refinancing
Also called: refinancing KPR
Replacing an old mortgage with a new one, usually to get a lower interest rate.
What it means
Mortgage refinancing is restructuring a home credit facility, whether by changing the tenor, adjusting the interest rate, or taking out new credit to pay off the old one. The goal is to ease installments or change the debt structure to suit the family's condition. The process is similar to a take over, but its scope can be broader. Families need to understand the requirements and costs before applying.
Why it matters for families
Refinancing can help a family whose cash flow has changed, for example after income drops. However, extending the tenor usually increases the total interest paid. If a family only looks at the smaller monthly installment, the long-term total cost can be overlooked. A thorough calculation is important so the decision is not harmful.
Example
For example, the mortgage installment feels heavy after the family's income drops. The family considers refinancing with a longer tenor so the monthly installment is lighter. The consequence is that the total interest paid until it is paid off may be larger. The family needs to weigh the monthly relief against the total cost.
Common misunderstanding
It is often assumed that refinancing always saves money. The correction is that extending the tenor can raise the total interest even though the monthly installment goes down.