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Hello everyone, as per in the previous thread, this thread is open for questions related to Mortgages in any way and form. No question is too stupid, be it finding out your loan eligibility, questions regarding to CCRIS and CTOS, banking products, MRTA/MLTA, etc. everything is welcome!

Please use it responsibly! This is not our personal sales thread! And although I am a mortgage broker, I enjoy answering any questions related to mortgage in my free time. For examples on the types of questions that are being asked and answered, you can refer to the link I provided above.

Happy discussing!

This post has been edited by wild_card_my: Dec 15 2014, 08:45 AM

hi wild card.
there's always a rumoured that islamic loan is hard to pay off and incurred a lot of additional charges.
can you let us know the clear and main differences of conventional loans against islamic loans?

and also differences between conventional versus semi-flexi and full flexi loans.

thanks.

There are a number of Islamic loans in Malaysia such as the Murabahah and BBA which are based on a cost plus a marked up profit for the banks. These are usually fixed rates of which I would not cover (because it is an older product and I discourage my clients from taking them due to the unprofitability of it)

1. As for the differences between the conventional and islamic:



I will make an additional note here, Islamic loans (MM) can repaid off just like conventional reducing balance loans. In that the interest is calculated on a daily basis and are not added into the final settlement price. The amount that needs to be settled if you need to sell, refinance, or early settle the property is the outstanding balance amount.

2. As for conventional (and Islamic) flexi vs semi-flexi... I am in the opinion that if you do not run a business, or that your income does not fluctuate, that you should opt for the fee-less semi-flexi.

a) A full-flexi account comes with a cost of about RM10 a month (more or less depending on the bank) for the use of the facility. With a full-flexi account, you get to save the daily payable interest (of your housing loan) for every Ringgit that you put into the account. I mentioned business because businesses require liquidity and may very well benefit from reducing their HL interest by depositing a sum of money into their accounts, while having the liquidity to withdraw it when they need to. The liquidity comes in the form of an ATM card or a linked CASA account to the housing loan.

Example: You have a shop that is opened Monday to Satuday, rest on Sunday. On Saturday, you deposit all your proceeds of the week into the flexi account, on Sunday, you would save [(your-HL-interest-rate)/365]*AmountDeposited worth of interest. On Monday, you withdraw the money to run your business.

b) But for those who earn a fixed salary, with the occasional bonuses or two in a year, they are better off with the semi-flexi due to the lack of flexi-fees. Do note that semi-flexi account also reduces the capital outstanding (hence reducing the payable interest), the only drawback is its a little inconvenient to deposit and withdraw the payments since you don't have any ATM card or linked-CASA account to do such transactions - you need to deposit a check and note it as "for capital repayment" AND go to the bank in person to ask for a withdrawal, and there is a one-time cost of RM10 to RM40 (depending on the banks) for each withdrawal.

But if you only do this once or twice in a year, or only when you need to buy the occasional big-ticket items, it's not inconvenient and you would save the full-flexi account fees.

- Faiz Azmi (+6 013 369 3993)

This post has been edited by wild_card_my: Dec 11 2014, 01:35 PM

faiz, tell me more about islamic loan. it sounds good on paper. in actual fact, it is better than conventional loan in every aspects

is there any drawbacks / disadvantage of islamic loan vs conventional loan?

I need to run now, but the only actual disadvantage of an Islamic loan over the conventional are the needs for extra documentations to complete the memorandum of transfer. Each bank has a different sets of "Extra" documentations required for an Islamic loan over conventional, and the differences between the 2 vary between RM500 to RM1000 depending on the loan amount from my experience. The differences are getting smaller though, OCBC Al Amin for example only requires 1 or 2 extra documentation, while this other Malaysian bank requires like 4 or 5 extra documentations. These documentations may add costs to the MOT. I really need to check with the lawyers to confirm, they deal with the documentations on a daily basis, while as for myself, my job is to get the clients' the mortages they need, and once they have signed the papers, I have no choice but to pass them over to the lawyers (due to P&C laws, I cannot even check up on their documentation progress, I have no rights to know).

Other than that I can't really think of any (so far, not saying that there isn't any) since the MM and conventional loans are similar in almost every way. Except that the MM has no lock-in periods.

Edit: As of now, out of the 5 banks that I could do, only Alliance could do Islamic full-flexi, while the rest (OCBC AMBANK, MAYBANK, HLBB) can only do Islamic semi-flexi. But you know, I have explained full vs semi flexi above.

Maybe you all can ask me about the specifics (for example, interest rate calculation, interest rate, tenure, etc -which ive answered above any-) on whether or not there are differences in those areas, then I could go about it?

This post has been edited by wild_card_my: Dec 11 2014, 03:40 PM

The most important thing that Islamic Housing Loan needs to clarify is the concept of Early Settlement.

The Earlier / First Generations of Islamic Loan did not allow for Early Settlement and the Borrower had to pay the Full Amount even if the Loan was settled early

There was a case that even went to Court and the Courts ruled in favour of the Borrower.

Since then, I was told that Islamic Loans was changed to cater for Early Settlement but how is it in practise, is it the same as a Conventional Loan, perhaps our Consultants here can clarify

You are correct. Im in my 20s, so when I started in this business, the BBA and Mudhrabah -fixed rate, interest/profit already included in the SELLING PRICE, and you need to settle that amount to be released of the buy-and-sell agreement- was already out of fashion.

When I started, the Musharakah Mutanaqisah (MM) have just been introduced, and it mimics the conventional loan concept of calculating the interest based on a reducing balance.

As such, for all intents and purposes, the Islamic loans (MM only, not BBA and Mudharabah) of today are similar to conventional loans. Most of my non-Muslim clients opted for Islamic loans after my 2 hour explanation (i love explaining things to my clients) about the similarities plus the added benefits of no lock-in periods.

edit: Now you can early settle and only pay the outstanding balance, just like conventional loans. So when people ask me what the differences are... it's very difficult to find other than the nitty gritty ones. Maybe if you all ask about the specific areas I can try to clarify

p/s I lied, I'm leaving at 5pm.. but still working

This post has been edited by wild_card_my: Dec 11 2014, 04:24 PM

Maybe the old ones that I am not familiar with, but the newer ones like the Musharakah Mutanaqisah Islamic loans by OCBC Al-Amin does show the so-called "real outstanding". Other Islamic loans from other banks that adopt the Musharakah Mutanaqisah system does the same thing. It's called outstanding balance by the way.

Posted below is an account information that i have the permission and rights to post, and if you look closely at the bottom, the outstanding balance is clearly spelled out. This is the amount that has to be paid back to the bank if the client needs to settle the loan.

Due to the competitive landscape, more innovative products with different features introduced. There is conventional full flexi loan without the condition of lock in period and no cost incurred for withdrawal of excess fund.

Whatever advantage one product has, the competitor will try to come out sth with better features. The gap is closer.

Forgive me but I am not too aware of any conventional loan products that do not come with the lock-in period clause. Can you share the banks that are offering this packages? I only carry 5 banks, but each bank has their main products that I focus on, so I can't be expected to be aware of all products. =)

I can say with confidence though, that there are more (if not all) islamic loans that do not come with any lock-in periods compared to the conventional ones.

Agree, but such good terms are only offered to selective customers.

I got friends that was offered full flexi with no lock in from both RHB and CIMB.

The Loan was in excess of RM1.5 mln+++

Rate was BLR less > 2.5x%

I see so these are the packages offered to priority or HNW customers. Im not surprised then that their officers would go the extra mile to secure the loans for their customer.

The Islamic loans on the other hand, has been sanctioned by BNM (I will find the source, currently on mobile) to remove any unfair clauses like te lock-in periods from being included in their loan agreements. The conventional counterpart is free to include or exclude the clause; thus as far as I know and in general, it is safe to say that most if not all conventional loans are riddled with lock-in period clause

This post has been edited by wild_card_my: Dec 12 2014, 08:49 AM

I'm not too sure what is the threshold the bank sets to be entitled for full flexi with no lock in. Probably it's for HNW or high value transaction at this stage. But since the market is competitive, I foresee the terms could be relaxed further and benefits more consumers one day in the future. This is good for consumers.

Definitely. Even without the BNM doing the same sanctions on conventional loans to remove the lock-in clauses, eventually they would do something anyways since it seems like the islamic loans are more attractive to the customers. I can only speak based on anecdotal experience: even my non-Muslim customers opt for Islamic loans after I've explained the differences between the two.

The more competetive these banks are, the better for us consumers.

Hi, good day to you. I have some questions regarding my intention to refinance my house. I currently own 3 houses which I intend to refinance one of my houses, was told by the officer that in order for me to get 90%, I have to prove that the 3rd house I purchase is with 70% loan amount, is this true? I'm doing the refinancing with the same bank, usually how long it takes for the bank to disburse the money?

AFAIK, BNM rules state that the max LTV for the 3rd and subsequent Loan is 70%. Based on this, it does not matter what is the LTV of the First and Second HL, whether its 90% of even 50%.

Also, it does not matter what is the remaining principal amount, you may have only 10% left for the first 2 HL, the 3rd will be capped at 70%

But lets wait for our other sifus here to explain. I could be wrong.

Hi, would like to ask if we can do payment by biweekly instead of monthly to reduce daily interest rate ? Do we need to inform bank in advance / personal go to branch office ? Currently using OCBC semi flexi loan . Would be happy to get some information from all sifu above... Normally payment is via online

thanks for the explanation, appreciate it very much. Btw do you have any idea usually how long it takes for the bank to disburse the money after approval of refinancing?

The BNM ruling as practiced today, refer to the dates the loans are taken. 1st and 2nd property can be finance at 90% but it doesnt matter if you did not finance it at 90%, because the 3rd property will only be capped at 70%!

As such, to prove this to the new bank, all you need to do is to make them a copy of all your bank loans. The 1st and 2nd property (according to the date of the LO) can be refinanced to a maximum of 90%, while the 3rd property is now limited to 70%.

You got this right.

It depends on the bank, but I can confidently speak for OCBC and OCBC Al Amin... (eh.. which is your bank). The interest for this loan is based on daily-rest, that means the moment you make an additional payment (called advanced payment by OCBC), you would already save the interest for the next day onwards, for the amount that you paid in advance.

edit: But yo yo yo, please do call the bank to confirm ya. I cannot be liable for any misinformation here. I am confident of it though, just that it is your responsibility to confirm this with OCBC call center.

So yes, if you want to save the interest of 4.4% (whatever you housing loan rates are) on a daily basis, do go ahead and pay in advance. Every interest that you paid in advanced, is money saved! In essence, this is WAY BETTER than putting your money in FD Also, all advance payment can be deducted automatically if you do not pay (or not able to pay) the monthly installment, say in the event where you go to vacation or something

- Faiz Azmi (+6 013 369 3993)

This post has been edited by wild_card_my: Dec 12 2014, 11:48 AM