"Two years ago, banks were charging home buyers base lending rate (BLR) 'plus' interest rates for their housing loans.Today, the BLR for mortgages has fallen to a 'minus' level. In addition, then, the average BLR was about 6.75% which was later adjusted to about 5.55% currently."
The competitiveness in housing loan sector among banks has created a situation where the interest are so much more lower than what it used to be just more than 2 years ago. Read the statement above. It was taken out of an article from StarBiz (read the full article here).
To those of you who has taken a housing loan more than 2 years ago and you are still servicing the loan, you should really just go to your bank and tell them you want to refinance your loan. However, it may be difficult to make a choice on how to make the best deal out of the favourable condition of the housing loan market out there. To make things easier, I have made some simple guideline.
- If you are out of your lock-in period and are have principal balance of more than RM200K.
You are in the best position of all. There are so many interestingly low rates out there for you to choose from. Banks offer rates that are as low as BLR – 2.2%. But you should also look at loan provided by insurance companies where the interest rates are fixed, i.e. it does not depend on BLR. I heard that they are offering as low as 4+% for the whole tenure of loan which is very very low.
- If you are out of your lock-in period and are have principal balance of more than RM100K.
You are in a position where you can choose the bank which offers you the lowest interest rates. You do not have to pay any compensation for your existing loan and all banks are giving out loan with zero-moving cost. That means you do not have to pay any fees in getting the loan, saving you many thousands in legal and other costs.
- If you are out of your lock-in period and have principal balance of less than RM100K but your house is worth more than RM100K.
Most banks do not give out loan with zero-moving cost if the loan amount is less than RM100K. In this situation, you should consider refinancing with a loan amount of at least RM100K. I know many people do not want to owe banks more than they already have after paying so much interest to the banks in the past. However, do not worry about paying more interest to the banks that you have to because you could get a loan with a flexi account. To put it simply, lets say you have a principal balance of RM80K. You get a new loan for RM100K, u will have extra RM20K of cash. Just put the RM20K in the flexi account. The RM20K will reduce your principal amount to RM80K. You pay interest for just the RM80K, just like your previous loan but with a lower interest rate and the best thing is you can use the RM20K you have in the account in case u need the money.
- If you are still in your lock-in period.
In this situation, you can negotiate with your bank to get a lower rate. They will give you a better rate though it will not be the same as the market rate. Or else you will have to compensate them to save more in the long run.
2 comments:
the lock in mechanism will stop this, and some banks will charge a hefty penalty. but if it's possible, yeah, should really refinance.
Even when the loan is still within the lock in period then you can request for a better term from your bank. They will be willing to do.
Actually this message is more for people who has got their loan more than 5 years ago. Loans at that time was very favourable to banks, most of it are at BLR +1-2% or more. And many just continue paying their monthly installment and never bother about it. They never realise that they could easily have save enough to get themselves anything from a Kancil to a Civic for FREE!
I do not know about the others, but a check with my neighbours confirm this.
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