SPEF (Flexible Financing Scheme for PR1MA) – DREAM Solution for purchaser?


PR1MA launched SPEF (Skim Pembiayaan Fleksibel/Flexible Financing Scheme) with the hope to increase loan approval for PR1MA house buyer. It is understood that many qualified purchasers of PR1MA scheme are unable to secure a housing loan, hence could not own their home even with PR1MA. How does SPEF actually work?

How does SPEF works?

First of all, it allows only paying interests for the first 5 years. Is this something special? This is actually as any of our property bought from developer. During construction period, most borrowers are paying only interest during the period of time based on amount drawn down by developers. In this case SPEF could be viewed as extra 2-3 years extension of interest paying only as currently our standard construction period is 2 years for landed and 3 years for high rise residential.

By paying interest only during the first 5 years means if you are serving 35 years loan, your 35 years begin when you start to pay full instalment (the 6th year). Further to that, you are paying highest amount of interest during the first 5 years since no reduce in principal amount. The cost impact is illustrated by The Edge Malaysia as below.

new-doc-39 *Source : The Edge Malaysia, 20th-26th Feb 2017, page 8, “Housing loans are not always productive debt”

How does SPEF increase the chance of approval for Housing Loan?

As known to most of us, Debt Service Ratio (DSR) is one of the major consideration in housing loan approval especially in determining the amount of loan eligible. Most of the banks allow DSR ratio up to 70% or 85%. Therefore, an increase or RM 100 a month in repayment ability could actually increase about RM 20,000 in loan amount. SPEF Step Up allows borrowers to justify repayment by taking into consideration monthly EPF contribution by both employer & employee into EPF Account 2. Using example below, referring to RM 216 of example one is derived from 30% of (RM 3000 x 24% (11% employee + 13% employer). By additional amount of RM 216, one could actually arrives at extra loan amount of near to RM 45000 (total loan – approx. RM 232,300). This is considered as level one step up loan under SPEF.

Example below is illustration of Step Up Level 2 as borrowers would also agree to use the accumulated amount in account 2 of EPF to pay instalment. (for the terms & condition, kindly refer to In this illustration, it is assumed that loan amount eligibility is based on instalment ability of borrowers in the first 5 years which is paying interest only. (RM 283,300 x 4.75%/12 = RM 1121). However, we have doubt over this assumption as banks would need to determine further how much amount has actually been accumulated in EPF Account 2, many might not have accumulated a lot, especially those looking for first house might comprised of many who has just started work for not long ago.

As of this time of this article, we have yet to gather enough information from participating banks (Maybank, CIMB, RHB & Ambank) in regards to this matter.


*Source : The Edge Malaysia, 20th-26th Feb 2017, page 8, “Housing loans are not always productive debt”

Points to consider for PR1MA buyer?

  1. EPF always allow members to withdraw amount from EPF Acc 2 as down payment for purchasing first house. Should you have sufficient amount in Acc 2, you may consider to make EPF withdrawal and pay higher down payment, which resulting lower loan amount, hence, lower monthly instalment and subsequently lower DSR. Many may not be aware that, one is allowed to withdraw a total amount (Property Price – Loan Amount) + 10%. This means that you can actually withdraw 30% of property price from EPF account 2 if you are taking only 80% loan.
  2. Have you done your credit management? The extra repayment ability by taking EPF monthly contribution as discussed above can easily being cancelled off by your other loan commitment. For example, an outstanding amount of RM 3000 in your credit card account would have been considered as RM 150 monthly expenses. Or you might have a personal loan /  hire purchase loan that is about to complete in few months time. We would advise you to talk to a mortgage advisor to understand you own situation prior to make any decision.
  3. Are you ready to utilise your retirement fund for owning your house? Typically Malaysian doesn’t save enough for retirement. By fully utilising EPF Account 2 might further reduce our saving for retirement. Further to that, we can not do any other withdrawal even for Medical in the event of emergency until the loan is fully paid up.

Fixed Rate Mortgage Loan – Is this the RIGHT time?

Recently in my sharing session, audiences may find that I’m promoting Fixed Rate Housing Loan. While some knew about it, many still unaware that in Malaysia’s housing loan market, there is a choice of Fixed Rate. The question now, is this the time to take fixed rate? Why I choose to promote this at this time? (In fact, I’ve been promoting this since end of 2014)

Fixed Rate

Before we discuss further, we should first clarify some confusions with fixed rate housing loan. (If you already know, kindly skip this paragraph) First, the interest rate is fixed through out the tenure and the maximum tenure is also 35 years or up to age of 70 years. Does this means the interest calculation works like our hire purchase loan? No, the loan is still calculated on daily basis. For any early prepayment or full settlement, client need to only pay the outstanding principal (plus any administrative cost-if any). Secondly, is the loan locked through out the loan tenure? No – You can settle the loan at any time you wish.

Whenever I talk about fixed rate, as usual, the first question is :

1. What is the interest rate?

The rate is currently around 4.99%. The respond that I will receive is : SO HIGH!. Yes, it is higher than most of the commercial bank rate out there. When I told audiences a year ago, the rate is 4.65% (promotional) and 4.85%(normal), client also told me: SO HIGH!. Some chosen to believe when I share what I’m going to discuss later in this article. Today average commercial bank rate has reached 4.7% and some of the purchaser have not even got their house key from the developer. Many will still wait and say ~So HIGH!

2. Why is the rate for Fixed Rate Housing Loan higher that variable rate?

Actually, Fixed Rate is not always higher than variable rate. When interest rate is on high side, fixed rate will be lower than average market rate. Why? Fixed Rate will always be closer to average rate over long span of time. Currently 30 years average is about 7%, therefore fixed rate is nearer to average and higher than variable rate. When variable rate were around 14% during 90’s, fixed rate is also around 7% and much lower than market rate. Fixed Rate need to take into consideration of long term rather than short term market rate. Honestly, fixed rate is actually still very low currently. This was due to stiff competition over the past few years.

3. Will Fixed Rate increase?

Yes, definitely fixed rate will increase when market interest rate increased. However, at this specific moment, if you locked it, it will not increase for your loan no matter what happens.

4. I want the lowest! 

Just like when we were buying stocks in share market, I want to buy at lowest point and sell at highest point. But, how many investors really bought at lowest point? Everyone expect it to be lowest until the price rebounded and start to increase. And we know that the rate has just rebounded over the past one year.

5. Where the loan money come from? Bank’s share holders or public?

The fund definitely comes from the public. Let’s look at deposit rate; is it in the increasing trend or decreasing trend? From any marketing materials by banks, anyone of us would sense that the interest is in the increasing trend. If the cost of fund got higher, how do financial institution get their profit? Should they increase the lending rate?

6. Who control Base Rate and Base Lending Rate?

Bank Negara Malaysia (BNM)? Wrong! It’s is controlled by banks. Recently few banks had adjusted their Base Rate (BR) and Base Lending Rate (BLR). I’ve no intention to  discuss this as the information can be easily obtained.

Please do not get me wrong, we are independent mortgage advisers. We do provide consultation and assist our client for mortgage loan applications to few major banks. Our intention is only to share our view with the public for everyone’s benefit.

If you would like to know more, feel free to contact us: email to

We also provide training/sharing/seminar session in matters regarding to Mortgage Loan.


How Anyone Can Calculate Property Loan Repayment, for FREE!

Have you wonder how can you make your own calculation for Property Loan repayment? One of the easiest way is download a free application – Karl’s Mortgage Calculator (from google play). Below I attached a simple tutorial – How to use the calculator?

Karl's Mortgage Calculator

Thank you for watching.

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Some Tips on Banks Approval Criteria

Many of us knew but not all the criteria of bank approval for mortgage loan. Video Linked below is a sharing session at MCT Land Sdn Bhd for their purchasers about loan application and approval criteria.

Some of the Highlights:

  1. What are the point to consider for property selection?
  2. What income could be considered?
  3. What are the effect of extra RM 300 income per month to the margin of finance?
  4. How do banks find out about our repayment habit?
  5. What is the challenge faced by a fresh graduates?
  6. How does 70% ruling affect our loan eligibility?

Feel free to contact us for further clarifications. Follow us on Facebook : or email us at

If you are a property agency, developer, investment group, residence associations & etc, feel free to contact us for workshop/seminars/clinics for the following topics:

  1. How to know my Mortgage Loan Eligibility?
  2. How to Leverage Banks on Property purchasing/ investment?
  3. How to save interest on existing mortgage loan?
  4. How to choose a Mortgage Loan that suits me?
  5. What is Mortgage Loan Protection option? MRTA/MLTA?
  6. How can I plan for my wealth distribution?

Video :


I’m sorry, But MRTA does not necessary protects your mortagage loan!

* This post was written based on discussion from a ex-mortgage sales person from banks.

MRTA Does Not Necessary Protects Your Mortgage Loan!

Most of the Property Owners believe that their mortgage loan was protected by Mortgage Reducing Term Assurance (MRTA or MRTT for Takaful), but this is not the fact! It is a real life situation that many loan borrowers not knowing their loan is not well protected.  In some of the situation, the protection expired within first few years while some with coverage less than half or a quarter of their loan amount.



What is the reason a mortgage sales propose MRTA?

First of all, it determines a mortgage sales person incentive and key performance index (KPI). Most of the time, banks will either through collaboration with their sister company or any other insurance company to provide MRTA to their borrower. Whichever the business partner may be, it will generate some revenue for the bank. Therefore, banks will want their mortgage sales to bundle the product to their customers. In order to ensure the cross selling, many banks actually impose minimum requirement to their sales person in order to get higher incentive or to meet their KPI.

Further to that, MRTAs bundled by bank are normally financed into the mortgage loan; but, there are guideline by banks that total Loan to Value ratio of a property should not be more than 90% (property) + 5% (Legal Fees, Valuation, Stamp Duty & MRTA). To avoid complication, mortgage sales will bundle the amount allowable for financing. Hence, the consideration is amount of premium that could be financed rather than amount of protection that the client need.

Lastly, due to the current competitive environment, every bank is offering different lending rate for mortgage loan and this is one of the biggest consideration of client when choosing a loan offer. Normally, bank will allow for rate appeal if client is taking certain amount of MRTA. Without properly advising client, mortgage sales will eventually bundle in a minimum amount to ensure the lending rate provided is competitive.

Therefore, MRTAs were often being offered without proper advice to clients.


What are the most common misunderstood facts about MRTA?

My loan is covered with MRTA (100% loan amount and full tenure year), therefore I’m sure that my loan is very well taken care of if any unfortunate event happens to me. This is true if the plan was properly planned, the interest rate expected during purchase of MRTA is valid or higher than the actual effective lending rate. For example, a 1% increase in lending rate would have increase your instalment by 10% in some case, or the loan will be prolonged by almost 10 years. Hence, the MRTA purchased earlier may not be sufficient to cover the outstanding loan amount.

I’ve bought MRTA for 10 years, therefore for the first 10 years if anything happened to me, my loan is well taken care of. This is one of the most misunderstood fact about MRTA. By refering to the chart below, this is an example of a loan with 24 years tenure, loan amount of RM 875,000-00. Black represent outstanding loan amout, Blue represent the expected protection for the first 10 years. Red represent the actual protection for the first 10 years.

MRTA - Chart

* Mortgage Reducing Term Assurance (MRTA) is one of the tool for loan protection. However, the highlight of this discussion is most of the time a borrower was not properly advised on how MRTA worked and what was provided. Hope this could help to create awareness among mortgage loan borrowers.

Feel free to contact us at:

Read full text here : About MRTA – Nov 2015 (PDF)

Hope this could create awareness among mortgage loan borrowers.

2 Financial Quick Rules

The first rule to be discussed is related to mortgage loan. After practising and repeatedly making calculation for mortgage loan upon enquiry, I observed that anyone could quickly make a simple calculation base on this rule. A mortgage loan with tenure of 35 years (max) and effective interest of around 5%, the monthly instalment will be about 0.5% of the loan amount. Example, if you are about to get a loan of RM 500,000, the monthly instalment is about Rm2,500 per month. Not too sure if there’s any name for this, for easy of reference, I would like to call it as Rule of 1/200 (equivalent to 0.5%).

How can anyone do a quick check using this rule?

  • Decide on affordability of repayment prior to purchase of property. Simply divide the loan amount by 200 and that will be your monthly repayment amount. Decide whether you are comfortable with the repayment amount or not.
  • Prior to looking for a property, decide how much monthly repayment you are willing to pay. For example, if you decided to pay RM 2,000, multiply it by 200, and you will end up with RM 400,000. Since maximum loan margin for residential is 90%, you could look for a property around RM 450,000.

The Second Rule – Rule of 72. Many write up available for this Rule of 72, but many seems to have not really look into this quick reference. For me, most of the time, this will be used for estimating the viability of a investment. What does this mean?

Divide 72 with the return rate offered, that would easily estimate the time for your initial investment is doubled. I would like to use one of the simplest example, Fixed Deposit Saving. If you save RM 100,000 in a FD account with 3.6% interest rate, with the interest received added back into principal, your saving will be RM 200,000 in approximately 20 years. We get the answer 20 by dividing 72 with 3.6.

You can also use this to estimate your rate of return for investment. Example, my investment doubled in 10 years, therefore my rate of return will be approximately 7.2%.

2 simple rules for quick check. Perhaps with advancement of electronic devices, many will not find these rules helpful, I still like it the old way for quick check.