Sunday, 8 June 2008

Mortgage Refinancing ~ Buying Additional Property

Buying a house is not to be a sole shelter anymore. It could be one of wise investment opportunities.. How about this.. Say 5 years ago someone bought a property at RM152k and now its value jumped to RM210k.. 5 years back, interest rate at 7% (6.75%+0.25%). 30 years 90% loan had cost him an installment of ~RM1k per month. Now many banks offered very good rate, for instance BLR minus up to 1.85%.. If he refinance the property with flexible home loan with an option of free moving cost (FMC), and he gets 90% loan of RM210k house value, his installment will be at ~RM900 a month. And he will get roughly RM60-70k nett considering his full settlement with previous bank at RM130k-140k. That is a handsome sum.. Forget about he will prolong his house repayment period at the flip side.. That is why he should look for flexible loan which will enable him to make pre-payment at any time.. Definitely his income will be increase in future. If he maintained his lifestyle or increase it by a lil bit only, he could channel all his salary increment into the home equity and lessen its repayment period.. Brilliant strategy rite..? Now, what he can do next..???? Precisely...., buying the next property... Say, buying a condo or service apartment in good location, he will need at most RM15-20k as a down payment.. And he still have a balance of RM40-50k which he could spare it as an additional fund to repay the new housing loan at least for 3-4 years... Again, his income will increase in conjunction of first 5 years... So, he should not worry of being unable to pay the installment... And that second property will increase in value in the next 5 years off course for another refinancing exercise.. :) Indeed, he can rent it out as well.. If fully furnished condo/ service apartment at prime location, someone will be able to rent it out up to 2k a month.. See, he is making money out of it...


OngKL said...

This is a great article, Fauzi.

You have demonstrated a brilliant strategy in making use of refinancing to increase our asstes.

Can we post this article in our blog ( to share the useful investing strategy with more readers?


Fauzi said...

Sure, no problem.. I am more than happy to do so.. More articles will come as well. :)