Spe­cial step-up end-fi­nanc­ing – is it worth the trou­ble?

The Sun (Malaysia) - - MEDIA & MARKETING - BY EVA YEONG

PETALING JAYA: The spe­cial stepup end-fi­nanc­ing scheme an­nounced in Bud­get 2017 for homes un­der 1Malaysia Peo­ple’s Hous­ing (PR1MA) seems to be more trou­ble than it’s worth.

Last Fri­day, the gov­ern­ment an­nounced a spe­cial step-up end­fi­nanc­ing scheme in col­lab­o­ra­tion with Bank Ne­gara Malaysia, the Em­ploy­ees Prov­i­dent Fund (EPF) and four banks – May­bank, CIMB, RHB and AmBank.

Prime Min­is­ter Datuk Seri Na­jib Ab­dul Razak said fi­nanc­ing will be eas­ier and more ac­ces­si­ble to buy­ers with a to­tal loan amount of 90-100% with the re­jec­tion rate to be re­duced dras­ti­cally.

For ex­am­ple, an ap­pli­cant with a monthly in­come of RM3,000 will be el­i­gi­ble for a loan of only about RM187,000. How­ever, through the spe­cial scheme, the ap­pli­cant will be able to bor­row more than RM295,000.

The EPF con­firmed that a fa­cil­ity will be in­tro­duced for mem­bers who meet PR1MA’s el­i­gi­bil­ity cri­te­ria and are mak­ing EPF hous­ing with­drawal for the first time. How­ever, it also said that upon choos­ing the fa­cil­ity, all other pre­re­tire­ment with­drawals un­der Ac­count 2, namely med­i­cal, ed­u­ca­tion, Age 50 and Hajj with­drawals, will no longer be avail­able un­til the PR1MA loan is fully set­tled.

“I don’t think that’s a good idea. One must pri­ori­tise what is more im­por­tant – a roof over your head or your health,” CH Wil­liams Tal­har & Wong Sdn Bhd man­ag­ing di­rec­tor Foo Gee Jen told Sun­Biz.

While the de­tails of the scheme have not been fi­nalised, Foo said, it is likely that the in­ter­est rates of­fered un­der the scheme would be higher due to the higher risk that the banks have to take.

“They need to make sure they don’t over­stress the bor­rower in terms of the in­ter­est rate. Per­haps also, they could set up a time frame, maybe five or 10 years, within which the bor­rower must set­tle the loan, to en­sure that they re­place what they have with­drawn,” he said.

Malaysian In­sti­tute of Es­tate Agents im­me­di­ate past-pres­i­dent Siva Shanker said the scheme may tide over a small group of buy­ers who need a “top up” in their home loans and have the abil­ity to re­pay.

“The scheme may back­fire. What hap­pens if you have a med­i­cal emer­gency? The money you save in EPF is for your re­tire­ment,” he said.

“Al­though prop­erty is a good as­set, it is not a liq­uid as­set. If you have an emer­gency to­day, you can’t sell it im­me­di­ately for the money and you may be forced to sell it be­low its value or at a loss just be­cause you need the money,” he added.

Siva cau­tioned against banks low­er­ing their cri­te­ria to ex­tend loans to buy­ers who ac­tu­ally can­not af­ford the loans.

“This is how the sub­prime crisis hap­pened in the US, when peo­ple who couldn’t af­ford mort­gages were given mort­gages. If it is wide­spread enough, mar­kets worsen, salaries are cut and lay­offs hap­pen, there will be peo­ple who can’t af­ford to re­pay their loans,” he said.

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