Hello,

So you would like to refinance to get as much as possible for the cash out portion and for the tenure to be extended to more than 30 years. The loan amount will be limited to your income-vs-commitment levels, as well as up to 90% of your collateral Open Market Value (OMV) which is about RM585k. Your cash out-portion will be RM585k - RM210k = RM375k. For your needs I will help you apply to HLBB and OCBC.

Do give me a call so we can arrange a meet as soon as this Sunday evening. My services are free, I get my commissions from the banks, and I sure will work my level best to get what my client wants.

This post has been edited by wild_card_my: Dec 20 2014, 09:00 AM

If I'm not mistaken based on central bank's ruling the max tenure for cash out is 10 years - am I right?

Yes and no. I do not design the banks' products so I would not know how they got around the BNM ruling, but here is what I know:

1. When you apply for a loan, the bank would need to check your income and your commitment levels, including the commitment of the new loan that you are applying for. Each bank has a different number for the maximum amount of your nett income that can be used as part of your loan repayment commitments, which is called the DSR limit.

2. When you apply for a refinancing, the loan will be divided into 2 portions:

a) Refinancing (which is the outstanding balance of the mortgage you want to refinance)
b) Cash-out (which is whatever amount above the outstanding balance) which you will receive as cash for you to spend on.

3. When you apply for a refinancing with a cash out, the bank will do 2 types of calculations:

a) Calculation to determine if you will burst your DSR limit or not.
b) Calculation for the actual monthly installment

4. For "Refinancing (which is the outstanding balance of the mortgage you want to refinance)", the calculation for the monthly commitment will based on a maximum of 35 years (or until you are 70) tenure. As such, the monthly commitment would be low.

For Cash-out (which is whatever amount above the outstanding balance), the calculation for the monthly commitment will based on a maximum of 10 years. As such, the commitment would be rather high. A lot of people get their loans rejected because of this BNM ruling

5. HOWEVER. If you do get your loan approved, OCBC and HLBB would allow the monthly installment (for both the refinancing and cash-out portions) to be repaid in 35 years; as such, your installment would still be low

Conclusion: The 10-year rule was introduced to lower household debt by preventing borrowers from continuously extend their loan repayment period; however, those who are not affected by such actions due to much higher nett-income-vs-commitment would be allowed to do so.

I'm sorry if this is rather confusing, do ask if you need more clarifications!!!

p/s I will on break for half-a-day starting from 11am today. You all have a good discussion and I will get back to answer any open questions.

This post has been edited by wild_card_my: Dec 20 2014, 10:26 AM

I understand what you meant but does BNM spell out (clearly) that sensitizing the repayment capacity (for cash out portion) using 10 yrs tenure scenario but actual tenure can be longer (provided the DSR remain satisfactory under the 10-yrs tenure scenario)?

This post has been edited by Jasoncat: Dec 20 2014, 10:39 AM

Like I mentioned, I did not design the products, so I do not know all the details of the ruling and its impact on mortgage products; but the banks' product designers seem to be able to get around that BNM ruling. I guess what I am saying is that this question is well beyond my scope of expertise.

However, the results seem to be as you suggested. 35 year tenure for both refinancing and cash-out portion are being done by OCBC and HLBB.

This post has been edited by wild_card_my: Dec 20 2014, 11:12 AM

It's alright and thanks bro. I just hope that with the discussions and more people join in we will get a clearer picture.

Definitely. If we can get bankers (executive and corporate levels) to chime in as an expert, that would be nice. All we have currently are customers/clients/public and a number of bank-agents/broker/salesExecutives that may only understand the product in its surface.

If this is true i don't understand why did i need to pay lawyer fees in my loan topup case recently. Any exception?

Can you elaborate on the situation? Were the names of the applicants the same? Which bank was it with? Was it of different or same mortgage products? What were the details in the LO? What was the loan amount and how does it compare to the original loan amoint? etc. Can we get more details?

Hello,

I have a fully paid house (under my mother's name) which I plan to cash out to settle all my other loans and to simply service a single loan.

My outstanding loans are;
2x ASB Loan
2x Car Loan

I'm free of credit card,PTPTN,MARA etc debt.

My income fluctuates greatly. Anywhere between 11,000 to 25,000. 11,000 is basic. Remainder is allowance base on per hour of work. Average for 2014 has been 16,000

Will it be a problem as my mother is age 60 in 2015?

Is it possible to cash out for a period of 35 years? Seeing as you recommend OCBC and HLBB which can up the tenure to 35 years?

Is it wise to settle my ASB Loans as their rates are BLR-1.65% as compare to Refinance rates of BLR-2.45%(approx.)?

Is it wise to settle my car loans seeing as car loans rate a approx. 1 to 2% only?

I also plan to cash out additional funds for emergency savings/life savings which I will put into ASB/ASB2 accounts. Again, comparing rates, ASB/ASB2 dividend of minimum 6% p.a as to Refinance rates of 4.4% p.a. (BLR-2.45%). Is this a wise decision?

Thank you for your time!

This post has been edited by zeronuker: Dec 21 2014, 07:12 AM

Hello,

First of all, let it be known that a fully paid house is not subject to the:

1. 70% MOF limit on the 3rd and beyond housing loan BNM ruling. As such, it can be finance for up to 90% of its value

2. 10 year tenure commitment calculation for the cash-out portion; your application will be calculated at a maximum of 35 year tenure (for the commitment AS WELL AS installment calculation) just like a normal housing loan application.

So these 2 points above work in your favor.

--- ---

Now, the house belongs to your mother with her name, but not yours on the SPA, correct? But you are the one with the big income; as such you are the ideal person to be the applicant for the loan. I would suggest an outie-3rd-party loan application which is a loan application with:

X as the person who owns the house, but Y is the one who applies for the loan with the house as the collateral. Of all the banks that I represent and know of, only OCBC can do an outie-3rd-party loan application.

Other banks are able to do an innie-3rd-party loan application only. That is X owns the property, X and Y both apply for the loan application with the house as the collateral. If your mother has an income, we can do an innie-3rd-party loan application while if she does not, or you would not want to burden her, it is best if we stick with outie-3rd-party loan application with OCBC.

---

In a way, yes it is wise to settle the ASB loans and use the cash that you get from this refinancing to maximize your ASB units; you are simply switching your ASB loans for Housing loans with much lower interest to finance your ASB investment.

However, you may also consider investing the cash-out into other funds that gives higher than BLR-2.45% returns, while also keeping the ASB loans that are paying itself anyway through dividends (provided that you don't spend the dividend)

Whether or not any of these moves are wise depends on how you would like to roll. Do you want to be highly, medium, or lowly leveraged? A younger person with high income may want to be remain highly leveraged since it will give bigger and better rewards once you enter retirement, however, it also comes with the risks such as less than stellar performance by these funds that you invest it. ASB has never given a return of less than the BLR rates, however, the same cannot be said about other funds.

--

Car loans are calculated based on simple interest, when you want to compare it to a housing loan which uses reducing balance interest calculation, you need to convert the simple interest into reducing balance interest. However, keep note that a simple interest loan such as Hire Purchase as well as Personal Loans have already had the interest included into the outstanding balance. Which means that even if you settle these loans ahead of time, you WILL HAVE TO pay the interests on the remaining years anyway. The rebates given when you do early settlements are the prerogative of the bank's officer.

So in short, I do NOT recommend for you to make an early settlement on your car loan. Instead, invest the money in TH, ASNB or other unit trust funds.

---

I can be contacted at +6 013 369 3993 if you would like to proceed with the application. I also offer other kinds of services, including, but not limited to investments in equity.

This post has been edited by wild_card_my: Dec 21 2014, 10:47 AM

Good stuff on 2 options....I thought it involves lawyers etc all the time(yeah didnt do much homework..luckily read this thread)...I am with UOB and considering top up ...Btw, top up need to be paid in 10 years right?

I do not handle UOB banks so I would not know what their procedures are going to be like. Sorry

The house is under 1 name which is my name so with the loan application for both existing and topup with alliance bank. Same mortgage product but different rate as the topup is smaller amount thus higher rate.

The bank officer mentioned we need to engage lawyer even for topup. I was contacting the outsource agent who taken care of first application, does it make any difference if talk to the bank directly? Just didn't think about it that time for the sake of convenience.

Wait is this with OCBC/AlAmin?

It's Alliance Bank.

Ah, that's where it is!!

I should really make a note there that the explanation on top-up costs and policies above was for OCBC/AlAmin only.

Sorry for the confusion, and to make it up for all of you guys, I will personally call my handlers from all these banks to get clarifications on their top-up policies; and then I will post it up here.

Ah now make sense. Thanks for clarification ☺

Will it be a problem as my mother is age 60 in 2015?

if refinance under your mother name, tenure will be 10 years max, You can refinance and cash out under your name, 35 years is possible if your age us below 36 of years

Is it possible to cash out for a period of 35 years? Seeing as you recommend OCBC and HLBB which can up the tenure to 35 years?

35 years is possible as above mention, DSR can even reach 35 years as your house is now unencumbered, easier acceptance.

Is it wise to settle my ASB Loans as their rates are BLR-1.65% as compare to Refinance rates of BLR-2.45%(approx.)?

Yes it's radical decision to do so as u will save alot.

Is it wise to settle my car loans seeing as car loans rate a approx. 1 to 2% only?

CAR loan is in flat rate term, but with 2% flat rate calculation, paying it off with cash out amount is not worth. as the reducing balance rate for BLR-2.45% account for higher interest than the 2% car loan.

I also plan to cash out additional funds for emergency savings/life savings which I will put into ASB/ASB2 accounts. Again, comparing rates, ASB/ASB2 dividend of minimum 6% p.a as to Refinance rates of 4.4% p.a. (BLR-2.45%). Is this a wise decision?

It is wise for you to invest into ASB with your cash out amount, it also depends on your investment and risk appetite, as the ASB return yield is always higher compare to BLR-2.xx% .

If let say I want to refinance from UOB to OCBC...any deals you can give ie ZEC?