Hi,

I have just taken up AIA offer of 5.75% fixed for 30 yrs home loan for 289,800.

Since BLR has gone down to 6.5%, I think I will drop further. In my opinion, BLR won't increase in the next 5 yrs at least!

This had prompted me to refinance my loan. I'm actually paying RM1692 for my home loan and RM150 each (my wife) for mortgage life.

Can anyone tell me the procedure on Home Loan Refinance? What are the steps to be taken? Any costs involved? For AIA, they have no lock in period so I THINK I can refinance now or after CNY.

My loan started this February 2008 and my house is still under contruction which will be ready by June 2009.

I really regretted not taking up the AMBANK offer (-2% BLR for 30 yrs) at that time. I realised banks are offering much more cuts now. Any advice?
With the recent cuts in BLR to 6.5% now, will banks actually cut down on interest rates (say -1.5%) ?

Please advise me on the steps and costs.

Thank you.

fookeesan,

Its gonna be a very expensive affair if u opt to refinance now. While short term BLR is expected to be even lower, but u never gonna know whats gonna happen in 2010 or 2011. Y not stay put n have some peace of mind especially when u know the storm is coming, real soon.

Stop making impulse decision again, and have a long term outlook. Relook at this again in 5 years time once your lock in period is over. FYI, AIA DOES have lock-in period IF you REFINANCE within 1st 5 years, correct me if im wrong.

Fyi, was never a big fan of AIA fixed rates coz I think its really expensive, but the next 2 years its gonna be one hell of a ride. It could be useful.

Thank you very much for your comment. I have to check if I have any lock-in period as the contract is at home but I re-call that my agent told me that they have no lock in period which is their main selling point against the banks.

I understand that this may be an impulse decision but comparing to one who took BLR -2% fixed for 30 yrs means that I am paying RM2900 extra every year. Now that BLR has gone down, I may have paid more (over 3k).

Therefore, should I have no lock in period, can anyone tell the steps to refinance? I will definitely look into the risks as well. Its just that I want to know if I can refinance at a better deal. From what I can see, BLR won't increase in the next 5 years, I can save RM15000 on that if it is possible ( I do not know that costs of refinance yet). Of course, I understand we will not know what will happen in the future, but deep in my heart, paying 5.75% for 30 yrs is a wrong choice.

Thanks

i have been trying to switch my 5.99 AIA to another bank for about 2 years already and that will cost me about 2-5k just for the change, they don't call it lock period but whatever they call it, you will have to pay extra for that to happen.

I would take the 5.75 deal but in general if you still insist then you will have to call AIA about the switch, ask them to calculate a total cost you have to pay until the loan is cleared in AIA, then contact AMBank officer to pay for that amount if you transfer the loan over, if you have a deal, then congrat.

Thanks man. May I know what is the cost for the 2-5k??

Moreover, would I still have to pay for Lawyer's fee??

Any AIA agent can clarify if my mortgage loan will still be valid after I refinance?

Mtsen, actually I plan to go to every bank to check on the rates again on refinance to get the best deal.

Thanks.

fookeesan, do also check if the banks are willing to refinance an undercon property. Most of the banks I know doesnt do undercon refinancing.

Good luck

if there is no lock in period, then the cost involve should be only the legal fees, that too will cost a few K, unless you take the zero entry ones.

if you dont mind, can share the outcome of your findings on the latest rates offered by banks ? I am thinking of refinancing as well.

IC

Thank you very much for your help. I really do not know about banks don't do undercon refinancing......

Hope luck is with me =)

---

Added on November 26, 2008, 11:28 amI will share it defintely....

Legal fees will cost a few K as well...... hope won't be much.....Thank you very much

This post has been edited by fookeesan: Nov 26 2008, 11:28 AM

Hi Fookeesan,

We have 8 panel banks in our co. At the moment the lowest refinancing rate is 4.35% with 0 moving cost. If you're interested to find out exactly what are your savings and whether you qualify, kindly pm me your property details. Tq.

My opinion:

1) All banks have lock in period of 3-7 years, but mainly fixed to 5 years. Early redemption penalty is generally 3% of the loan amount. e.g. If you loan 200k, you have to pay penalty RM6k, even if you redeem after 4 years 11 month.

Take note some have additional administrative charge for redemption, e.g. RM1k + 3% penalty.

The only bank which does not have lock-in period is Al-Rajhi which I checked several months ago. But not the lowest % offer though.



2) I do not believe in the Zero moving cost. Normally it is merge with your loan. E.g. If you plan to re-finance 200k with another bank with 0-cost, the other bank loan is actually 200k + 12k = 212k loan.

The additional 12k (or any amount) is the legal fees cost and may include the free-penalty that the banks claimed they absorb for you to move over.



My advise is stick with it until 3rd-4th year. Don't rush. Then, even though you are still under lock-in period, write a letter/email to the bank to request their discretion to review your home loan interest rate. The bank will have option to reduce down for you or reject your application. Ensure you pay promptly to have a good track record. The bank would like to keep a client who pays on time, although they earn a bit less % from you. Less risk.

If they approve, then you do your maths whether it is worth the reduced % rate that they offer before you sign it. Nego further if needed. No legal fees involved. Just some minimum RM20-200 administrative charges involved.

If they do not approve, wait till end of 5th year, then decide whether you want to jump to another bank loan, or write again to request review. Normally 98% of people will jump. Again, refer point #2 as not all bank will absorb the so called zero moving cost.

End of the day no harm comparing, if you get X value savings and the savings is worthwhile then obviously you stand to gain by refinancing. However if your penalty exceed your savings, it would be better to stay put.

In your case there is unlikely to have property appreciation so you won't get extra cash in hand but there maybe savings that are worthwhile.

For example 289k loan @ your current 5.75% for 30 yrs =
1) RM1,686.52 per month
2) Interest paid over 30 years RM318,149
3) Total paid over 30 years 607,149

Compared to 289k loan @ BLR - 2.4% (4.1%) for 30 years =
1) RM1,396.44 per month (you pay less RM290 per month)
2) Interest paid over 30 years RM213,719
3) Total paid over 30 years RM502,719

* Total savings of RM104,430, is this worthwhile to pay your penalty?

Some relevant topic:
http://forum.lowyat.net/topic/829560

For me, I would calculate on the savings over 5 years for short/medium term plan also. As after 5 years, I might refinance again if there are better package. However, take note that after 5 years, there may not be better package available if BLR rises !!! Hence, you are stuck with fluctuating BLR and may pay more over the 30 years.

Since DannyOP has the calculator, please help to calculate the interest paid for current package and refinanced package in 5 years period.

e.g.
Current @5.75%: 5 years Interest paid = ??

New Package @4.1%: 5 years Interest paid + penalty + MRTA/MLTA + legal fees paid (including absorbed) = ??

If it saves you over 5 years, most of the time you'll save over 30 years. If it doesn't, think and plan carefully. Cause now, you may see you can save RM104k, but that is over 30 years. If you take the new package now and refinance again in 5 years time, you may actually lose more money.

I cannot calculate on TS, as I have my own excel spreadsheet and functions, and I normally pay more than the monthly installment.

Very good point here. I'd also discourage anyone from taking up loans with lock-in period of more than 5 years. Just compare the rates that were offered 5 years ago VS today's rate and u'll see what I meant.

i've been told that al rajhi give 0 lock in period.
can anyone confirm this?

which bank is kind enough to give u blr -2.4% for the whole tenure of 30yrs without a single catch...

so using blr -2.4% for calculation is simply MISLEADING, in other words, just some bloody flowery sales talk to lure people.... zzz

Btw, BLR drop is only today stuff, don't expect to see much adjustment on package offered by bank within these few days ...

if there's any bank offering BLR -2.4%, i'm sure there's catches like 'no prepayment', '7 yrs bonding period', early exit fee 5% on loan amount'..etc etc etc....

BLR drop 0.25 today and i think it wont change for another 2-3 yrs. currently only Maybank and CIMB declare the changes, not other banks.

i think u got the wrong idea or maybe some stupid bankers cheated u.

zero-cost package is ur legal fees borned by bank and that's for sure. if u say the fee was ''merge'' in ur loan, that's call ''finance'' it with the loan. can say all banks will have 90%+5% margin of finance, the extra 5% is for their customer to finance their legal fees and MRTA/MLTA into the loan.

i've also come across with some banker who did this. telling it's free legal fee package but he finance it to loan for the customer so that he can get better rates for the customer, and also can compare to other bank package.

There is no legal fees etc because it is 0 moving cost, hence :-

5.75% 5 years Interest paid = 80,274

4.1% 5 years Interest paid = 56,599

* So there will be a gross savings of RM23,675 (you have to minus your penalty if you r currently in your lock-in period for the nett savings)

* pls note I am not allowed to promote one bank is better than the next because all 8 banks are in our panel and each application is judged seperately. So what is done is your enquiry/application is passed from us (NYLife) to all 8 banks. Since 8 banks are competing for your business, they will come back with the best offer and it is up to you to decide. In some cases there may be more than 1 bank offering the same rate so it all comes to personal choice and experience you may have which bank u prefer to sign up with.

I think this is only fair, rather than the loan officer from one bank die die also say their bank is better than the other. Your enquiry/application details are all kept strictly p&c.

This post has been edited by DannyOP: Nov 27 2008, 04:24 AM

what are the unfavourable terms that we should be aware of ? from what i know, 5% penalty, 7 years lock in, any others ?

Free moving costs would usually result in not so favourable rates...U cant opt for a Non-Zero moving cost where you bear the legal and stamp duty fees..It is not necessary for you to finance it into your loan...just a lil advice...

my view is that ZMC is a very useful tool IF you r buying investment properties as it helps you lower you capital expenditure.

For own use properties, try to go for non-ZMC if u really can afford it as u'll benefit in the long run.

Yes, it is not from one bank, but from multiple local and foreign banks.

Not only that, some zero-moving cost will be e.g. BLR-1.6%
while non-zero-moving cost (need to pay own legal fees, etc.) will be BLR-1.8%
meaning the zero-moving cost package is using the 0.2% to offset the cost that the bank going to absorb.

Surface level, the 2nd offer seems worth to refinance for TS. TS have to do more homework on it

Agree. Do not be mislead/misguide by the loan sales/office. Go through each offer and ask questions. Do detail homework.

Thank you very much for the advices guys.

Will definitely carry out research and ask TONS of questions to make sure that I'm gaining from refinancing.

hi all, im very interested to write a letter to my bank to review my high interest rates, which is currently BLR+0.1% ..anyone has a sample letter?

From what i see, you are expecting FREE LEGAL FEE + SUPERB RATES ...

You have to know that, there is no free lunch in this world. People opt for ZEC package because they cant afford the legal fees / they do not wish to come out with a lump sum to pay the legal fees. Bank do not force you to take ZEC package which have higher interest rate.

And sometimes, financing in the legal fees so that the banker can give u better rate is a good choice. If it was ZEC, BLR -1.7% vs NZEC BLR -2.1 (with legal fees financed in), i believe the monthly installment for option B is lower than option A.

@ n73me : Unfavourable terms?

Let's put it simple, there are 2 ways bank can earn from your loan.
1. Interest Rate
2. Fee based profit (i.e late payment charge/apa-apa-apa fee for every few seconds/XX% for deposit blablabla)

Bank uses our money to actually give out those loan. i.e our FD/Current Account/Savings etc ...
So assume their cost of fund is the FD rate which is like 3.5% now.
At BLR (6.5) - 2.4% = 4.1%
It seems like the bank is earning 0.6%, but overhead cost etc? So it would probably means by giving BLR -2.4% they won't be earning much from the interest rate.
Bank is a business, would they be so stupid to actually kill their own profit?

There comes those penalty, fees, charges, bla bla bla bla ..... limitation so that you will die die stay with them for at least XX years, can't reduce principal more than XX %, every time you make extra payment XXX% are charged blablablablabla ....

So in other words, there is no free lunch in housing loan/any dealing with banks. Don't be idiot that chase for super low rates and die by their hidden charges etc......

ed0gawa,

If the bank term it as Zero moving cost, then there should not be any cost involved. Not hidden or repackage deals with fine print T&C. This is misleading the customer, similiar like MAS/AirAsia with Zero Fare flights.

And YES, if it is a Zero moving cost package as advertised, I am expecting FREE LUNCH. Don't explain to me about the offer, and at the end tell me add in X thousand amount into loan and pay installment. Normally when they reach this part, I cut short the conversation.

Recently a MBB Home Loan officer approached me with free lunch (real lunch). She has offer from MBB packages and I list down the things I'm looking for if I were to refinance my home loan. She did not get back to me (yet!) after 1 month.

Agree that bank is a business entity and need to make profit. Similiar like people in stock market who buy large amount of shares and sell when it increase RM0.02 and make a profit of few hundred/thousand. It is based on volume.

It should be straightforward. Don't know why the Maybank officer coudn't get back to you.

In our co. it is not only 1 but 8 banks reply within 3 days of your application. Those that fail to reply we consider they're either not efficient or not interested.

Another point, is the MRTA that is added to the loan amount and you pay by installment. Which is another no no for me.

Anyway, I am not desperate to refinance at this moment. Just surveying on and off for better deals, if available.

DannyOP,

I got no idea. If the offer is good for me, I'll take it. If not, I'll pass and wait another 6-12 months.

Sorry to TS, seems like hijack the thread already.

I'm learning more from this. Keep on going pls.....

As i said,
ZEC is for those that could not come up with the legal fees on their own.
NZEC is for those that wanna enjoy better rates.
NZEC with legal fees financed is for those that want better rates yet do not want to come up with legal fees.

U got 3 choices, no one force you which package to take. It is not a hidden terms that ZEC package has worse rate compared with NZEC.
Financing of MRTA is also optional. As long as you choose to take up MRTA, the bank has earn some commission from there. They don't care if you wanna pay cash or finance in.

There are banks with PARTIAL ZEC package, they only pay up legal fees to a certain amount.... can't really remember which, but i believe Maybank has something like that...

For those interest in NZEC where legal fees are financed in, IF the difference in rate is less than 0.3%, don't take it up.
e.g ZEC package = BLR -1.7%
NZEC package = BLR - 1.90%

Monthly installment of NZEC which be higher...

IF the difference is 0.3% or more, NZEC package installment will be lower.

** Above figures are based on serial of test i did, with legal fee quotation obtain from various law firm **

Lucky la you, I got mine 3 years ago 6.25% fix with AIA on 15 years loan. Now stuck dunno want to refinace or not. I heard from my agent lock-in is 4 years with 4% penalty. Any sifu here can advice whether I should refinance or not. I also think BLR will be low for the next 5 years or so, by the time I almost finish my loan already if BLR to rise again.

Suggestions and advice please.

Wow 4% is quite high, r u sure? Better to check your loan docs to confirm. What is your loan amount? I can check for u comparing both.

My loan amount is 230k, now left about 180k. How about MRTA, last time I bought insuran to replace it, do I need to buy again if refinance?

180k at 6.25% for remainder 12 years :-

1) RM1779.90/month
2) Interest payable = 76,306.49
3) Total payment inclusive of interest = 256,306.49


180k at 4.1% (assuming 6.5% BLR) for remainder of 12 years :-

1) RM1,584.70/month
2) Interest payable = 48,197.60
3) Total payment inclusive of interest = 228,197.60

Savings = 28,108.89

- update - have checked, you don't need to get MRTA since you already have insurance to replace it.
- upsate - for a ltd time the rate now is BLR - 2.5% (effective rate 4.0%).

This post has been edited by DannyOP: Nov 30 2008, 01:25 PM

At 6.25% of interest for remaining of 180k and 12 yrs tenure, your net interest paid is RM74,330 with monthly payment of RM1780

Assuming you refinance your outstanding amount with Zero Moving Cost Package at BLR-1.85% (Taking CIMB's Flexi loan package for example)

Interest:4.65%
Monthly:RM1634
Net interest paid:RM53,963

After minus the penalty 4% of 230k which is 9200, Total Saved is RM11167

For the insurance, if you purchase separately then should be able to continue to policy.

This post has been edited by VpowerZone: Nov 29 2008, 02:03 AM

Just got an update, lowest rate now is BLR - 2.5% at BLR 6.5% so 4.0%for a ltd time. You can put in your request first, then decide once you have the offer. Request is f.o.c

Thanks guys. I am now asking AIA to reduce interest rate for me, if not, after lock-in period next year, I will refinance.