I am having this mortgageone house loan and have paid extra up to RM 150K now (This is monthly extra payment than I can withdraw anytime). The loan interest is BLR - 0.8. (5.55 - 0.8 = 4.75%) I am thinking of buying a new car (around 150K). The car interest is 2.3%. But the effective interest rate is higher because the HP-loan is fixed for 5 years.

Should I withdraw the 150K from my mortgage loan and pay the car with cash? Then I can continue to service my housing loan as usual? Is this advisable? Will this cause income tax problems later?

Pls advise.

good idea. I support.

I worry it will cause income tax to come after me for paying an expensive car in cash.

Leave min 100k spare cash in your M1 as u never know what will happen in the future. Btw, can you go for 3 years financing instead?

I think you can split portion of the cash for you car loan.
Take a shorten and smaller loan to avoid income tax.
Keep some cash in the Home loan account.

No choice:( But for the details of breakdown, need to work out.

Instead of comparing the interest rates between homeloan and hirepurchase, why not compare hirepurchase and alternative investment? If you can use the extra cash to generate effective return (for the car loan that you have approx 4.6%), which is not hard at all these days.

Another thing, why not re-nego the rates for your existing homeloan? minus 0.8 is very doable.

Go to http://www.maybank2u.com.my/ Click Loans, enter housing loan amount and interest. Then go hire purchase and enter amount and interest, compare.

I compared HP 2.5% vs Housing Loan 5%. Then make it same amount of years. The difference is very very small.

Yeap. I tried that. The difference is minimal. But other benefit is I can increase payment to the M1 account anytime with immediate savings on interest. The HP-loan interest is fixed.

Anyway, I am going the middle-way, ie pay RM 100K for the car, and get 3 years loan instead.

Thanks for the help