Mortgage refinancing loans now to be paid out within 10 years Posted on October 2, 2013 - Featured, Investment. By Loanstreet In Q3 of 2013, Bank Negara Malaysia (BNM) issued new guidelines to banks regarding refinancing of mortgages. Prior to this, anyone could refinance their homes with repayment tenures of up to 35 years. Under the new guidelines, however, any cash-out amount from mortgage refinancing would need to be paid back within 10 years. This guideline was part of Bank Negara’s efforts to reduce unnecessary household debt, and also to cool speculative activities in the property sector fueled by lax home loan refinancing. Many people are now asking, how can you avoid it? Effect of the guidelines Before this, you could refinance your house for up to 90% of its market value. The cash out amount could be used for any purpose, including investing in other properties and is a common practice among serial property investors. Maximum loan tenure follows those of housing loans, which is 35 years. Assuming the house is worth RM400,000, outstanding housing loan balance is RM150,000, interest rate is at 4.6% and margin of finance is at 90% of market value, that means that: Cash Out Amount = (90% * RM400,000)-RM150,000 = RM360,000 – RM150,000 = RM210,000 To borrow RM210,000 over 35 years, the total monthly installment would be RM1,726.09. Under the new rules, the total monthly instalment to be paid would be much higher: Monthly Installment to pay for RM150,000 over 35 years = RM719.20 Monthly installment to pay for RM210,000 over 10 years = RM2,186.54 Total Monthly Installment = RM719.20 + RM2,186.64 = RM2,905.84 That is a difference of RM1,179.75 per month! Is there any way around it? The good news is yes! As of date of writing (Sep 27), only five banks in Malaysia have implemented this limit. The rest are set to follow suit in the coming weeks. Additionally, this should see the re-emergence of term loan + overdraft facilities that fell out of favour in recent years to full-flexi loans. So if you’re looking to refinance your house any time soon, hurry!
Posted on: Wed, 02 Oct 2013 00:41:01 +0000
Trending Topics
Recently Viewed Topics
© 2015