How To Use The Value Of Your Home To Fund Financial Goals
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Are you a homeowner? If so, most of your net worth is probably tied up in your biggest asset: your home.
But you likely have other financial responsibilities and aspirations. Perhaps you need to clear off debt, invest to grow your wealth or take up a major renovation project. However, these things can be expensive. Wouldn’t it be great if you could use the value of your home to cover some of these costs?
Fortunately, there’s a way to access the value of your home to fund these financial goals. Here’s how a redraw facility and top up financing can help.
How does a redraw facility work?
A redraw facility gives you access to extra funds from your existing home financing with the bank. It works by unlocking the value of your property and lets you redraw the increased value, or the amount you’ve already repaid or both.
With Maybank’s Redraw Facility, you can apply for additional financing against the latest market value of your home. This is possible because the market value of your home has increased and you have paid down your financing over time.
Here’s an example of how this works. Let’s say that you bought a house valued at RM250,000 in 2011. You borrowed 80% of the home value, or RM200,000, from the bank to purchase the home.
Let’s fast forward to 2021. After ten years, you’ve paid off part of your home financing, leaving an outstanding balance of RM100,000.
You need access to financing to fund your financial goals – but how? You’re in luck, because the value of your home has increased to RM500,000. This means you can borrow additional money against the current value of your home.
Borrowing 80% of your current home value means borrowing up to RM400,000. But you still have an outstanding balance of RM100,000, so the redraw portion that you can borrow is RM400,000 – RM100,000 = RM300,000.
In this example, the redraw facility gives you access to financing of up to RM300,000. However, your actual amount depends on your home value and how much the bank can lend you based on your repayment capability.
What can you do with your extra funds?
You could do anything with these extra funds, making it a convenient way to fund large financial goals. For example, you could:
a) Consolidate debts
If you have many high-interest/profit debts, such as credit card debt or personal financing, you could pay them off with the funds that you’ve unlocked. This makes financial sense, as these debts charge high interest/profit – for instance, credit cards can charge interest/profit rates of 15% to 18%. By contrast, home financing interest/profit rates are typically much lower and currently at a historical low of 3%, so clearing off high-interest/profit debts means potentially paying a lot less interest/profit.
By unlocking the value of your home, you could also invest to potentially grow your wealth. You could invest in a new business venture, top up your ASNB investments or even invest in yourself through postgraduate education.
c) Renovate your home
Need to spruce up an ageing property, or need another bedroom for a newly-arriving child? Or perhaps you just want a total makeover to turn your home into the sanctuary you’ve always dreamed of. Whatever the reason, a home renovation could be the answer. But renovations can be expensive – renovating a condominium unit alone might need a minimum of RM70,000 to RM80,000.
On the upside, a redraw facility could help you access funds that can cover these costs. In addition to achieving your home renovation goals, this could potentially increase the value of your home.
d) Greenify your home
Making your home eco-friendlier doesn’t just help save the environment. It can help you save a ton of money too – up to 90% of your monthly bill! According to TNB’s solar calculator, a terrace house with a monthly electricity bill of RM500 may only need to pay RM20 a month after a solar installation. That’s a yearly bill savings of RM5,749!
A solar installation can cost tens of thousands of ringgit, but it’ll pay for itself in the long run. The redraw facility can help you access funds to cover the upfront costs.
Take advantage of Maybank’s Redraw Facility
Maybank’s Redraw Facility makes it easy to unlock the value of your home. Whether you’re an existing Maybank customer, or a new customer who would like to refinance your home with Maybank, here’s what you’ll get:
- Convenient online application through Maybank2u
- Financing based on the latest market value of your property
- A chance to win eco-friendly prizes when you participate in Maybank’s Go Green campaign
With Maybank’s Redraw Facility, you’ll have fast and convenient access to funds that can help meet your financial goals.
Plus, if you are an existing Maybank customer with a landed house in prime location, you will access the redraw funds even faster* without having to wait for documentation to commence and complete.
*Terms and conditions apply