Thousands of property owners in recent years have taken advantage of new mortgage products and historically low interest rates to refinance debt, often saving in the tens or hundreds of thousands of baht over the course of a loan.

But with interest rates now on the uptrend, the decision whether to refinance or not has become more difficult.

In general, refinancing costs can cost a homeowner as much as 2.3% of the amount to be refinanced, once penalty fees, application charges and other expenses are calculated.

Costs can be even higher for borrowers in the early stages of a mortgage, as most lenders will impose a huge 2% penalty charge for borrowers refinancing mortgages within the first three to four years.

According to Saowaros Siriwan, a senior vice president at Siam Commercial Bank, the country's largest private bank mortgage lender, refinancing makes sense only if a borrower can get at least one percentage point in rate savings.

"Once you consider the costs, front-end fees, revenue stamps and other expenses, if you can't get a one point savings, it's not really worth it," she said.

Consider a borrower who has paid into his current mortgage for five years at prime rates of 5.5%. A rival bank now proposes a refinancing deal at one point under minimum lending rates, or 4.5%.

With one million baht outstanding over a 15-year period, should the borrower take the deal? Well, a rough calculation based on a one percentage point reduction in interest rates amounts to just 10,000 baht, compared to 23,000 in expenses from refinancing costs.

But you need to consider the total savings over the entire duration of the loan. The longer the remaining repayment period, the greater the savings from an interest rate deduction. With 15 years remaining on the term, the gross benefit from a one percentage point cut is around 75,000 baht, placing the borrower ahead by around 52,000 baht from refinancing.

On the other hand, if only five years were remaining on the debt, gross interest savings would be only around 25,000 baht, leading to a net gain of just 2,000 baht by switching lenders.

Unlocking your home's value

For most people, your home is the most important asset in your investment portfolio. As you pay down your mortgage debt, your net value increases. Likewise, rising property values have helped boost the net worth for many households.

Of course, that value isn't liquid until you sell your home. But home equity financing is one way of taking advantage of the asset value locked up in your home. By borrowing against the value of your home, you gain access to cash today to cover emergencies, start a new business or perhaps to purchase a new car.

Many banks now offer property financing in the form of fixed-term loans or credit lines backed against the value of your home. In most cases, terms and conditions are similar to that required for a new borrower, with fixed-term loans available from 100,000 to 10 million baht over 15 year repayment periods.

Banks also increasingly offer special loans for home decoration, construction and renovation. You will often be required to provide additional documentation with your application, such as construction blueprints, building permits and the contracts with your building contractor.