Be A Smart HomeOwners!

Be A Smart Homeowners !

The sharp deceleration of the economy as a result of the worsening economy downturn and competition is heating up amongst the commercial banks for banking on home loans. More new home loan promotions and competitive on re-financing packages are available in the market to entice home owners to re-finance their existing loans.

Following the latest cut of the interest rate by Malaysia’s Central bank, most commercial banks have adjusted their base lending rate (BLR) from 6.75 to 5.55% - 5.95%. With interest rate trending lower, it is even more benefiting through restructure your repayment (Monthly Partial Prepayment) instead of re-financing.

Re-financing might not give you the maximum savings, hereby taking the Hong Leong Bank Re-financing plan comparing with Monthly Partial Prepayments (MPP) to proving the maximum savings you would obtain from MPP.

For instance, for a loan amount RM 300,000.00 with loan period 30 years and interest rate 6.55%, the bank would induce home owners to re-finance after 5 years with loan outstanding amount about RM280,000.00 by offering BLR-1.50% and BLR at 5.95%. Homeowners able to save up to RM107,000.00 due to the difference from the interest rate (about 32%).

It is save from the monthly repayment from RM1,907 reducing to RM 1,549

(Saving RM 358/month) for 25 years.

However, if the home owners apply for the revising interest rate as per above case i.e BLR-1.80%, the new interest rate would become 4.15% (5.95% - 1.8%); instead of reducing the monthly repayment, if home owners opt for MPP and revise the monthly repayment to RM 2,200 (extra payment for RM 293/month), he able to saving up RM 200,143.00 (RM119,432 from revising interest rate and RM 80,711 from MPP strategy).

Beside that, the loan period would shorten to 14 years from 25 years.

Outstanding Loan : RM 280,000.00

Loan Period : 25 years

BLR : 5.95%

Interest Rate : BLR – 1.5%

	Original Int. Rate (6.55%)	Refinance (4.45%)	MPP (4.15%)
Total Payment	RM 569,801	RM 464,518	RM 369,658
Loan Period	25 years	25 years	14 years

From the above comparison, you can clearly see the benefit from MPP instead of re-financing and the maximum savings up to RM 200,143.00 and not only RM 107,000 as per bank advertisement.