Wednesday, October 27, 2010

WANTED: A Loan Consultant Who UNderstands What I Need!

Since this is the forum for Property Investors or those aspiring to be one, I'd like us to share what our requirements are for loans and mortgages. When one is taking out a loan to buy a property, especially if it's for investments, one should opt for those flexible package, with a good interest rate plan.
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Interests Rate Plan:
Usually, one would be short on cash in the early years of the acquisition, and through the years, one would have increased one's salary, have more cash, collected more rent and hence, have more savings, one can pay up the loan in a large part or full. So, one should go for the lowest interests rates in the early years e.g. 3 to 5 years and subsequent years rates can be higher because it is likely one would not need to be paying much or any interests in the later years.
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Redraw Facility:
It is also very likely that, being a Property Investor, one would become itchy again when one sees good real estate on sale. So, the loan package must allow for as much cash available as possible when one needs it. Preferably, the redraw should be within a short notice in case one sees a good deal and need to snap it up immediately.
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Lock-In Period:
Most loan packages have at least a 3 year lock-in and usually it's 5 years. So, if you are buying for speculation, try to negotiate the lowest lock-in period if possible. However, in my opinion, 5 years is a good time for prime properties because it allows 3 years for construction (if it's a new launch) and a further 2 years for further appreciation and rental collection. 5 years is also the holding time if you want to be exempted from paying property gain tax. So, one should not be too bothered about Lock-in period unless one only has the aim to make a quick gain. Instead, one should look at a good redraw facility from an earlier loan package and use that for the quick gain transaction.
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The Wrong Package:
One should not get stuck with a long term fixed-term loan no matter how good the interest rate is. One such loan is the OCBC fixed-term loan. Sorry for picking on OCBC because I am not sure how the other banks do it. It works like this...using a RM400,000 loan as an example:-
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The monthly repayment based on today's BLR is about RM1800 and the lock-in period is 5 years. So, if you have the money and want to "zero-rize" the interests, you can't dump in RM400,000 because you will break the lock-in terms and will have to pay huge penalties...in this case 3% of the loan amount which is RM12,000!! Nor can you dump in RM399,999.99 because the term loan requires the RM1800 monthly repayment (or the fluctuation according to the current BLR to be paid monthly without fail). So, while you are OK for this month, the moment you pay RM1800 into your loan the following month you will be penalized.
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So, the only way to "zero-rize" your interests under this package is to pay 5 years worth of "Advanced Repayment" (5 years being the lock in period), i.e.
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5years x 12 months x RM1800 = RM108,000.00
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The balance is paid as "Capital Repayments" i.e. RM400,000 - RM108,000 = RM292,000 is "Capital Repayment". The crap is, when you want to redraw, you are only allowed to redraw RM108,000. You can't redraw the Capital Repayment. So in effect, the bank loans you RM108,000 for your property which is worth more than RM440,000!!! Clever Bank.
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To make it worse, you have to give the bank 1 month notice before you are allowed to re-draw. Funny enough, I told the Loan Consultant exactly what I wanted and he offered me this crap. Being the nice guy I am, I signed on it without reading the details.

22 comments:

Anonymous said...

hi...do more review on new projects lar...got vested in 20 tress west or not?

sinleong said...

nope - loose soil area. don't touch

Anonymous said...

i dont think what you stated in your article is accurate. Suggest you check properly with OCBC ppl before jumping to conclusions.

sinleong said...

kindly state which part of the article is not accurate? thanks.

Anonymous said...

for starters, capital repayment is redrawable with notice. typically they will credit your account within 3 working days from receipt of your notice.

advance repayment is however not redrawable. SO if you have intention to withdraw that sum, you should not put 5 years of instalment as advance repayment. If you want to zerorise your loan, and yet want the flexibility to maximise the withdrawal of your capital repayments, the prudent way is to withdraw from your capital repayment and then dump into the advance repayment periodically. This is the disadvantage of the ocbc package for ppl who have capabilities to zerorise their loans.

ocbc package is not fully flexi unlike those of cimb, standchart, alliance, hsbc etc. generally the word to describe their package is a semi-flexi package.

i strongly suspect u r unhappy with your ocbc loan. pull out before its too late! as they say, always read the fine print and never trust the loan consultant. but more importantly, try not to give inacurate comments.

Anonymous said...

hi sin leong,
i dont get it..where did the extra 40k come from?
mind explaining..

sinleong said...

oh..that's just an estimation. cos bank wont loan you 100%. actually the correct figure is RM396,000 loan for a property which is RM440k...

Anonymous said...

hi...any comments on soho? seems like soon to be released

sinleong said...

high density and dodgy developer - dont touch it

afan said...

What about sunway velocity?

sinleong said...

velocity - it's priced in the future. my opinion. what do you think?

Anonymous said...

what bout the upcoming thing in bulit ceylon by UMland....that one can make it?

sinleong said...

no details about suasana ceylon yet. however, if you are keen on bukit ceylon, you should consider sixceylon by bolton or wing tai's verticas. the land opposite seri bukit ceylon has been sold to UOA for RM2000psf. something exciting is coming up.

Anonymous said...

I was the launch of Suasana Bukit Ceylon yesterday. It appears to be a staggered launch with only the mid level floors being sold. Prices start from RM800 plus onwards. Choice of 1 or 3 bedrooms. layouts not that great cept for the largest 3 bedroom units. But at least none with windows facing an internal air well.

Anonymous said...

i think the market now is really flushed with alot of new condo launches, esp studio...feeling gonna be a gluth soon...

any nice new landed worth a second look, or even the used units, plainly for capital appreciation

sinleong said...

WTH...i've not been invited for the Suasana launch!!

Anyway, it's true there is a glut right now. And rumours abound that the Bank Negara will cap lending at 80% to curb speculation. This will hit property prices badly.

sinleong said...

2nd hand landed units are probably worth looking at. look-out for under-priced basic units in freehold areas e.g. tmn desa, subang jaya etc. reason being, most landed property new launches we see nowadays are leasehold. and those freehold ones are really heavily priced.

Anonymous said...

The launch wasn't anything to shout about. The door gift was a pair of car windscreen shades which gave the launch a cheap air since that is given out at the registration table. I declined to take mine. And I am sure you don't want to be with all those people there eating as if they have had a meal during the last few days.

All the 1 room units were taken up. And the cheaper 3 roomers which had windows facing each other. You may as well go to the showroom in Kompleks Antarabangsa to look. But I think you won't find much competition as I expect sales to be slow. It's not a very good location.

afan said...

Yes it is quite pricey for that area where traffic is quite congested.

Anonymous said...

with the loan for cap at 70% for person that has more than 3 property..its gonna correct market...

Edith said...

Hi SinLeong, I'm new to loans. Are there any banks/lending institutions that do not charge a penalty for early repayment of the loan? Can you recommend the bank with the overall best loan package? 3rd property purchase, so I'm looking at 70% max. loan limit. Thanks!

sinleong said...

yes, there r such things but u pay much more in interests. sorry, i can't recommend anything...