who want to capitalise on the current situation but do not have enough cash can jump on the wagon.
How? The answer is refinancing.
Refinancing is the restructuring of your loan in a way that gives you different terms or rates and usually gives you better cash flow, especially through cash-out refinancing.
Before deciding on whether to opt for refinancing or not, you must first weigh out various options — how much can you save by refinancing your home loan? Would it put you in a better position debt-wise? How will it serve you in the long run? Let’s find out!
Advantages of refinancing
- Lower interest rate
Currently, the Overnight Policy Rate (OPR) in Malaysia is at its all-time low at 1.75%. If you refinance your home loan now, you can save on your monthly interest payment significantly. Combined with the HOC, you can apply to refinance for a new home loan at this all-time low interest to reduce your accumulated debt for both houses.
- Debt consolidation
Usually, paying for multiple loans is hard. You are more likely to miss a payment or become overwhelmed by the mounting loan instalments. To ease your burden, you can refinance to put all your home loans under one loan.
Paying your loans will be easier and you can even bargain a better interest rate in the current situation. Besides, if you invest in a new home under the HOC scheme, you can put that home loan together with your existing ones to put all your obligations in one neat package.
- Healthier credit score
Refinancing allows you to save money thus releasing more free cash for your use. You have less monthly interest to pay and less debt obligation in your record. It puts you in a great position to meet your obligations regularly and your debt-to-income ratio also looks considerably better. Thus, it helps you to obtain a higher credit score for further loans in the future.
- Large loans
Often, multiple small loans can add to your interest expense. Refinancing enables you to take a larger loan to cover all your existing loans in one single new mortgage. It is easier to maintain and saves you time and hassle in catering to different loans at different times of the month.
- Longer repayment period
When you took your first loan, your financial capacity might not have been as good as it is now. Over time, your income has grown, your credit score went up and you are financially healthy.
If this is you, then refinancing your home loan today can give you a better negotiating position to get a longer repayment time. You will have more time to pay your loan which will free up your monthly cash to invest in other important things.
Disadvantages of refinancing
- Risk of foreclosure
If you cannot pay your mortgage payment in time, you stand the risk of foreclosure on your homes. However, if you can make your payments on time, then you need not worry about it.
If your sole purpose of refinancing is getting a better interest rate and better terms and conditions, then you will be freeing up cash. So, you will have enough money in hand to make your payments in a timely manner.
- Closing cost
When you refinance your home, the closing cost can quickly add up. You will have to pay for a loan application, home appraisal, disbursement and stamp duty. But as long as you keep an eye on the cost and look for a bank that has the lowest closing cost, all will be well.
- Interest cost
Refinancing often involves adding your other existing loans to put all debt obligations under one new mortgage. Hence, your new interest rate will be higher than the existing one as you are paying for a bigger loan amount. To avoid overpaying your interest, calculate your existing interest on loans to make sure your new interest is lower.
As with all financial decisions, choosing to refinance is not a decision you can make lightly. You’ll need to weigh all the pros and cons, as well as calculate your monthly commitments carefully before deciding to sign the papers.
Luckily, the approval process for refinancing is not as long as personal loans, so if you apply now, it may even get approved just before the HOC ends!
Head on over to our Refinance Calculator to find out more!