Refinancing Home Mortgage To Higher Interest Rates

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So, the time has arrived for me to settle the refinancing of my mortgage loan.  Kindly note that this is not a sponsored post, and the companies and parties mentioned below are involved in assisting me with the application process and completion of the refinancing procedure.

My last mortgage loan is with Hong Leong Finance (and yes, I am a shareholder), which started in October 2022.  It was a 2-year fixed rate loan where I enjoy an interest rate of 1.4% in the first year, and 1.5% in the second year.  I was relatively fortunate, because I started looking around for mortgage packages since April 2022, before the crazy propelling of interest rates began, and thankfully, although I was a couple of months too early, Hong Leong Finance was able to lock in the rates for me till my previous lock in period ceased.  As such, I am able to enjoy the lower rates with peace of mind when the interest rates were crazily high in 2023 and most of 2024.  However all good things must come to an end and it is time for me to refinance my mortgage again, if not, the interest rates I am liable for will shoot up to 3.95%.

For this, I seek the services of Redbrick Mortgage Advisory back in July.  Despite knowing that interest rate cuts were looming at that point in time, the exact schedule of rate cuts were still uncertain and time was running out for me, as usually refinancing requires 2 months notice to current mortgage bank/ finance institutions to prevent any penalty.  As such, I had to start picking the best deals for the options available for myself.  At that point in time, I was presented with 3 options, which were to reprice with Hong Leong Finance, or refinance with United Overseas Bank or Maybank.  

Of the 3 packages offered, I decided to go ahead with refinancing with Maybank, with a 2-year fixed rate package at 2.9%.  This interest rate is almost doubled that of what I was financing with in the past 2 years, so the instalment amounts will go up quite a bit.  To mitigate the jump in monthly instalment amounts, I was advise that due to my age, I can choose to increase the tenure of the loan to the maximum duration of 30 years (and this is the last time I can do this), so that my monthly instalments will be slightly lower.  I decided to go with that as I do not want to impact my liquidity, though it will also mean that I will have to pay higher absolute amount of interest in total.  However, as moving forward, interest rates will be cut and hopefully, 2 years later the mortgage interest rate can fall below 2%.  When that materialize 2 years later, I can do another repricing with a shorter tenure without needing to increase my monthly instalments.  How it will eventually turn out remains to be seen, so I will just do what I can at this juncture, that works out for my finances and liquidity.  Housing loan is a long term commitment, so I will just deal with it one step at a time.

So, 3rd October 2024 marks the new lock-in period of my loan package!  May the pace of rate cuts be gradual within these 2 years, and by July 2026, the interest rates will be pretty low for my next refinancing/ repricing.  Kindly note that the rate that I managed to lock in was the best back in July.  Fast-forward to September, based on one of the recent blog post by Financial Horse, the terms and rates for the packages as of September 2024 is much better than in July when I have the discussion with the mortgage broker.  Well, I suppose I just have to wait for 2 more years for a better deal.  For now, Barista FIRE, here I come...!

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