many thanks for the explanation. But how to pay the xtra rm700? Just make sure my savings acc got at least rm2.5k every month?

Reply had been moved to Article 2. Understanding the terminology of "Settlement", "Prepayment" & "Partial Prepayment" - Implication on your prepaid fund

This post has been edited by home_save: Dec 20 2010, 12:11 AM

Dear all,

Need some advice...

Planning to buy a double-storey house still in construction. Developer will take 2 years to complete it.
Details of the purchase are as belows:
Selling price: RM 400K
Margin of finance: 90%
Plan to take MRTA
Duration: 20-25 years

My age: 34 years
Income: minimum RM 7.5K

I am a government servant. So I have options to choose from bank or take govt loan.

If govt loan, interest is fixed 4%. But will have to 'insurance' from one of their panels (something like MRTA i suppose)
If bank loan, currently rates I got is (RHB, Public Bank) BLR -2.2%, which is quite similar to govt loan anyway.

So... any advice which to take? My thought is since bank rates looks quite good now (my first house was BLR +), quite similar to govt loan, might be a good thing to take bank loan. Then can keep the option of govt loan to buy a next property when bank rates are not so good like nowadays.

I have used Alliance Bank's Save Link loan before. Any bank these days offer BLR -2.2% or better, with similar facility (interest based on remaining principal and further offset by balance in current account)?

How much will I need to keep aside for agreements (loan, S&P) and MRTA?

Is taking a longer duration better?

Wow that's a lot of questions. Thanks for your help.

Michael

This post has been edited by mhfw: Sep 14 2010, 10:02 PM

@mhfw,
4% fixed loan for life is a lot better than variable rate loans. BLR-x loans fluctuates with BLR, hence if BLR is 12% and your loan rate is BLR-2%, you'll end up paying 10%!

I'd take the government loan in a heartbeat.

Dear Michael,

For strategic arrangement of your properties (consider you won't sell any of them), it would advisable to take a bank loan now and keep the gov loan as a last resort option. It is especially true when the time goes bad and you have encounter a long-wait investment opportunity. Based on historical BLR fluctuation, BLR is somehow delayed as compare to economic performance. When the time is good, BLR will keep on increasing while when things go wrong, BLR will be remained high for a while and readjusted to a lower rate to stimulate the economic growth. It is obvious that during a good time, packages will be offered at BLR - X% while BLR + X% for vice versa.

Consider if you take a loan now and your package will be BLR - X%, in regardless of what is the trend of BLR in the future. Think positively, the rate that you are serving will be less than BLR and you reserve an option of gov loan to seize the investment opportunity during the bad time (avoid getting a package when BLR + X% and avoid the need of refinancing the package into BLR - X% in the future). However, kindly take this advice from a pure investors' perspective. If you just plan to buy a home and that's all, going for gov loan will make much more sense.

I believe the facility that you able talking about is flexi loan. There is a trade-off between the rate and convenience of facility. For the features of "offsetting interest with the balance in CA", you will need to sacrifice your request for a lower rate. OCBC can offer a rate of BLR -2.3% with conventional loan while HSBC might make it to BLR - 2.4%. However, rate and type of facilities granted are subjected to banks' discretions. It is advisable to think twice whether you would need this kind of facility by giving up a lower rate.

Based on your property selling price with mof at 90%, loan doc legal fee will be very like to be around 4.1k with stamp duty 1.8k, S&P legal fee will be solely determined by the panel legal firm of developer. You would need to talk to them on this. Highest MRTA which payable to protect your loan is estimated to be 8k+, subjected to institutions.

Regarding your tenure, the common rule will be :

Max tenure = 65 - current age

and round up to the lower ten. Does longer tenure mean anything thing? Let us consider the major advantages and disadvantages of having a longer tenure:

PRO:
(i) lower monthly installment. Installment differentials between having a longer tenure or shorter will be even obvious when your loan size grows significantly big.
(ii) improve successfulness of your loan application. Certain banks will take into your "Monthly commitment - Gross Income" ratio when approving your loan. Lower your monthly installment will lower the ratio and thus, increase your possibility in getting a loan. Applicable to those who with high commitment.
(iii) Cash flow. I don't think I need to explain on it right?

CON:
(i) increase of interest payable. Consider you get a loan of 400k. Tenure=30 yrs, Interest paid=359k; Tenure=40yrs, Interest paid=557k. Increase of 10 yrs tenure will lead to an increase of interest payable of 200k. Does it sound interesting to you?

Wow, a long answer. Thanks for taking your time to go through this. Please let us know if you do need any help on this as we would please to help out. Have a good night and nice dream.



This post has been edited by home_save: Dec 19 2010, 11:46 PM

very helpful insight chris. By the way, if now take bank loan and later blr increase too much, can we convert to govt loan?

just curious, gov 4% is calculated the mortgage way (principal keep reducing) or like hire purchase (interest x principal x tenure)?

U may try citibank.... Loan below 150k citibank has the best rate ... BLR-2.1.. Mayb u can try apply citibank... Johor which part?

fixed loan is just like hire purchase.

all bank fixed loan package is same.. u cant dump money.
even u dump, it is only prepayment for next month.
if u dont believe, pls look at the t&c of your offer letter if you are getting this type of package.
many ppl didnt aware regard this.

but ING fixed rate home loan can make prepayment, right?

Is best you check your agreement to be sure.

Hi,

Any comments on UOB? will the disbursement take a long time?

Hi,
I am looking for home loans for
1) Jasmine Tower Unit, SS2 RM311000 (Completed unit).
and/or 2) Goodyear Court 6, USJ RM115,000 (Completed Unit)
and/or 3) GM Klang (commercial property to be constructed), slightly more than RM200,000
Looking for tenure up to age 70 or more
Requirements:
Fully Flexible loan
Heard that best rates are offered at 80% purchase price and I can do that.

Pls pm me.
Thanks in advance ....

hello all,

is HSBC's homesmart only for direct purchases from the developers? If I buy a 'new' - as in never occupied house from a subsale, can I apply for homesmart?

HSBC Homesmart can be use for direct sales, subsales and refinance. It's a full flexi loan. Pm me if you need HSBC loan.

Is the BLR going to increase again shortly? Just read a 1/2 page of article in China Press Newspaper talking about BLR increase.

I think for ING we can dump money...btw any ING agent here..pls confirm..

Hi Chris,

Thanks for the detailed input.

So you're saying, if just buying a house and get over with it, better to go for govt loan and get it over. If want to invest more properties in future, better to get the good BLR-x rates now, keep govt loan as backup for future use right. Hope I understand it correctly.

From what the officer in govt loan explained, govt loan is based on mortgage, interest calculated on reducing principal. Have the option to dump in money as well to shorten tenure.

Shorter tenure and pay less interest sounds more interesting. But will limit cash flow. Hmm.

Michael

Post had been moved to Article 2W. AIA & ING – The No Lock Penalty - How does it differ from banks?

This post has been edited by home_save: Dec 20 2010, 12:03 AM

Hi Michael,

No problem, Michael. You are correct. Let me share a common method that used by many property tycoons in building up their property empire. Profit capturing by selling their properties at a higher price during a good time and buying at a low price during a bad time is not their preference. Normally, what they did is to go for property which has strong appreciation fundamentals. And, they bought it, rent it out at Rental > monthly installment. Overtime, the loan is going to be paid off by the tenants and the Open market value of the property is going to rise (OMV). With OMV > initial purchase price, refinancing will make much sense as this will provide them with cash to purchase 2nd property (provide that it will be refinanced at Rental>Monthly installment). When the momentum built up, the appreciation of initial properties will fund the purchase of new properties while rental > monthly installment will soon be significant enough and make up a big portion of passive income. Certain of our clients practice this method for decades and now, their jobs are "landlords".

Certain points which are publicly concerned are not part of their concerns at all, for instance:
(i) Ppl always concern about the tenure and interest payable. For them, as long as the unit is popular and they can rent the properties out at Rental > Monthly installment, they won't concern too much on the tenure and interest payable as in the end, tenants bear their cost of ownership and they still own the properties and get passive income.

(ii) Liability > Asset. One of the interesting points that people asked is that, if the method of refinancing keep on repeating, this kind of landlords will eternally having liability > asset, does it sound crazy? Their answer is "So what?!" Imagine that you can rent out all your unit with Rental > monthly installment, and all the properties are insured against death. You will have infinite potential in building a great property empire by leveraging the money borrowed by the banks. If someone is willing to borrow you with the money to earn money, why don't you use it?

There are many interesting points to be highlighted in making yourself to be a property tycoon. Lower rate does not necessary serve your purpose while only the correct package will make your life easier and profitable to own a property. If you need assistance on this, we would be please to help out.

Appreciate support from LYN.



This post has been edited by home_save: Dec 20 2010, 12:01 AM