Tenure on housing loan
On 5th July 2013, Bank Negara Malaysia ("BNM") announce that they had reduced the maximum tenure of bank loan to 30 years or up to 75 years old which ever is earlier. One of the reason for the reduction in the bank loan tenure is due to BNM effort to reduce the house hold debt that has been on the rise of Malaysia.
However the pricing of the house has not reduce (in fact is has seen to have increased over the period of time). In my opinion the prices of the house increased while the tenure period decreased would have impact to a higher repayment on a monthly basis.
If that is the case how much can I borrow?
A general guide line for housing loan is that a person can borrow up to 1/3 of the nett month salary (if couple it can be the combined income) x the number of years eligible to loan. Please refer to the following for an example of a general guide lines:-
Salary per month (combined): RM9,000 per month nett (nett of KWSP and monthly tax deduction)
Age : 30 Years old
Mortgage terms: 30 years or up to 75 years old which ever is lower therefore maximum would be 30 years.
Rough amount eligible to borrow:- (RM9,000/3) x 12 months x 30 years = RM1.08m
*please take note that this has yet to take your credibility into consideration.
In the event that you think you are unable to pay off 1/3 of nett then you can compute your housing loan amount based on the repayment you can pay. Please go to repayment section.
Total housing investment should be lower of the total amount of repayment that you can pay or 1/3 of nett salary.
Credibility
The calculation above is just a main guideline on how much the bank would approve. However the total amount above would have to based on your credibility. First and foremost if you want to check for your credibility, you can assess to Central Credit Reference Information System ("CCRIS").
CCRIS is a system that collects credit information on borrowers from financial institutions and supplies the information back to them. This is one of the sources of information used by financial institutions to help them establish a view of the credit histories of potential or current borrowers. It is not a blacklist system as perceived by some people. The information that would take into consideration are your promptness of your payment, number of properties, cars that you have.
*To check on it, you have to personally go to BNM building (in KL) and put in your ic with thumbprint to print out your CCRIS report.
Generally, the better your credibility the lower your interest rate would be and the easier your loan would be approved
Interest rate and loan agreement
Just the rule of thumb, interest rate are calculated based on Based Lending Rate (BLR)- Spread. As of 2014, the BLR is maintained at 6.6% and the spread would depend on the bank individually. The spread in general would range from 2% to 2.6% depending on the credibility, the total amount borrowed and the locked in period.
In the loan agreement there would be terms and condition i.e the payment terms, the locked in period, early repayment penalty and etc. I would advise that you read through your loan agreement as penalties for early repayment, change in rates due to late repayment i.e if payment had been delayed, the interest rate might change from BLR -2.2% to BLR+1%. This is to ensure that you do not receive surprises when different situation happen. (sometimes penalty might not be worth for early repayment).
Please note that if the interest rate in your bank loan agreement is BLR-2.2% it is actually a floating rate whereby BLR might increased or decreased depending on the decision of the government.
Total amount that you can borrow
Generally you can borrow up to 90% of the 2 property purchased (as long as is under your name) and subsequent property maximum amount to be borrow is 70% (depending on your credibility).
Point: If you are a couple, if you plan to purchase a lot of properties for investment purpose (and if finances allows it) then put individual name so that a total of 4 properties eligible for 90% loan.
Repayment
Here comes the part whereby you need to commit yourselves monthly to pay for the property. Generally if the interest rate at BLR-2.2%= 4.4% i'll do a simple calculation with a property of 100,000 (any more you can just do a simple multiplication on the amount of your dream house) would be about RM500 per month. So with the assumption that you were to purchase about RM500k house, your rough monthly repayment would be Rm500x5= Rm2,500.
Please note that this is just a general computation and does not reflect the actual repayment. Please get a repayment schedule from your bank.
Another method of calculating the home that you can afford can be based on your repayment amount. I.e total amount that you can make payment is say RM250 per month for a period of 30 years. Your computation would be based on the following:-
RM250 x 12= RM3,000
Total investment amount = RM3,000 / 0.5% (basis) = RM600,000
Basis of the general rough computation with interest rate of BLR -2.2%. (6.6%-2.2%) is as follows:-
| Number of years | Basis |
| 30 | 0.50% |
| 20 | 0.60% |
| 10 | 0.70% |
| 5 | 1% |
Conclusion
Based on this article, please take note of the following:-
1. Do a simple calculation to know roughly how much bank loan you are eligible
2. To shop around bank to get the best spread
3. Check on your credibility to through CCRIS (BNM building)
4. Read out all the terms and condition in your term loan agreement to be aware of penalties that might inquired of any non compliance. (read out any rights to change interest rate based on bank discretion)
5. List down the expenses you have and determine how much you can save per month.
Have fun on house hunting!!
My next post would be sales and purchase process timeline. Please like and follow my facebook page at www.facebook.com/serikembanganren for updates on Real Estate in Malaysia.
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