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> Mortgage Loan Package Inquiries, (Strictly NO Promotion Allowed)

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nick_km P
post Jun 24 2022, 04:04 PM

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Hi sifus,

I am considering whether to take LPPSA loan or bank loan to finance my 1st property (not a PR1MA or PPAM house). The options are as below:

LPPSA

Loan Amount : RM 400,000
Tenure : 25 years
Insurance : RM 17,645 (including LHTO)
Interest Rate : 4% (Fixed for the entire tenure)
Monthly Instalment : RM2,205
No restrictions on advance payment

Bank (Semi-Flexi)

Loan Amount : RM 400,000
Tenure : 25 years
Insurance : RM 10,131 (MRTA 100% for the entire tenure)
Interest Rate : 3.05% (BR + 0.17%)
Monthly Instalment : RM1,956
Interest saved on advance payment up to 30% of outstanding balance

Any advice on which loan is more suitable for me at the moment? I am buying for own stay and currently have no plan to purchase a 2nd property in the near future.

Thanks.
nick_km P
post Jun 25 2022, 10:42 AM

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QUOTE(vinceleo @ Jun 24 2022, 05:27 PM)
Opt for the lower interest
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Bank's interest rate is currently lower compared to LPPSA's fixed 4%.

However in the long run (25 years tenure), would the floating rate offered by banks be sort of a disadvantage compared to fixed rate should the OPR increases beyond 4%?

nick_km P
post Jun 25 2022, 10:45 AM

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QUOTE(coolguy99 @ Jun 25 2022, 10:16 AM)
Try HLB and PBB. I applied for 4 banks including Rhb and mbb too but those two offered me the lowest rate
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I received an offer from HLB which was BR + 0.17%.
Still waiting to hear back on PBB's application.
nick_km P
post Jun 27 2022, 03:42 PM

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QUOTE(mushigen @ Jun 27 2022, 02:17 PM)
For semi flexi, HLB from my experience, only allows you to offset interest (by paying extra) up to 30% of remaining loan balance. If you're thinking of parking a lot of money to offset interest, this is something to consider.
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For HLB's full flexi, the interest saving on advance payment is capped at 70% of the outstanding balance.
nick_km P
post Jun 28 2022, 09:09 AM

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QUOTE(mushigen @ Jun 27 2022, 04:38 PM)
That's for full flexi.

For comparison, most banks allow offset up to 100% for semi-flexi.
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That is correct. HLB has capping on its advance payment, 30% for semi and 70% for full flexi. Guess that is a downside should you have extra money to put in to reduce interest.
nick_km P
post Jun 28 2022, 09:49 AM

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Dear Sifus,

Any opinion on what to consider when it comes to spread rate offered by bank?

Currently I have 2 offers, one is BR +0.17% and another is BR +0.53%.

As per conversation, the banker told me that higher spread rate means better position for the bank (more profitable) as they have more flexibility to maintain BR.

Whereas lower spread rate is exposed to volatile BR, as it might not be enough to sustain the bank's current cashflow, hence there might a possibility that bank increases BR without increase in OPR.
nick_km P
post Jun 29 2022, 04:37 PM

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QUOTE(kok_pun @ Jun 29 2022, 09:49 AM)
I disagree.

BR is variable and the spread is fixed. Logically speaking, the lower the spread the merrier as the bank earns u less. The only thing that you need to concern about is the effective interest rate (EIR).

The only way to gauge how far you will be impacted along the line is to look at the Preceding mechanism (BLR) as a reference. Last time banks pact against each other to offer identical BLR (6.6,6.3,6.05 etc etc) except Cxtxbank and a few other smaller banks. Assuming you have gotten an offer of BLR-2 in the year of 2012,

BLR in 2012 : 6.3
EIR is 6.3-2 = 4.3

Now take a look at BNM official website and compare the differences.

All I can say is mbb is the best among all the mainstream banks and CIMB is the worst with a 0.20 or 20 basis points diff.

To put the above into perspective, some of the lower BR offering banks are not really offering a low BLR rate, and history might repeat itself when the new SBR come into play later in this year.

Hope this helps
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Thank you for the detailed explanation. Currently both banks offer the same EIR of 3.05%. Hence the difference in spread rate is one of my considerations.

What do you think of the plan to defer loan application to after SBR is implemented? Already spoke to developer and this is doable as my loan covered less than 90% of the SPA so I can hold off the loan application at this stage.

And any thoughts on bank loan vs LPPSA loan while I have your attention?
nick_km P
post Jun 30 2022, 01:23 PM

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Dear Sifus,

Hi everyone. Me again. Sorry but I need some opinion on this matter.

LPPSA loan is fixed at 4% for the entire loan tenure. This is currently higher that bank loan offers that I got (currently at 3.05%).
Repayment for LPPSA loan only kicks in after Progress Billing of 95% by the developer (in my case, completion is scheduled for June 2024).
Repayment for bank loan will start upon first drawdown by bank which is around June 2023. By then I am pretty sure the interest rate ain't gonna be 3.05% anymore.

So in your opinion, should I take the gamble and go for LPPSA considering that bank interest rate might go beyond 4% by June 2024? Or its unlikely to hit that high that fast?
nick_km P
post Jul 1 2022, 10:44 AM

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QUOTE(kok_pun @ Jun 30 2022, 04:47 PM)
try looking at Schedule H, i am more interested to know how much is the first drawdown in June 2023, and how much interest you would be paying for June 2023 til June 2024.

Second question: 1 year period for completion of construction? Super developer?

imho, by june 2023 it could be 3.5% to 3.7%, the trend now is 0.25% every 6 months...
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I am planning to take 55% loan.

Hence for bank loan, the first repayment is scheduled to kick in June 2023 when PB of 55%. Rough calculation based on EIR of 3.05% suggests interest paid of RM12,388.22 for the first year.

For LPPSA loan, repayment only starts upon PB of 95% (completion is estimated by June 2024).

 

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