Using property refinancing for cash-out to gain more financial flexibility

Property prices continue to rise in recent years, and many properties have gone up in value. Property owners can use this opportunity to refinance and get cash-out or remortgage their properties at other banks. Current interest rates are low, so property owners can obtain additional cash at low rates by refinancing their properties, or lower their mortgage rates by remortgaging their properties. There are three major factors property owners should consider before refinancing to get cash-out or remortgaging their properties:

Interest rates:

If the original mortgage rate is 1-month HIBOR plus 1.7%, and the new market mortgage rate is 1-month HIBOR plus 1.4%, then, assuming that the 1-month HIBOR is 0.4%, the property owner can save 0.3% in interest payments.

Remortgage date:

In general, most banks require a 1-month notice period for early repayment of mortgages. Interest must still be paid on the mortgage during the notice period. Therefore, property owners should check the notice periods of their current mortgage providers before remortgaging so as to avoid paying additional interest payments.

Penalty periods and relevant expenses:

Penalty periods for mortgaged properties are typically around 2 to 3 years, and are recalculated after a remortgage. If a property owner remortgages a property during the penalty period, they are required to pay penalties to the previous mortgage provider. Moreover, property owners should be aware that there may be additional expenses (for example legal fees) involved when remortgaging a property.

In summary, interested property owners should compare interest rate differences between new and old mortgage plans and be aware of penalty periods, remortgage dates, and other relevant remortgage costs before making a decision on whether to further charge or remortgage their properties.