1. Refinancing of the house for cash out portion

I would recommend refinancing the FULLY paid off property because you are not bound to the rule where the refinancing portion is limited to just 10 years of repayment or DSR calculation. If you refinance a house that already has a bank loan on it:

a. The refinancing of the outstanding portion's installment will be calculated at a maximum of 35 years.
b. However, the cash out portion's commitment when calculating your Debt-service ratio (DSR) will be calculated at a maximum of 10 years. This will effect the maximum amount of loan that you would be getting.

Keep note however that banks like OCBC, Alliance, and HongLeong allow the repayment tenure for the cash-out portion to the maximum of 35 years, but you need to pass the DSR test as mentioned above first.

This is why I recommend refinancing the fully paid off house. As such, when you refinance that house, do it at full 90% and use the cash to to pay off the higher deposit, and lower loan amount for the new properties you want to acquire. With this method, you simply borrowing using one property to buy another. It's beneficial since you get to have cash in hand which you are free to use however you see fit.

2. Loan tenure

Now, I would still recommend applying for the highest loan tenure due to the flexibility of banks nowadays with advance payments that will offset the loan outstanding amount. As such, if you sign for 35 years tenure and repay your loan as if you had signed for 25 years tenure, then you will end up paying the same amount as someone who had signed for 25 years tenure anyway - your advantage would be that you have the flexibility of reverting to a lower installment if you need to (during financial emergencies)

3. Loan eligibility

Here is my calculation of your loan eligibility based on 85% DSR. Keep note that banks have different DSRs, some lower, other higher than 85%.



This post has been edited by wild_card_my: Jun 30 2015, 11:45 AM

I may need to verify this information with my lawyer, but the 50% stamp duty is applied to the Sales and Purchase Agreement (SPA) stamping fees. While the 20% stamp duty discount is applied to the Loan Agreement (LA) stamping fees.

1. The LA stamping fees is calculated at 0.5% of the loan amount as stated in the LA

2. Here is how you calculated the SPA stamping fees



This post has been edited by wild_card_my: Jun 30 2015, 12:33 PM

Disclaimer: I do recommend that each person verify this with our own banks before proceeding to make the advance payments, as banking products change overtime, and a person's loan facility with one bank may not be the same with another person's (even with the same bank, and similar products)

I know that some banks, particularly OCBC would accept the advance payment paid from all channels (cash deposits, check deposits, online transfer into the loan account) as part of the loan outstanding balance offsets. The only problem is that this is considered as advanced payment and not capital repayment, as such you cannot withdraw it.

Nowadays we have full-flexi loans as you mentioned, that comes with additional flexi charges ranging from RM5 to RM20 a month. And there are also the so-called semi-flexi loans, which is what I have mentioned above, whereby advance payments can be made that will offset the outstanding balance, and you can do capital repayments over the counter (which can be withdrawn). Advantage is that it doesnt come with any monthly fees.

This post has been edited by wild_card_my: Jun 30 2015, 12:18 PM

Welcome back bro, selamat berpuasa.

Advance payment does not reduce the interest right. Just sits there doing nothing unless you did not make payment rights, like going overseas for long holidays, etc.

Thanks, I was taking care of someone. He has recently passed and now I can return after a 6-month hiatus.

With OCBC in fact, the advance payment (money you paid to your loan account without notifying the bank, and will be used as your monthly payment if you do not make any repayment on the oncoming months) is, in fact, used to offset the outstanding balance.

However, different bank products, even from the same banks, but applied and signed at different times will have different rules. Best to check with your own bank for your particular loan, and then verify it by going through your LOAN STATEMENTS to confirm that the advanced payment does in fact, reduce the O/S thus reducing the interest incurred.

Hi Sifus,

Through some previous circumstances I have ended up with 2 loans from HSBC for my property. One is a HomeSmart with a balance of about 400k and another is a HomeSmart Reserve with a balance of about 200k. Both have the same interest rate of BLR-2.1%. Both also I believe (need to check) to be in the tail end of their lock in period.

My question is, at this point in time, is it a good time to consolidate both into one loan account with better interest rate? My preference is a fully flexible loan. What are the cost associated with moving?

Thanks

My sympathies and condolence for your loss.

I am going to assume that you are just looking to refinance the O/S and not looking for cash out. As such:

1. The loan legal fees, stamping of the legal documents, and valuation are your only costs of moving to a new bank, but you can include the costs into your new loan, thus there is no money out of your pocket. Here is an estimation for one particular bank's moving fees. There is also a discount of 20% on the stamp duty if you move from conventional to islamic loans:



2. It may or may not be a good time depending on the interest rate that you are getting. I am leaning to it being a good time though. If you can get an effective interest rate of 4.45% (or lower), and your current effective interest rate is 4.75% you are already saving 0.3% per annum, on the RM600k loan that you are paying to the current bank.

At 0.3% of interest savings, each year you are saving RM1.8k per annum; this ammount reduces as your outstanding loan amount reduces.

3. Alternatively, you could ask for HSBC to get a new rate, but this will come with a new lock-in period, as well the rates may not be as great as if you refinance. The banks know that there is a cost associated with refinancing and they are capitalizing on your predicament. I am referring to all banks, not just HSBC

This post has been edited by wild_card_my: Jun 30 2015, 12:46 PM

Thank you.

Good day all,

Would like to ask for advice on loan eligibility.

My details:

Age: 35
Gross annual income: RM60k
Loan commitment: RM870 monthly
Credit card oustanding: RM1000

Property details:

Type: landed
Selling price: RM850,000

I have a condo under joint ownership with my parent, current market value at RM550k.

I am looking to get 90% housing loan. This will be my first housing loan.

Appreciate any advice I can get. Thank you all in advance!

EDIT: grammar nazi..

This post has been edited by Odinn: Jun 30 2015, 12:51 PM

DSR more than 70% base on your income, i will advice you for joint name

Hello ODINN, due to the lack of information provided, I will assume a few things.

1. The gross annual income is based on your basic salary and fixed-allowances; claims and bonuses are not included

2. Loan commitment is in the form of HP.

3. The condo, does it still have a loan for it or is it fully settled off? You have a name on it, but not the name of the loan (if any) correct?

4. Even in the best situation, the maximum loan amount that you can get with 85% DSR is RM553k. I do recommend reducing the target property price or applying with a joint applicant

Good day,

Is it possible to refinance my 1st house (bought in 2011) in order to get surplus cash to settle PL (90k, monthly 2300). Outstanding amount for that house is 300k and MV around 440k.

Thanks.

Yes, and I do recommend doing that, or at least doing a LOAN TOP up. The reason is, the interest rate for a housing loan is much lower than any personal loans.

At 90% financing, RM440k house can give you RM396k, of which 96 will be in the form of cash for you to pay your PL. There are not much fees for top ups, but refinancing will cost you legal fees, which can be included into the loan (so no money out of your pocket)

Which bank is the house encumbered to ya?

Dear all,

Recently a bank offered me effective interest rate of 4.35 for loan amount of RM747k (35years). Does it consider a good rate? Can I know the average interest rate for this amount?

HSBC.

It is in fact, on a good side. Is this rate before or after appeal?


Well talk to them, ask them about the terms and conditions of top ups. What is the expected rate, the tenure, the lock in period, and the costs associated with topping up.

If you are satisfied with the terms, then go ahead. Otherwise, I can help with application to other banks.

'

Many thanks, bro.

To all aspiring borrowers.

Please remember, its not how much you can borrow that is important.

What is more important is how much you can afford to pay monthly, your free cash flows.

Even if salary is 20k, if too much fixed cost that cannot be reduced, also no point. If can only afford say another 3k, then your instalment you can afford is 3k and loan is about RM600K for 30 year tenure although max loan is closer to RM1.3 mln

Apologies, not pouring water on anyone but borrower must always be mindful of cashflow vs affordability.

Thank you for this. I do plan to get this next property under joint ownership.

Thank you so much for the details. To further elaborate on your assumptions:

1) Correct, fixed income only, not including claims and bonuses

2) Loan is personal, not housing. Four year commitment, can be completed sooner if possible.

3) Condo loan is still being paid off, and the loan for the condo is not under my name so I have 0 housing loans at the moment. The condo is jointly owned by me and my parent.

4) I do plan to apply for joint loan with my partner.

Her details are as below:

Age: 33
Fixed annual income: RM54k
Credit card and personal loan commitment: RM1000 monthly

Appreciate if you could advise further on this.

Thank you again