QUOTE(heata @ Mar 17 2017, 10:36 PM)
Hi all.. need some advice here.
1st time home buyer, s&p signed, prop price 420k, looking for a joint loan of 360k 15 years tenure with my wife. Asked few banks: Hong leong, public, and maybank, was offered for interest of 4.35 to 4.5 subject to approval.
My question is... what are the best loan package available out there in terms of interest rate?
Dear
heata,
1. 4.35% is good
Base rate + spread rate = Effective lending rate
Base rate will alter according to banks need from time to time, hence it will affect your EFL
Spread rate will be fixed throughout the loan tenure.
Hence, banker like to say lower spread rate will be better:
Example:
A) 4% + 0.5% = 4.5% effective lending rate
B) 4.1% + 0.4%=4.5% effective lending rate
Both ELR is the same, but the spread rate is different.
Hence in common perspective sense, people will chose the lower spread rate as it is fixed throughout loan tenure. Thus will say B is better.
But actual sense, there's no best solutions or answer for this. Because, lower spread rate doesn't secure the bank from increasing the base rate in the future and ELR is higher than A in the future.
It's very subjective:
1. Base rate is different across different banks.
2. When OPR adjusted by BNM, Base rate wouldn’t bulge.
Base rate would either stay neutral or increase, depends on bank owns decision. Base rate could even change without OPR altered.
3. SRR is the reserve requirement that bank needs to uphold, set by BNM. It’s a liquidity management. When BNM believes economy is prospering and lack of funds, it may reduce SRR requirement to keep less money as reserves in bank and have bank lend more fund out for economic activities. This lead to higher loan growth. The changes of Base rate can reflect the effectiveness of Government Monetary Policy.
4. Spread are defined according to the borrower risk profile, but spread rate are mainly fixed when display to public, as most of the borrower holds almost identical risk.
5. Base rate may be adjusted every 3 months, it’s following KLIBOR. Every 3 months we may or may not witness a changes in bank base rate, but it depends on the banks own internal decision. Hence it is subjective. 3 months stated are just an example usage.
Example:
Jan OCBC rate 4.02
April OCBC rate 3.92
6. Spread rate will not change and is fixed till the end of the loan tenure
7. even when base rate is superbly low, the effective lending rate in the end could be higher.
Example:
Maybank: Base rate 3.2% + Spread 1.5% =4.7%
OCBC: Base rate 4.02%+ Spread 0.5%=4.52%
It all boil's down on the spread given, hence do look at the effective lending rate instead!!! Shop around and ask your mortgage agent.
Base rate
Pro
a) Greater competition between banks
b) Higher transparency, as bank will display their profit margin and bank lending efficiency
c) Bank loan rate changes will have a higher correlation with Malaysia market economy and OPR.
d) Better indication in monetary policy changes.
Cons
a)Uncertainty. Rate may change accordingly to banks own internal desire.
b) There’s a bottom line for how low our loan rate can drop.
Example:
BLR 6.85
6.85-2.5%=4.35%
6.85-2.6%=4.25%
And so on
Base rate
3.2%+ 1.35%= 4.55%
3.2%+2%= 5.2%
BLR is negative in nature, it can go as low as the bank allows it to be.
Base rate is positive in nature, it has a benchmark bottom line. 3.2% is the bottom line and won’t go any further down."
For me, if the ELR is the same, spread rate different isn't differ by alot, I will chose according to few criteria as below:
A. Banks that are easily accessible to your vicinity, why take loan offer form bank when you need them, you need to drive 20-40km.
B. Customer services, go with bank that offer tremendous value added service, try calling their hotline whether easily reached and are they responsive and helpful. In long term, this will lessen any unwanted hassle.
C. Semi or Full flexi that suits your criteria. SOmetimes, different banks semi and full flexi mechanism is different
D. Does the loan package has the right features that you need? Finance legal fees, semi/full/fixed/islamic loan ? lock in period or without? defaultment period ? loan account is it link to saving or current account?
E. Does the consultant serves you well?
etc all this that must put into consideration into long term perspectives instead of just interest rate. Effective interest rate right now is quite short term view.
Cheers
QUOTE(heata @ Mar 18 2017, 10:28 AM)
its last unit of the hse so we just signed to secure it.. =(
15 years because we wanted to settle it fast.. but the officers in bank advise us to do longer tenure say 25-30 years while paying according to 15 years schedule. is this a wise move?
also would like to ask u.. regarding dsr. in terms of joint loan, the installment amount is 50/50 or 100% taken into calculation of an individual dsr?
thanks for your reply=)
Let me give you an example:
A.
RM400K loan
4.5% rate
20 YEARS
YOur installment/ month would be RM2530.60
Total payment 20 years: rm607,344
B.
Rm400k loan
4.5% rate
35 Years
Your installment/ month would be RM1893.03
Total payment 35 years: RM795,072
The contrast different:
a. The total payment for A is lesser than B
b. The monthly lowest fixed installment payment for B is lower than A. You have to commit RM2530.60 minimum to pay your monthly installment, which is RM700 more than scenario B, what if suddenly you need the extra cash flow?
Hence,
Why not chose scenario B, paying RM1893.03 monthly BUT paying additional rm637.57 (rm1893.03+637.57=rm 2530.60), Your Total payment would be the same as 20 years RM607,344.
QUOTE(heata @ Mar 18 2017, 12:22 PM)
thank you for your explanations! you are being very kind and helpful=)
Mar 13 2017, 07:19 PM
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