We heard a lot of people saying, you can “milk” out your home loan every 10 years. Your property is your cash cow, it is your asset that generating equity every year.
As such, do we wonder why do we refinance our property? The advantages of refinance is able to help you to get some cash, mortgage refinancing can result in lower instalments and better loan management.
Do we know what to do with the extra cash. Let’s explore more on the objective of the refinance.
What are the purpose of refinancing?
For sure that refinancing is enable you to get more cash. You may used the extra cash for the following reasons:
(a) to clear credit card debt
(b) to clear personal loan
(c) to help children to clear study loan
(d) to send children to oversea to study (child education)
(e) for home renovation
(f) for medical fees
(g) business expansion
(h) for investment purpose
Above are the eight typical purpose of refinancing. Item (a),(b),(c) are the bad DEBT that need to be cleared off. However, if the refinancing for home renovation, is not recommended.
With the extra cash that cash out from the refinance, and used it for business expansion or another investment purpose, this could be a good debt. Ideally, the good debt will be able to generate more cashflow or future capital appreciation.
Malaysia Bank Lending Rate
Refer to the chart below, it showed that the lending interest rate is on the down trend since 1999 till now. If landlord bought the house in 1997 or 1998, the interest rate is at 13%! I am still a colleague student during the Asian Financial crisis.
I am very sure, after year 2000, everybody should rush to the bank and ask for the refinancing in order to reduce the hefty interest rate.No one willing to pay such a high interest rate and not a wise thing to do as an investor.