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 ask@ethanteh.com

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

 

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What does a Mortgage Advisor/Broker does? When to see one?

Many of the public has yet to know that there’s a group of Mortgage Advisers who work independently from bank to advise and assist client on mortgage loan application for property financing/refinancing.

Instead of being attached to a particular bank, mortgage advisor work independently and normally attached to some firms with license from certain banks as their sales representative. Mortgage advisor would then working as associates with the firm after meeting training and certain certification requirement as set by the bank.

As mortgage advisor, at most of the time, will assist client to do application to more than one bank to increase the chances of approval and for comparison of better offer from different banks since at this moment, there’s no processing charges for mortgage loan application. Also at this moment, there’s no charges to client from Mortgage Advisor but Mortgage Advisor earned the referral fees from whichever bank that secure the client.

When you should see a Mortgage Advisor?

  1. Whenever you need to apply for a property financing and do not have much time to see different salesperson from different banks.
  2. When you want to find out the loan eligibility before you search for the right property.
  3. When you need advice about restructuring of loan and find out more about existing property loan.
  4. When you need an unbiased advice regarding property loan. – “There’s no best product, but there’s product that best suit you”

When you should go to bank instead of Mortgage Advisor?

  1. Mortgage advisor needs full documents and cooperation from client to understand the client’s situation, needs and suitable package/banks. If client is unwilling to disclose or provide income documents, client should opt to visit the bank personally and preferably the existing bank that the client is maintaining the account as most of the information is readily available to them. However, this will limit the client to accept whatever offer made by that specific bank.
  2. Most of the Mortgage Advisor only representing certain bank/financial institution. If client has specific preference on a bank that is not represented by the Mortgage Advisor.

If you are interested to join us as Mortgage Advisor, kindly email you resume to: career@ethanteh.com