What Is Cash-Out Refinancing?
Cash-out refinancing lets you replace your current home loan with a bigger one and take the difference in cash. Essentially, you’re using your property’s equity — the portion you’ve already paid off — to free up money for renovations, investments, or consolidating debt.
👉 Example:
- Current home value: RM1,000,000
- Outstanding loan: RM400,000
- Equity: RM600,000
- If your bank allows refinancing up to 90% LTV, you can borrow RM900,000.
- New loan (RM900,000) – old balance (RM400,000) = RM500,000 cash out (before fees).
How Does Cash-Out Refinancing Work?
Step 1: Calculate Your Equity
Your property’s current value minus your remaining loan.
- Use a loan balance tool to check how much you still owe.
Step 2: Estimate Your Eligible Amount
Most Malaysian banks allow refinancing up to 80–90% of property value.
Step 3: Deduct Costs
Cash-out isn’t free. Expect:
- Legal and valuation fees
- Stamp duty (0.5% on the new loan)
- Possible lock-in penalty if your loan is still within 3–5 years
👉 Try this legal fee estimator for upfront charges.
Step 4: Calculate Net Cash in Hand
Subtract fees from your gross cash-out.
Benefits of Cash-Out Refinancing
- Lower interest rates compared to personal loans or credit cards
- Large lump sum access for renovations, education, or investments
- Debt consolidation option (combine multiple high-interest debts into one loan)
Risks You Should Know
- Bigger loan = higher total debt
- Longer repayment period
- Lock-in penalties and refinancing costs
- Risk of losing your property if you default
When Is Cash-Out Refinancing Worth It?
- Renovating to improve property value
- Consolidating debts at lower interest
- Funding children’s education or business expansion
- Investing in another property (if ROI exceeds new loan costs)
👉 For investment comparisons, you can also try a property ROI calculator.
Example Scenarios
| Home Value | Loan Balance | Equity | Max LTV (90%) | Cash-Out Potential |
|---|---|---|---|---|
| RM800,000 | RM400,000 | RM400,000 | RM720,000 | RM320,000 |
| RM1,200,000 | RM500,000 | RM700,000 | RM1,080,000 | RM580,000 |
FAQs About Cash-Out Refinancing in Malaysia
1. How much can I cash out from my property?
Usually up to 80–90% of your home’s market value, minus your outstanding balance.
2. What fees are involved in a cash-out refinance?
Legal, valuation, stamp duty (0.5%), and possible lock-in penalties.
3. Is cash-out refinancing better than a personal loan?
Yes, because mortgage rates are much lower than personal loan rates in Malaysia.
4. Can I refinance during the lock-in period?
Yes, but you’ll need to pay a penalty (often 2–3% of the loan).
5. What’s the difference between a normal refinance and cash-out refinance?
A normal refinance replaces your loan at a lower rate, while a cash-out refinance gives you extra cash on top of your balance.
Fredrick is the creator behind houseloancalculatormalaysia.online, dedicated to helping Malaysians easily understand and calculate their home loan payments. With a focus on accuracy and simplicity, Fredrick develops reliable tools and clear guides to empower users to make informed financial decisions. His goal is to provide trustworthy, user-friendly resources that save time and reduce confusion in the complex world of home loans.