Early of October, I read some latest news from an OCBC agent through a local forum that the MLR rate will be revised to 4.40% per annum soon, from 4.70%. I knew the agent personally and I believe the news was true since it is from reliable source.

However I did not share this news in my website immediately as the rates was  not officially announce yet. So I just waiting and checking on the OCBC website regularly. I thought the latest revised rates should be announce in the “Latest News” section or somewhere in the main page with eye-catching graphic, but end up the announcement only can be found in the property loan main page. To get into that page, I need to browse from main page to select personal banking. In personal banking page I have to select loan and finally landed to loan main page and found the advertisement.

OCBC Main page

OCBC Loan Main Page

And finally found this:

Congratulations to all OCBC Ideal Mortgage loan owner as you can enjoy lower rates now. I would said this is very attractive rates in current market and some more with short lock-in period.

And finally a question raised up in my mind: Why OCBC changed the MLR rates? This gave me not a very good impression again that the MLR rate is solely controlled by OCBC bank and it can change anytime!!

I believe most of the house owner will take seriously to settle their housing loan as soon as possible because getting a house is one of the biggest financial commitment in our life. The earlier we settle the loan, the earlier we release our burden and of course will save more interest.

So I used the Adjustable Rate Mortgage Calculator to calculate when I can settle my loan with extra payment(prepayment) every month. The end result is very interesting and excited because I only need 9 years to settle my house loan.

Year 1 = 3000 every month

Year 2 = 3000 every month

Year 3 = 4000 every month

Year 4 = 4000 every month

Year 5 = 5000 every month

Year 6 = 5000 every month

Year 7 = 5000 every month

Year 8 = 5000 every month

Year 9 = 5000 every month

Here we need to make few assumption as well:

- Rate remains fixed for first 3 years

- The rate increase every 12 months by 0.250%

- Interest rate cap at 12.000%

- You are displined enough to pay the total amount planned every month.

Of course, this is for the planning purpose and you might take consider some extra expenses such as family planning, travel, marriage, high debt due to high renovation cost which will caused you overspend and unable to hit the target.

So use this calculator to plan it and create your target as I already have my target:

To settle my house loan within 10 years.

You can download the mortgage calculator from the link below.

http://www.sendspace.com/file/i2uiqh

Sourced from my personal blog:

Cheras Vista Phase 3

KLIBOR based housing loan has been introduced to Malaysia property market since mid of last year. Until today, only Standard Chartered bank offering this type of product and named it as MortgageKLIBOR.

Image credit to Susan & her 5d

The only question comes into my mind is why only one bank offering this?

From my reading in few forums, most of the conclusion given is KLIBOR more fluctuating and react fastest to sentiment of economy. Undeniable KLIBOR is more fluctuating because the interest rates pegged to the 3-month Kuala Lumpur Inter-Bank Offered Rate (KLIBOR), which mean the KLIBOR rate changed every three months.

People tend to feel insecure if the rates changed frequently and this maybe one of the reason this types of loan is not popular in property market.  In this article, we will perform case study to compare interest rates offered by BLR & KLIBOR based home loan.

The graph below shown the historical rate of BLR and KLIBOR  from year 2005 to year 2009. The table below listed the historical rates in montly basis in detail and the different between both rates. In conclusion, even though KLIBOR is more fluctuating, but it does reflect to the BLR change and the changes is small if the BLR maintained in same rate.

The average KLIBOR for BLR maintained at 6.75 (31 months) is: 3.69%

The average KLIBOR for BLR maintained at 5.55 (8 months till now) is: 2.127%

The average KLIBOR for past 4 years is: 3.34%

The average BLR for past 4 years is: 6.47%

Case Study 1:

• Loan Amount: 300k
• ZEC(Zero Entry cos) or ACA t (All Cost Absorbed in MortgageKLIBOR)
• With MRTA
• Term Loan
• Loan tenure 30 years

Case Study 2:

• Loan Amount: 200k
• ZEC(Zero Entry cos) or ACA t (All Cost Absorbed in MortgageKLIBOR)
• With MRTA
• Term Loan
• Loan tenure 30 years

Conclusion:

• For ideal case, if the rates remain unchange for the entire tenure, KLIBOR package offer lower interest rates thus lower interest to pay. The different between KLIBOR package and BLR package is less than 0.1% only.
• When BLR rate increase to 6.75, average KLIBOR is higher, thus MortgageKLIBOR package is charging more interest. The different between KLIBOR package and BLR package is less than 0.3%.
• For average 4 years times, MortgageKLIBOR is more expensive. The different between KLIBOR package and BLR package is  about 0.2%.
• In ideal case, which unlikely happen, MortgageKLIBOR is offering lower rates, but only 0.1% different. So for long term consideration, BLR package definitely is lower interest rates.

As we always heard, figures tell the truth. I believe my readers are smart enough to read the figure above. This comparison purely compare the rates given and to know which types of loan actually allow us to pay less interest. This is not recommendation to any loan, but served as guides only.  The other factor such as withdraw flexibility, margin finance, bank and etc  should take into consideration when taking a property loan.

You might be interested to read more about MLR(Mortgage Lending Rate) offer by OCBC bank.

http://moneysospecial.com/mortgage-loan/ocbc-ideal-mortgage/

Recently OCBC Bank Bhd launched a new home loan package called Ideal Mortgage. Ideal Mortgage is a credit facility that does not use the Base Lending Rate(BLR) as a benchmark. It uses it’s own Mortgage Lending Rate (MLR) instead, which is developed exclusively for home loans and is calculated based on the mortgage business whereas BLR takes into consideration the overall bank costs.

MLR is currently set at 4.70%, while BLR is currently 5.55%.

Benefits of Ideal Mortgage:

• 2.5% fixed rate for first year, there after MLR -1.30 = 3.4%
• Short lock-in period – 3 years
• Low exit cost – Early settlement penalty is 2% of the approved loan amount or minimum RM 5K, whichever is higher
• Suitable for investor who aimed to sell the property earlier and maximum profit.

Drawback:

• Higher interest rate compare to others loan package. OCBC have a package which can offer up to  BLR – 2.4 whole tenure, which is equivalent to 3.15 % (Loan amount > 300k,  5 years lock in, 3% early settlement penalty)
• The benchmark rate MLR still very new in market and it solely controlled by OCBC bank. No history records to proof the volatility of MLR against BLR. Major concern for most people.
• More suitable to investor and not for house owner as it cost higher.
• NZEC package (Non Zero Entry Cost)

More details of the Ideal Mortgage package:

Securing a mortgate loan is the most important step in the home-buying process. However, choosing the most suitable mortgate loan can be one of the most stressful and important decisions in a persons life.

So I am going to share my experience in getting housing loan for my dream house, which I posted before in my personal blog, CherasVista.blogspot.com.

Getting loan for my property

One month after paid the booking fees, we finally made the decision to accept the offer from Public Bank. The process of getting housing is not easy task for new buyer like us. We spend quite a lot of times to meet with banker, agent to know more details about the available loan types in market now. We learned numerous of the “new terms” during the proccess such as conventional, semi-flexi and fully flexi, FEC, ZEC, NZEC, lock-in period, penalty, etc…Wow, not easy man.

RM50 per transaction (heard this can request to waive )

Bank: Hong Leong

Rates: BLR-2.15 Whole Tenure

Loan Type: Fully flexi, Free Entry Cost (FEC)

My thought:

Actually Standard Chartered bank can offer better rate but they declined my application due to SC not the panel bank of Cheras vista 3. I got to know other borrower able to get better rates from public bank, which is BLR-2.3(when we applied and was told will get this rate) even for lower loan amount. I tried to call the banker to ask for appeal but he is not very helpful to fight for better rate. So end up we didn’t do any appeal and just accept the offer. There might be some factor caused us unable to get our desire rate, but we tried our best already and we just accept it. No point getting mad because of extra few hundreds per year.

The most important thing is we got our dream house.