How to refinance a home loan in Malaysia, and when it pays off
When you refinance a home loan in Malaysia, the new loan agreement is stamped at RM5 for every RM1,000 borrowed, which is 0.5% of the full new loan amount. Add the lawyer's scale fee, a valuation and any penalty from your current bank, and switching can cost well over RM10,000 on a mid-sized loan before you save a single ringgit.
Refinancing can still save you money. The useful question is how many months of lower instalments it takes to earn back what you pay to switch, and whether you will keep the loan that long.
We cover what refinancing is, lock-in periods and early settlement fees, every cost with its legal basis, a worked break-even example, cash-out refinancing, and the steps from first quote to the new bank paying off the old one.
Quick answer: Refinancing pays off when your monthly saving, multiplied by the months you expect to keep the loan, is larger than the total cost of switching. Total cost means stamp duty (0.5% of the new loan), legal fees on the Solicitors' Remuneration Order scale, valuation, the discharge of the old charge and any early settlement fee if you are still in your lock-in period. Divide that total by the monthly saving to get your break-even point in months.
Work out your refinancing savings
What refinancing a home loan means
Refinancing means taking a new loan, usually from a different bank, to pay off the one you have. The new bank pays your old bank the outstanding balance, a new charge is registered over your property in the new bank's favour, and you start paying the new bank instead. Your property, title and ownership do not change.
People refinance for three main reasons. The first is a lower rate, which lowers the monthly instalment or the total interest. The second is a different structure, such as moving from a term loan to a flexi or semi-flexi loan. The third is cash: borrowing more than you owe today against the current value of the property, which is called cash-out refinancing.
There is a fourth reason that applies to older loans. Bank Negara Malaysia's revised reference rate framework made the Standardised Base Rate (SBR) the reference rate for new retail floating-rate loans from 1 Aug 2022, and that includes the refinancing of existing loans from that date. Loans taken before then stay priced against the bank's Base Rate (BR) or Base Lending Rate (BLR). Refinancing moves you onto SBR plus a spread, so you can compare offers on one common base.
The SBR is set to the Overnight Policy Rate (OPR). Bank Negara kept the OPR at 2.75% on 3 Sep 2026, so a new floating-rate loan today is priced at 2.75% plus whatever spread the bank offers you. The spread is the part that differs between banks and borrowers.
Lock-in periods and early settlement fees
A lock-in period is a fixed number of years, written in your letter of offer, during which settling the loan in full triggers a fee. Refinancing counts as full settlement, because your old loan is paid off. Check your own letter of offer first: the length of the lock-in, when it starts (usually first disbursement) and how the fee is calculated all vary by bank and by product.
Bank terms vary widely, and several banks have dropped the fee altogether. These examples come from each bank's own notices.
| Bank and product | Lock-in | Early settlement fee | Status |
|---|---|---|---|
| AmBank housing loan (conventional) | 3 years from first disbursement | 2% of the principal balance outstanding | Not imposed from 3 Jan 2025 until further notice |
| AmBank Islamic home financing-i | 2 years from first disbursement | 2% of the principal balance outstanding | Not imposed from 3 Jan 2025 until further notice |
| Alliance Bank mortgage | Lock-in period in the letter of offer | 2% of the approved loan amount | Ceased from 1 Aug 2025 |
| Bank Islam Wahdah Home Refinancing-i | No lock-in period | No penalty for early settlement | Current |
Source: AmBank, Alliance Bank and Bank Islam (as of 26 Oct 2026)
Two details change the size of the fee. A fee on the approved amount is larger than one on the outstanding balance, because you have already repaid some principal. And a waiver announced by your bank may apply only to certain products or dates, so ask your bank for a redemption statement that shows the exact settlement figure, including any fee. Banks may charge for this; RHB, for example, lists RM50 per redemption statement.
The new loan will usually come with its own lock-in. Read it before you sign, because it decides how soon you could refinance again.
The costs of refinancing: stamp duty, legal fees and valuation
Every refinancing has a set of one-off costs. Some are fixed by law, some by the lawyers' scale and some by the bank.
| Cost | Rate or basis | Who sets it |
|---|---|---|
| Stamp duty on the new loan agreement | RM5 for every RM1,000 or part of it (0.5%) | Stamp Act 1949, First Schedule, item 27(a)(iii); paid to LHDN |
| Stamp duty on the discharge of the old charge | Same duty as the charge, capped at RM10 | Stamp Act 1949, First Schedule, item 65 |
| Legal fee for the new loan documents | 1.25% on the first RM500,000 (minimum RM500), 1% on the next RM7,000,000 | Solicitors' Remuneration Order 2023, Third Schedule, Table A |
| Legal fee for the discharge of charge | RM400 for the first title or charge, RM100 for each additional | Solicitors' Remuneration Order 2023, Fourth Schedule |
| Valuation | Board of Valuers scale | Board of Valuers, Appraisers, Estate Agents and Property Managers |
| Disbursements | Registration of charge, land search, bankruptcy search | At cost, billed by the lawyer |
| Early settlement fee | Only if still in the lock-in period | Your current bank's letter of offer |
Source: Stamp Act 1949 (LHDN), Solicitors' Remuneration Order 2023 (Malaysian Bar) and RHB product disclosure sheet (as of 26 Oct 2026)
Stamp duty. The 0.5% applies to the whole new loan, including the part that simply replaces your old balance. We could not find a current Stamp Duty (Exemption) Order that exempts the refinanced portion of a home loan, so budget for duty on the full amount. The first-home exemptions announced in recent Budgets are written for purchases and tied to SPAs signed within set dates. Ask your lawyer to confirm whether any relief applies to your case.
Legal fees. The Solicitors' Remuneration Order 2023 took effect on 15 Jul 2023. It lets a lawyer give a discount of up to 25% on the Table A scale, so quotes can differ. Service tax and disbursements are charged on top, and the bank's product disclosure sheet will tell you that you bear them.
Valuation. The new bank needs a formal valuation report to decide how much it will lend. For completed property the fee follows the Board of Valuers scale, as RHB's product disclosure sheet notes. Ask for the quote before you accept the offer.
Working out your break-even point
The break-even point is the number of months it takes for your monthly saving to repay the cost of switching. The formula is simple: total switching cost divided by the monthly instalment saving. If you expect to keep the new loan longer than that, refinancing saves you money; if you might sell or refinance again sooner, it may not.
Example: Say you owe RM800,000 with 25 years left, at 4.50% p.a. A new bank offers 4.00% p.a. on the same balance and tenure. Both rates are assumptions for this example. Monthly instalment at 4.50%: RM4,446.66. At 4.00%: RM4,222.69. Monthly saving: RM223.97. Stamp duty at 0.5% of RM800,000: RM4,000. Legal fee on the scale: 1.25% of RM500,000 (RM6,250) plus 1% of RM300,000 (RM3,000) = RM9,250, before service tax. Say valuation, disbursements and the RM400 discharge fee come to RM2,000 together (an assumption; get real quotes). Total cost: RM15,250. Break-even: RM15,250 ÷ RM223.97 = about 68 months, or just under 6 years.
Small changes to the inputs move the answer a lot, so run your own numbers.
| Scenario (RM800,000, 25 years left) | Switching cost | Monthly saving | Break-even |
|---|---|---|---|
| 4.50% to 4.00%, full legal scale | RM15,250 | RM223.97 | About 68 months |
| 4.50% to 4.00%, 25% legal discount | RM12,937.50 | RM223.97 | About 58 months |
| 4.50% to 4.25%, full legal scale | RM15,250 | RM112.76 | About 135 months |
| 4.50% to 4.00%, plus a 2% fee on the balance (RM16,000) | RM31,250 | RM223.97 | About 140 months |
Example only, using the assumptions above. The legal scale and stamp duty rate come from the Solicitors' Remuneration Order 2023 and the Stamp Act 1949.
The last row shows why the lock-in matters most. A 2% fee on the balance, the basis AmBank used before its waiver, roughly doubles the break-even time in this example. If your lock-in ends in a few months, waiting is often the single biggest saving.
Two limits of this method are worth knowing. A lower instalment over the same tenure also means less total interest, so the monthly saving understates the full benefit over the life of the loan. And if the new bank's offer resets the tenure to a longer period, your instalment falls partly because you are paying for longer, not because the rate is better. Compare offers on the same remaining tenure.
Cash-out refinancing
Cash-out refinancing means the new loan is larger than what you owe, and you receive the difference. It works because the new bank lends against today's valuation, not the price you paid. Bank Islam, for example, describes its Wahdah Home Refinancing-i as offering financing of up to 90%, priced from SBR plus 0.80% p.a., and aimed partly at owners who want cash for personal needs.
Example: Say your home is valued at RM1,200,000 and you owe RM500,000. A bank that lends up to 90% of the valuation could lend up to RM1,080,000. After paying off the old loan, that leaves up to RM580,000 before costs. Stamp duty at 0.5% of RM1,080,000: RM5,400. Legal fee on the scale: RM6,250 on the first RM500,000 plus 1% of RM580,000 (RM5,800) = RM12,050, before service tax. At an assumed 4.00% p.a. over 25 years, the instalment on RM1,080,000 is RM5,700.64 a month. At an assumed 4.50% p.a., the instalment on RM500,000 over 25 years is RM2,779.16.
The costs scale with the new loan, not the cash you take out, so a cash-out refinance costs more to set up than a like-for-like switch. The instalment also roughly doubles in this example, and the bank will check that your income can carry it under its debt service ratio (DSR) rules. The property secures the full amount, so a larger loan means more at risk if you cannot keep up the payments.
Whether the cash is worth it depends on what you use it for and what it costs compared with other ways to borrow. That is a decision to make with your bank and, if the money is for investment, with a licensed financial adviser.
Steps and timeline to refinance your home loan
The process has the same steps at every bank, although the time each one takes depends on the bank, the lawyers and the land office. Start at least a few months before your lock-in ends so the switch can complete soon after.
- Check your current loan. Find your letter of offer and note the lock-in end date, the fee basis and your current rate. Ask your bank for a redemption statement showing the settlement figure.
- Compare offers. Ask two or three banks for their rate (SBR plus spread), lock-in terms, and whether they absorb or finance any legal or valuation costs. Compare on the same remaining tenure.
- Apply and get a valuation. The new bank checks your income, credit record and DSR, and appoints a valuer for the property.
- Accept the letter of offer. Read the new lock-in, the fee basis and any conditions before you sign.
- Sign the loan documents with the lawyer. The new bank's panel lawyer prepares the loan agreement and charge, and stamps them with LHDN.
- Settlement and discharge. The new bank sends the redemption sum to your old bank. The old bank releases the title and signs a discharge of charge, and the new charge is registered at the land office.
- Start paying the new bank. Cancel any standing instruction to the old bank once the old loan shows as fully settled.
What can go wrong
Most refinancing problems come from timing and fine print. These five come up most often.
Settling a few months too early. If the switch completes before your lock-in ends, the full fee applies. Check the exact end date and ask your old bank whether it counts from first or full disbursement.
A longer tenure that hides the cost. A lower instalment can come from stretching the loan instead of a better rate. Ask for the instalment on your current remaining tenure as well.
Promotional rates that change. Some offers have a lower spread for the first years. Ask what the rate becomes afterwards and model the break-even on the later rate too.
Financing the costs into the loan. If the bank adds legal fees and stamp duty to the loan, you pay interest on them for decades. That can still make sense, but count it in your sums.
A new lock-in you did not notice. The new loan's lock-in restarts the clock. If you might sell the property within a few years, a product with no lock-in may suit you better than a slightly lower rate.
Using the refinancing calculator
Our refinancing calculator does the break-even sum for you. Enter your current balance, rate and remaining tenure, the new rate and your switching costs, and it shows the new instalment, the monthly saving and how many months it takes to earn back the cost. Use the cost table above to fill in the stamp duty and legal fee, and replace our assumptions with the quotes you receive.
Run it twice: once with your best offer and once with a slightly worse one. If refinancing only pays off in the best case, it is a closer call than it looks.
Frequently asked questions
When is the best time to refinance my home loan in Malaysia?
For most borrowers it is soon after the lock-in period ends, because the early settlement fee no longer applies. Start comparing offers a few months before that date so the switch can complete on time. A lower rate is only worth it if you will keep the loan past the break-even point.
How much does it cost to refinance a house in Malaysia?
The main costs are stamp duty of 0.5% on the new loan, the legal fee on the Solicitors' Remuneration Order scale (1.25% on the first RM500,000, 1% above that), valuation, disbursements and the discharge of the old charge. On a RM800,000 loan, stamp duty and the full legal scale alone come to RM13,250 before service tax. Add an early settlement fee if you are still in your lock-in.
Is there a stamp duty exemption for refinancing?
We could not find a current exemption order that removes stamp duty on the refinanced portion of a home loan. The Stamp Act charges 0.5% on the loan agreement, so budget for duty on the full new loan. Ask your lawyer whether any relief applies to your loan before you sign.
Can I refinance during the lock-in period?
Yes, but you will usually pay the early settlement fee in your letter of offer, often a percentage of the approved amount or the outstanding balance. Some banks have waived or ended this fee, such as AmBank from 3 Jan 2025 and Alliance Bank from 1 Aug 2025, so check your bank's current terms. Add any fee to your switching cost before working out the break-even.
Will refinancing move my loan from BLR to SBR?
Yes. Under Bank Negara's reference rate framework, refinancing of existing loans from 1 Aug 2022 is priced on the SBR. Loans taken before that date that you keep stay on the old BR or BLR basis.
How much cash can I take out when I refinance?
It depends on the new bank's valuation of your property, the margin it offers and whether your income passes its DSR check. Some banks advertise up to 90% of the valuation, less what you owe. The bank decides the final amount after valuation and assessment.
How long does refinancing take?
It depends on the banks, the lawyers and the land office registering the new charge. Ask the new bank and its panel lawyer for their expected timeline when you apply, and start early if your lock-in end date is close.
Before you switch
Get your redemption statement, note your lock-in end date, and collect at least two written offers on the same remaining tenure. Then add up every cost in the table above and divide by the monthly saving. If the answer is comfortably shorter than the time you expect to keep the loan, refinancing is likely to pay off; if it is close, a bank that absorbs some costs or a later switch date may change the answer.
Work out your refinancing savings
This guide is general information, not financial, legal or tax advice. Rules and rates change; confirm the figures that apply to you with your bank, your lawyer or LHDN before you commit. PropLaunch is not a real estate agency.
