Category Archives for "Bank Loan"

No Extra Savings To Decorate Your New Home? No Worries, This Type Of Loan Can Help You Out!

There is a few things in life are as daunting as decorating your first home. It’s really hard not to feel overwhelmed as there is so many options available in the market and so many decisions to make. Ok, let say you already have an awesome ideas on how to decorate your lovely new home, but the first thing that always comes into mind is “I have spent 90% of my savings on house purchase, now I’m out of budget to decorate my new home that I like”. Well, that is really disappointed.

But, wait a minute!!! Did you know there is a type of loan that actually available for those who are facing house decoration problems like you to apply? Yes, that is Renovation loan! Whether you are starting out or starting over, this is a great choice to help yourself to navigate the difficult process of decorating a home for the first time.

renovation loan

Continue read on to get more details about renovation loan;

Renovation loan is a kind of personal loan that specifically designed for those homeowners who facing difficulty on house decorating. Renovation loan is usually bundled with a home loan and is sold as a package. The bank may offer a better interest rate for home loans when the renovation loan is taken as part of the package. Applicants are need to provide the related documents to proof of renovation while the collateral is not needed for renovation loans.

The loan documentation for renovation loans are relatively simple. Normally, it’s entry costs are cheap and funds are released very quick.

Its like other personal loans, most of the renovation loans are calculated by using flat interest rate. But, do take note that Alliance Bank’s Home Complete Renovation loan where the interest is calculated by using the reducing balance method.

renovation loan

Here is an example of how a renovation loan work:

Let say Janice has bought a subsale property with a RM 600k loan from Bank A.

Loan Amount: RM 600,000
Loan Tenure: 30 years
Interest rate: 4.6%
Monthly repayment: RM 3,706

After assessing Janice credibility, Bank A decides to offer the loan a sum of RM 150K to Janice

Loan Tenure: 10 years
Interest rate: 7.6% (Flat rate)
Monthly repayment: RM 2,200

And thus, Janice will need to prepare a RM 5,276 (RM 3,076 +RM 2,200) for monthly repayment. Which means she have to service 2 loans in total.

Now you have not to worry about no money to decorate your house. Do consult the bank for more details.

Source: WMAPROPERTY

It’s not about property ownership it’s about control! To get more details, visit 👉 Property Millionaire Intensive

What Are The Costs Involved When Refinancing Your Property?

It is for this very reason that most of the homeowners and property investors today are looking for methods on how they can increase their finances. Refinancing property can be a far better option! In today, we will tell you what is the costs are involved when you refinancing your property.

So, before you take action in your property refinancing, you would need to take note these several items;

Moving Cost

Ⓐ Moving Cost

This is mentions to money you will need to spend on in changing for a new loan. When you decide to refinance your property, you will need to prepare the extra money to pay for the items such as valuation fees, legal fees, disbursement and stamp duty.

In addition, should you are refinancing the property witht he purpose of save on interest, do take note of this amount and compare it to the savings in interest you will get through refinancing. Fee structure are like property valuation fee, legal fee and stamp duty fee.

Mortgage Lock-in Period

Ⓑ Mortgage Lock-in Period

If you’re ready to pay-off all your outstanding loan amount before the tenure expires, do check whether your existing loan has a lock-in period and whether you’re still bounded by it. For your information, the bank normally would charge a 2% to 5% on your original loan amount for penalty if you doing so.

In addition, if you fully pay-off your mortgage loan within the two to five years, you will then lead to a penalty for early settlement. So this is the meaning of “lock-in period” of your mortgage.

In summary, although you can save lot of money on mortgage loan interest and even able to get additional cash out from refinancing, but you’ll still need to prepare the extra money to pay-off the existing fees such as valuation fees, legal fees, disbursement and stamp duty. Furthermore, you will incur a penalty for early settlement if you get the cash out to fully pay-off your mortgage loan before your tenure expires.

Source: WMAPROPERTY

It’s not about property ownership it’s about control! To get more details, visit 👉 Property Millionaire Intensive

Guides For Home Loan Refinancing In Malaysia

Why should we consider to refinance our home loan or mortgage loan? Let say, if you have difficulty to pay-off your home loan repayment after 5 years or you wish to generate additional cash flow for you to invest in somewhere else, then it is the best choice for you. What does it really mean is, refinancing a home loan or mortgage loan can help you to pay-off an existing outstanding loan as well as replacing it with a new one.

To clear up your doubts, you can get the answer of why you can generate more cash flow for you as below picture;

refinance

Besides, the homeowners and property investors are able to reap benefits from refinancing their loan;

➊ To get the lowest interest rate
➋ The opportunity to shorten the home loan or mortgage loan tenure
➌ To purchase new property
➍ Debt consolidation
➎ To switch the existing mortgage product (Fixed Mortgage term loan, flexi mortgage loans or semi-flexi mortgage loan)

Let’s us thoroughly explain to you each of them;

Residential property

➊ To get the lowest interest rate

If there is a competitor bank offers you a 1% or 2% reduction interest rates, you would save from paying more interests which mean you’ll get the lower monthly repayment. Besides, if you’re rent out the property, you could be able to increase your rental cash flow as the monthly repayment is lower now.

For example, let say your loan amount is RM 500,000 and loan tenure of 30 years

ELR 5.5% ELR 4.5%
Monthly Repayment (RM) 2,839 2,543
Savings (RM) 305
Rental Income (RM) 2,839 2,839
Positive Cash Flow 0 305

Note: ELR is generally known as “Effective Lending Rate”

See? You will get another RM 305 every months! Now you can understand how it can generate additional cash flow for you should you refinance your mortgage loan.

➋ Shorten the mortgage loan tenure

You can shorten your mortgage loan tenure while you refinance your property. This may allow you to have savings on total interest that you need to pay back to the bank.

For example, let say your loan amount is RM 500,000 and ELR on mortgage loan is 4.5%

Loan Tenure 30 years 25 years 20 years
Monthly Repayment (RM) 2,534 2,780 3,164
Total Interest Payable (RM) 404,645 327,810 254,487
Saving vs 30 years tenure (RM) 0 76,835 150,158

 

Do take note that the shorten the loan tenure is, the higher repayment every month. But, if BR or BLR drops in the future, you can then choose to refinance to a shorter tenure by maintaining nearly the same monthly repayments. Which means you are able to pay the same monthly repayments as you’ve always been, but, you can still pay-off your mortgage loan in a shorter period of time.

Note: BR is “Base Rate”; BLR is “Base Lending Rate”

➌ To purchase new property

By refinance your mortgage loan, you are able to cash out from your property to purchase another new property. However, do take note that the cash out should be spent on asset which can generate more income or appreciation for yourself.

The common reason for property investors to cash out from refinancing is to increase property valuation by renovate it. While the reasons for homeowners to do so are to get wedding funds, children education, travel funds, purchase the high cost goods such as furniture, cars and etc.

In sight that most of the banks in Malaysia have offer flexi-mortgage, should you decide to refinance your property with extra cash out and doesn’t know how to spend those funds yet, you may leave it in your flexi-mortgage account in order to save some interest. In this case, you would have backup cash on hand without paying any additional interest on this cash until you utilize it.

Why Invest In Real Estate

➍ Debt consolidation

Mortgage is the cheapest financing options in town which compared to auto-loan or hire purchase, overdraft, credit cards and personal loan. Refer table below on the financing rate comparison.

Mortgage Overdraft Auto Loan Credit Card Personal Loan
Effective Interest Rates (%) 4.4% – 5.0% 5.5% – 6.5% 5.5% – 6.5% 15% – 18% 15% – 20%

 

With regards to debt consolidation, refinancing will help you to have pay-off the debts that their interest rates are higher than mortgage loan. For example, a credit card charges with an effective rate of 15-18% and up to as high as 20% for a personal loan. Comparing to the mortgage interest rate of <5%, credit card and personal loan’s interest rates is like x3-4 more expensive.

A wise consumer will use the refinancing money to pay-off the outstanding amount of credit card or personal loan to enjoy potentially 3 times or up to 4 times interest savings.

➎ Switching the existing mortgage product

Should you’re having a variable rate loan (pegged against BR or BLR) but predict that there will be significant interest rate hikes (for instance higher OPR rate adjustment), it would be better to refinance your mortgage into a fixed rate loans now. As such, your monthly repayment amount does not increase even if increases of BR or BLR .

Alternatively, switching from a fixed-rate loan to a variable rate loan can also be a good financial strategy, especially in a falling interest rate moment. If the interest rates fall continuously, the periodic rate adjustments on BR or BLR will result in decreasing ELR and lower monthly mortgage repayments, wipe out the need to refinance every time rates drop.

So, refinance the mortgage loan is not only the property investors’ game but the homeowner can try out this method to decrease the interest rate on mortgage loan as well as can get additional cash out from refinancing to get honeymoon funds and for your children education funds in the future.

Source: WMAPROPERTY

It’s not about property ownership it’s about control! To get more details, visit 👉 Property Millionaire Intensive

How Much I Can Borrow From Bank?

Before you go for house hunting, you should check on what your maximum loan eligibility is. If you have list this process into your property purchase, you can avoid disappointment at the final stage of the process. So, first, you will need to find out whether you are eligible to borrow the full amount to make the purchase.

I need to tell you that, the loan amount that you’re able to borrow is not based on your salary only, but the bank would list out other several factors into consideration when they assessing your eligibility for borrowing the loan amount that you need to buy your house.

These are the factors besides of salary that determines your loan eligibility;

1. Your Debt Serving Ratio (DSR)

Debt Servicing Ratio is a percentage of the debts that you are servicing over the income that you earned (DSR= commitment/income). For your information, every each bank have different methods of determining your DSR in spite of its based on the same information that you provided.

10 Things Home Buyers Always Do Wrong

2. Risk Profile

Besides of your credit score, the bank will assess your creditworthiness based on job stability, spending habits and etc. The likelihood of defaulting which is your inability to pay-off your debts or service, it is an important factor when you apply for mortgage loan.

3. Property Valuation

Sometimes, a property could be overpriced compare to current market price. So the bank need a property valuator to confirm the property that you’re applying a loan for is worth the money that you are paying for.This is done as in the event of you default , the bank will still be able to compensate the loan amount that you borrowed by selling the property back into the market.

4. Maximum Loan-to-Value (LTV) Ration/ Margin Of Finance You Can Access

Usually, a 90% of LTV ration could be anticipated on a Malaysian mortgage loan. However, if you holding more than 2 housing loans then the LTV ration on the following housing loan is lower and is capped at a 70%. At the same time, LTV rations are even lower for foreigners as these are the restrictions to those that have less attachments to Malaysia.

What is your current age

5. Age

Usually, the period of loan repayments is up to 35 years from the first day of your loan or until you have reached 65 or 70 years old (different bank have different age limit), whichever occurs first. The youngsters who age between 21 to 25 may have a higher chance of getting the housing loan approved compared to somebody in their 60s.

6. Number Of Dependants

The number of dependants can affects your loan eligibility as they would be spending parts of your income. It would also affect your capabilities to pay-off your housing loans. Should you have a spouse and five children dependent solely on your wages it may raise a concern with banks.

7. Your Joint Applicant

The housing loan which is supposed to be borne by you and your joint applicant, hence, the bank would access them to judge your joint creditworthiness before getting your loan application approved. Your relationship with the co-applicant may be matter also, it is less likely for children or parents and or spouses to have disputes compared to other type of relationships such as friends or siblings.

IDEAL Investment

8. Employee or Employer

This information will help the bank to determine whether you have a stable income. A people with full time job, fixed monthly income are considered as more stable. Besides, to those who work for themselves is considered less stable as there is no job security and as their monthly income isn’t fixed.

9. Past Relationships With Bank

The applicants who are loyal customers of the bank they are applying to may have an added advantage. However, if you’re not, not fret, as long as you don’t have significant conflicts with any banks or being blacklisted from any banks.

In addition, when you’re planning for  buying a house, it is advisable to have enough money to pay the deposit, valuation fees, documentation fees, legal fees and stamp duties on the housing loan. For your information, some of the banks can provide up to 5% (for insurance) and 2% (for legal fees) additional margin of finance to finance your valuation and documentation costs.

Last but not least, before buying a house, you should find out what the maximum loan amount that you can borrow from bank.

Source: WMAPROPERTY

It’s not about property ownership it’s about control! To get more details, visit 👉 Property Millionaire Intensive

What Are The Property Loans That Applicable In Malaysia

Whether you are homeowner or property investor, you should know more about this topic than we do. While, for the newbies on property purchase (first-time housebuyer), this article will be very helpful as you can understand what type of property loans that exist in Malaysia and you can defined which type of property loan that is suitable for your financials. Let’s get started!

Loan with Fixed Interest rate

① Loan with Fixed Interest rate

This is the common term loan in Malaysia which have a fixed interest rate throughout the loan tenure. This term loan is usually offered by insurance company. This type of loan is extremely useful for the people who purchase the property with the purpose of investment, as they can predict how much profits they can get from that property itself in following years. However, nothing is perfect. The negativity of this loan is inflexible which mean there is no early settlement for repayment allowed.

Image source: WallStreetJourney

② Loan with Floating Rate

This term loan is based on a reference rate such as BLR, BFR, OPR and KLIBOR that could change over the duration of the loan tenure. While, this reference rate is controlled by the bank or current market and could be changed at the moment’s notice, it will affect a loan’s interest calculation which means it could affect your monthly repayment amount and loan tenure. Hence, this term loam is quite risky as you will be exposed to changes in the BLR which is beyond your control.

Overdrafts

③ Overdrafts (OD)

Overdraft is a line of credit and accessed through a current account with no fixed monthly repayment. Normally, am applicant can only withdraw as much money as he/she has in his account. However, with the facilities of OD, an applicant is able to withdraw the amount that more than the available amount in his/her current account, it is depends on he/she setting the credit limit during the signing process. Do aware that some of the bank will charge a small amount for commitment fee (normally 1% of your un-utilized amount) even if you don’t exploit your line of credit. Hence, make sure you’re fully understand the terms and conditions of its agreement.

Combination of Loan and Overdraft

④ Combination of Loan and Overdraft

You can get the lower interest costs and enjoy the flexibility at the same time by combination of both loans and overdraft. Let say, your mortgage loan is about RM 100K and you are able to take RM 75K as a loan and the balance of RM 25K will be an overdraft. Besides, how you can do such split is depend on how fast you can clear-off the overdraft portion within the next 2 to 3 years. Let say you can save up to RM 1K every month, then your overdraft portion should be around RM 24K and RM 36K.

Once you have understand the above 4 type of loans then you’re good to go for apply a loan to purchase a property. Remember, always compare the interest rate that offered by different banks and check on which bank offer you a lower interest rate or better loan package that suit to your current financial status.

Source: WMAPROPERTY

It’s not about property ownership it’s about control! To get more details, visit 👉 Property Millionaire Intensive

Find Out How Much You Can Borrow Based On Your DSR

Before purchasing any properties, this is important to find out how much you can borrow from bank which based on your Debts Servicing Ratio (generally known as DSR). To get a quick answer of this, you may skip straight to online housing loan eligibility calculator. If you want to learn more about how its actually calculated, continue read on to get more detailed guidance.

4 Key Factors That Determine The Maximum Loan Amount You Can Borrow

You can borrow how much loan amount is depends on these 4 key factors;

  1. Your Debt Servicing Ratio (DSR)
  2. An individual’s risk profile
  3. Property valuation
  4. The max Loan-to-Value (LTV) ratio / Margin of Finance available to you

How Much I Can Borrow From Bank

This article is only covers the DSR factors, and we will first list out some common misconceptions;

⓵ You can only get the loan up to 1/3 of your gross income from bank

In fact, the bank will use more refined rules set during credit approval.

⓶ The differences of max borrowing amounts from each bank is not so much

In fact, the credit policies can differ greatly from one bank to another. Max borrowing amounts can even differ up to 3x between different banks.

⓷ Bank only approve up to 70% of your DSR 

This is only another rule of thumb and not particularly exact.

Debt Servicing Ratio (DSR)

Debt Servicing Ratio (DSR)

The DSR is shows how much of an individual income is used to pay debt installments and it represented as a % of income. It is derived from 2 main components as below

DSR = Commitment / Income

For your information, every each bank have different methods of determining your DSR in spite of its based on the same information that you provided. This is because every each bank has their own calculation methods for income and commitment recognition.

Example 1: Standard Chartered Bank may based on their calculations on Gross Income, while RHB and Maybank may based on on Net Income.

Example 2: CIMB and HSBC may recognize 100% of rental income, while Public bank and OCBC may only recognize only 80%.

Example 3: RHB recognizes only 45% of foreign derived income, while Hong Leong Bank is considers 100% of it

It is not unheard of that when different banks calculate the DSR for the same person, there can be DSR differences of up to 20%! But the differences do not stop there.

Once your DSR has been determined, every each bank will have their own guidelines for mas allowable DSR threshold. It is usually determined by level of income, however, it may also be affect by net worth and even things as random as qualifications and ages. Some example bank guidelines:

Income Bank A Max allowable DSR Bank B Max allowable DSR
< RM3000 60% of Net Income 60% of Net Income (+10% if professional)
< RM6000 70% of Net Income 70% of Net Income (+10% if professional)
< RM10,000 75% of Net Income 80% of Net Income (+10% if professional)
> RM10,000 80% of Net Income 90% of Net Income (+10% if professional)

Source: Loanstreet

Know Your Max Borrowing Eligibility

Sometimes, it can be very difficult to determine what is the maximum of loan amounts that you can borrow from bank if you’re not often up-to-date with the credit guidelines of each bank in Malaysia.

So, once you’ve get the result of how much you can borrow, you can then search for the best loans available in Malaysia and proceed with house purchase.

Source: WMAPROPERTY

It’s not about property ownership it’s about control! To get more details, visit 👉 Property Millionaire Intensive

You Should Be Cautions With Refinancing Loans If Your’re Facing These Problems

Although refinancing is a powerful tool to help homeowners to manage their current financial status, but it may not be suitable for some of them. If you are consider about refinancing, you will need to be cautions with refinancing loans if…

Your property have not built up much equity yet

➨ If you refinancing in very early in your home loan, your property have yet built up much equity and your home loan is still under lock-in period (penalty will be imposed for early settlement). If you are in this situation, refinancing may not suit to you for now. Do you research of your property before deciding to refinance your home loan.

You’re hurry to get the cash out money

➨ The bank will take some times to process your refinance application. It is different with personal loan, personal loan will provide a faster release of funds as processing for refinancing essentially takes about as much time as a regular home loan/ mortgage loan. Hence, you can’t get the cash out money right away.

You’ve had a problem on credit history

➨ Do note that only the borrowers with good credit history can refinancing their home loan while the borrowers with bad credit history will have the higher chances to be rejected by the banks. Besides, refinancing will increase your debt and this can further impact your credit history.

You’ve had no savings for the costs

➨ Since refinance is like you’re applying for a new home loan, then there is definitely have consist of entry costs (valuation charges, stamp duty legal fee and etc) on the new loan and existing costs on you previous loan (early settlement and etc). If you current savings is not quite much, you are not suitable to refinance your home loan now.

You expect to have a large amount of cash out

➨ Do take note that since 2013, some of the bank has imposed a tenure limit for cash-out refinancing and force the borrowers to make higher monthly loan repayments.

If you think the above 5 points are exactly talking about your current situation, don’t refinancing your home loan and find the other ways to solve the problems you facing now.

Source: WMAPROPERTY

It’s not about property ownership it’s about control! To get more details, visit 👉 Property Millionaire Intensive

What Is Top-Up Loan? What It’s The Pros and Cons?

In previous article, we have talk about what is refinance, how its work as well as its process. Let us summary all about this. Refinancing is the act of taking on a new mortgage loan with different terms. The reasons for homeowners and property investors to consider to refinancing their loan are to lower the interest rate, shorten the loan tenure or using the cash out from refinancing to purchase another new property, property improvement, pay-off outstanding personal loan and etc.

On the other hand, you might heard somebody else said about top-up loan and you might confuse is it same with refinance or what does it mean. In today, we will tell you what it’s all about as well as let you know the pros and cons of top-up loan. Let’s begin;

top-up loan

What is top-up loan?

Top-up loan is an additional loan on top of the current mortgage outstanding balance and it is based on the appreciated market value of the borrower’s collateral. Some of the banks may open a separate account for the additional top-up (i.e. 2 accounts to be serviced) with 2 interest rate while some of the banks may just top it up on the same account with a new single interest rate which means to continue with the same mortgage loan account. And it is depends on every each bank policies.

For example, let say Jenny bought a condo 9 years ago with a RM 120k loan from Bank A.

Total Loan Amount: RM 120k
Outstanding Amount in 2014: RM 100k
Loan Tenure: 30 years
Interest rate: 4.5%
Monthly repayment: RM 608

After that, Jenny has apply for a top-up loan.

Market value: RM 250k

Bank A offer Jenny a 80% of market value less outstanding loan amount (i.e. [80% x RM 250K] – RM 100K) after assessing her Debt Servicing Ratio (DSR) and other factors into account. The new numbers are as below;

Top-up loan amount: RM 100k
Loan Tenure: 25 years
Interest rate: 4.8%
Monthly repayment: RM 573

Thus, Jenny’s total monthly repayment will be RM 1,181 which is RM 608 + RM 573.

Besides, you can only proceed with the top-up loan with the same bank from your existing mortgage loan and sometimes, the bank would like to follow all the terms and conditions of the existing mortgage features.  In addition, top-up loan is suitable for the borrowers who need for an immediate cash out.

It goes without saying that a top up loan can only be done with the existing financier. But the advantage is that existing loan documents only need to be up-stamped, compared to redrawn from scratch in the case of refinancing. As such, the entry costs are much cheaper. Additionally, early termination penalties will not be invoked by the current financier.

top up loan

What its pros and cons?

Pros

👍 You’re no need to redo all loan agreements

👍 Minimal fees (because the existing loan agreements only need to be up-stamped compare to draft a new one in the case of refinancing)

👍 Shorter processing time as compared with refinancing (since you’re done this with the same bank of your existing mortgage loan)

Cons

👎 You’re unable to change some items such as Effective Lending Rate (ELR) and existing mortgage loan tenure (hence, you’are unable to enjoy the lower interest rate as well as shorten the loan tenure)

👎 You may need to service or pay into 2 different accounts should the existing bank open a new account on the top-up loan.

👎 The top-up amount might be limited as other banks may offer higher bank valuation on the property. (since you have to done this with the same bank of current mortgage loan, so you’re unable to compare the deals that offered by other banks.

Source: WMAPROPERTY

It’s not about property ownership it’s about control! To get more details, visit 👉 Property Millionaire Intensive

A Common Misconception On The Cash Out From A Refinancing Loan

The advantages of refinancing loan are many such as obtain lower interest rate compare to existing one, shorten the loan tenure, debt consolidation, switching to a better mortgage product,  purchase another new property, get the additional cash out to renovate or improve your property, wedding funds, children education funds in the future and etc. Yes,I didn’t lie to you, it is true!

Believe most of the property investors out there are not strange with refinance, as the’re often use the cash out funds to renovate the investment property in order to get a significant profits from re-sell the property. While, refinancing loan can help homeowners to reduce their financial burden and pay-off the outstanding amount of personal loan or credit cards to turn their credit history to positive.

Refinancing Your Property

Apart from that, we heard there is a misconception on the cash out from a refinancing loan. In today, we will clear up your doubts about this common misconceptions. Here we goes;

➧ The debt service ratio (generally known as DSR) of the additional cash out portion of your newly refinanced loan application will be calculated based on a 10 years repayment period of time.

➧ The additional cash out portion is used to pay-off your current outstanding balance of mortgage and the loan tenure is still the same as normal one which is up to 35 years.

➧ However, the above is just the calculation of your affordability or DSR. Its no collide with your actual refinanced mortgaged tenure. This is illustrated below:

The Common Misconception On The Cash Out From A Refinancing Loan

For example, let say Michelle has an existing mortgage of RM 250k outstanding amounts and refinance property with the current market value of RM 600k mortgage application. Then, the cash out amount, though your bank officer informs you that they will reckon your repayment capacity based on 10 years tenure, its no collide with your actual mortgage tenure and the most importantly is your monthly mortgage installments. It is to ensure you have strong repayment capacity.

Source: WMAPROPERTY

It’s not about property ownership it’s about control! To get more details, visit 👉 Property Millionaire Intensive

What To Do When You Can’t Afford Your Home Loan Repayments

Being a homeowner is a joyful moment in life. BUT!!!!! How if you’re no longer to make home loan repayment? Do you have faith in yourself that you can still make your home loan repayment after 5 or 10 years? Due to the living costs are gradually increased in Malaysia, many youngsters and first-time homebuyers are feeling the pinch as they might not be able to continue to make the home loan repayments or even buy a house.

If you are one of them, you might feel upset and thinking of give up on this house. Listen to me, don’t give up so soon! There is always have several ways to solve any problems in the world. In order not to facing bankruptcy, continue read on to get these tips to rescue your current situation;

5 Useful Tips For When You Can’t Afford Your Home Loan Repayments

Ⓐ Restructure Your Debt

Print

If you have been facing the difficulty to cover your home loan repayments for 3 months or above, you financial might be overburdened. Don’t freak out although its sound terrifying. Listen up, here is a method to you;

The firs step that you need to do is inform your lender about your current financial distress and request a little leeway to solve your financial issues. While, the most importantly is discuss with your lender about restructuring your loan affordability;

Here is the 3 things that you have to discuss with your lender;

1.To extend your loan tenure

You may check with your lender whether can extend the years of your loan tenure in order to lower the monthly installments. Although this way will increase the total interest costs and repayments overall, but it can increase your affordability. As other say, if you get profits from one side, you will lose something at the same time.

2.To lower interest rate

For your information, in certain situation such as market/ economy changes, bank will adjust the interest rates. Hence, you must keep watching the market changes and seek advice from bank consultant if there is possible to adjust the interest rates for you which based on your current financial situation.

3. Consider to refinance your mortgage loan 

In fact, you can consider to refinancing your mortgage loan as your borrowing amount may be able to cover your outstanding loan. In addition, refinancing can offer you the better interest rates (do your homework that which bank is suitable for refinance loan or offer the lowest interest rates) and can also help to switch your current loan type and terms. (fixed or flexible)

Ⓑ Take Advantage of Your EPF Savings

EPF Savings

Every Malaysian should have a EPF savings if they’re employed by any companies. You have to fully understand what EPF is use for. EPF savings is not your retirement fund only, but it can also allow the contributors (if you started to pay for EPF, you’re officially as EPF member) to withdrawals from second account to pay off your home loan.

In another way, you can also withdraw a little amount to reduce the borrowed amount. This method can helps you to reduce your monthly installments and not affecting your retirement fund, so, don’t worry about it. For your information, you can also use your second account from EPF savings to help your spouse to pay-off the mortgage loan.

Ⓒ Rent Out The Extra Empty Room (if all the rooms are occupied, just skip this method)

Rent Out The Extra Empty Room

If you have an empty room, you can consider to rent it out to earn extra income. This tips can help you to reduce your burden on loan repayment by collecting rental with tenant. In addition, you can charge a higher rent (reasonable) if your house is in a major city/town, or nearby college/ university/office building.

Besides, all the things you need to do is clean up the room and provide the simple amenities such as water-heater, fan/ air conditioning and washing machine. This facilities are enough to attract potential tenant to look at your room.

Other than that, you should be aware of renting the room to a complete stranger. When you’re searching for potential tenant, you may try to reaching out to your friends or relatives first. Or else, do check on the tenant’s (stranger) background such as asking for references, employment details and etc.

Ⓓ Cut Down The Unnecessary Expenses

Cut Down Unnecessary Expenses

If you’re facing shortage of cash flow, it is advisable to cut-down the unnecessary expenses temporary. Such as;

  • Satellite TV subscriptions. For example, Astro, you may unsubscribe its package temporary until your cash flow turns positive.
  • Downgrade your internet or mobile data. For example: 10GB downgrade to 3GB. I understand that many people will gone crazy if their life without internet/ WIFI, so downgrade the internet/mobile date seems like a best choice for you.
  • Ignore the fancy stuffs temporary. For example: branded shoes, handbag and cloths. Put these things down temporary as you’re currently facing financial difficulty. Only buy those things if your cash flow turn positive.

Alternatively, you can sell off your belongings that still in good condition such as clothes, handbags, books and etc. And you can find a part-time job to sustain your financial needs in short period of time.

Ⓔ Sell Out Your House (If the above 4 tips are failed)

Sell Out Your HouseIf all the above tips are failed after you tried, unfortunately to tell you that you should consider to sell out your house to limit the effects of defaulting on your housing loan. Should you have been making monthly repayments for some years, says 5 years, there is some equity should has been built on your house. It can helps to reduce the outstanding amount and can also avoid Real Property Gains Tax costs (generally known as RPGT), if you’re making profits of over 10% or RM 10K, whichever the lesser.

By sell out your house, you may gaining from it at the same time. So, be wise to use those balance amount and buy again at a later time. So, don’t be upset about it.

Source: WMAPROPERTY

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