Dear forumers,

How does everyone think of Fixed Rate Home Loans?

AIA just launched some amazing new knockout rates from as low as 4.99% Fixed the entire tenure!

Check out the link below for more info.

http://realestate.net.my/forum/viewtopic.php?t=10154

I'd say its an amazing offer for anyone looking at a 10 years and above loan tenure.

Let me know what you guys think.

Best Regards.

What is so great when the current BLR is volatile?
Last few years AIA had been using the sales tactic on how we're at the lower BLR and because of economic growth, BLR is sure to shoot up as their marketing tact for 5.5% fix rate. Look at the situation now and what is AIA doing to the existing customer on 5.5%?!

It's more or less about gambling for the best deal where no one knows for sure.

Don't know about u, Mod - but i don't gamble when it comes to rates - especially if it's to fund my prop's.

IMHO - don't take a fixed rate for the sake of "gambling" or getting a better deal. Take it only if stability of cash flow is what you're looking for. Some investors may be very cash flow sensitive. In that sense, this may be the ideal vehicle for you....particularly for investment purposes.

Don't cry or fret if BLR falls further. You are already locked in. As long as your net cash flow (Rent > Installments) remains positive - get over it - and stick to the fixed rate.

i locked in 5.99%

Anyway I believe it is up to the individual what his/her property brought for.

1] If for own stay, may be good to lock in fixed rate now and enjoy the whole tenure and hope the average BLR is much greater than 6% and you will benefit in long run
2] If is for investment, it is good to take advantage of the current low BLR now as in 1 or 2 year, unlikely to shoot up drasticlly.
3] If one wish to maximise it's property profit may choose an float rate that do not have a lock in period (usually higher than normal float rate), and then switch to fixed rate only when economy showing sign of recovery.

Just some opinion.

Regards,
Kelvin

The point I'm bringing up here is basically in regards to no one knows for sure the volatility of the market which in turns have effect on the overnight interest rate thus effecting the BLR.

So when a direct question and answer on "what do you think" of fixed rate vs BLR -% rate, it's sort of gambling. That's my opinion.
However you do have a good point there on ROI.

The pros of fixed rate is when economy turns good and BLR starts to increase, one is guranteed of a lower rate. However, during good times; banks would still be fighting for rates to entice customers. In a way; like the previous offering of AIA - 5.5% during the good times, a lot of other banks which applies the concept of BLR -% is still giving up rates that is on par or even lower to this 5.5% fixed. But obviously the downside would be in the event that BLR risen, these guys on BLR -% would loose out.

Cheers.

can anyone here shares what happen if A did an islamic loan and then wishes to changes to other more flexi plan ?

what will be the penalty payment ?

It's case to case basis based on the terms signed and negotiation with the Financial Institutions.
Anyway, it's out of topic.

Thanks for the feedback so far.

Referring to boon's response..

"What is so great when the current BLR is volatile?"

I personally think 'Certainty' matters especially when everything else is volatile or uncertain.

Why put money in FD when the returns are even lower than Inflation? Mainly because of its certainty and knowing for sure its there when you need it.

Moreover we're talking about one of the bigger investments in one's lifetime. Same goes to owning a property, knowing for sure you're gonna clear it off in exactly 20 years.

I just wanna get everyone's opinion as there are many seniors and sifus here whom have gone through a few recessions for the past few decades.

Being young and inexperience, most would just jump on the lowest BLR-% rates and hope it stays that way.

I'm hoping to get some views from people who really take the time to make informed and calculated decisions and would rather not 'gamble' it when it comes to investing.

I wonder what would Warren Buffet go for?

This post has been edited by Zarth: Feb 17 2009, 05:52 PM

Warren Buffet would go for his current home in Omaha. LOL

By the way, I have both fixed rate loans and BLR loans - both have their usages and advantages.....U just have to be very clear in your objectives - and approach your investment and financing decision with gumption and proper risk mgmt.

Housing loan is a loan that we serve nearly our working lifetime. Some may be rich enough to complete it in 5 years (the usual bonding period) while some might even take till their age of retirement. With the economic cycle as we now see, we don't know how low will it go and also how low can it stay. For those of a less risk taker, then fixed rates would be good. Personally on my side, the unstable income would serve best for floating rate.

Warren Buffet, the world’s richest man lives in Omaha, Nebraska in a 6,000-square-foot gray stucco house he bought in 1958 for $31,500.

Anyone know if he bought it with cash back then or did he take a loan?

I personally think its a great offer since its only 1% above current flexi loan rates. Traditionally AIA have always fixed their flat rate at 1.5%-2% abovve flexi loan rates.

AIA is getting more desperado it seems

considering i just refinanced from them......and if i'm an indication of their pool of disgruntled customers - then I think you're right about them being desperado. LOL

phoeni, what would happen to current aia loan holders should aig goes under? Can aig foreclose our houses should we fail to settle of the outstanding loan balance?

Very good question.

One which panicked me enough to call the Legal boys in my bank. LOL.

OK - in the LO there are no draconian terms which allow the bank to foreclose to raise liquidity.....It's against BAFIA and God knows how many other laws.

In other words - foreclosure can only occur if I'm delinquent like nobody's business. In that sense, borrowers interest are protected.

In the event AIA grows bankcrupt - well, it's anybody's guess what may happen. I won't put my bet on any legal document then. But my guess would be BNM would intervene to protect the borrowers anyhow.

Even now - the Local AIA unit is looking for a "strategic partner" to buy a material stake in the company. this serves as a level of comfort to all AIA borrowers, I suppose.

for that matter, what happens if any bank goes under? they simply get "eaten" by a bigger bank... but i remember several years ago, a friend of mine went through a lot of hassle, because during the M&A of one bank, they lost his home loan records etc... to be precise, they lost his payment records...

Fixed rate is good if inflation is high ... provided your salary / rental income follows the inflation rate

Imagine your rental RM1000 becomes RM2000 10 years later and your installment is still the same.

I wonder if a Zimbabwean salary is in billions today and if they got fixed rate loan 20 years ago for only 200K ... can easily pay it off?