Mortgages - Malaysia ................................
Malaysia has a promising mortgage market and some of the initiatives of the government are indeed targeted at encouraging people to buy homes:
Malaysia has a strong mortgages market. The country has seen major changes in the mortgages market. The interest rates are currently at a record low and this is expected to continue as Malaysia’s central bank does not intend to intervene in the near future.
Home loans in the country are of 5 types and most of the loans are variable interest rate loans. These are:
Basic term loan:
This is the most basic and conventional type of home loan. Generally, a borrower will pay a fixed amount of instalment throughout the loan term, without having the flexibility to reduce the loan interest at any point of time. Such mortgages have lock-in periods ranging between 1 and 5 years. If a borrower settles the loan or gets arrangements with another bank within that timeframe, he may incur a penalty charge. Approximately 3% will be charged in such cases.
Semi-flexi loan: This loan is more flexible in terms of reducing interest. If a borrower has extra cash and wishes to make use of it settle part of the outstanding loan, he can do so and get a reduction in the interest rate, thus saving money in the long run. However, the borrower will not be able to withdraw the advance money paid for emergency uses.
Full-flexi loan: A full-flexi loan bears the same characteristics a semi-flexi loan, but the borrower can withdraw his advance payments with no extra charges or penalty. He will be provided with a cheque book and a linked current account to withdraw the money anytime in case he needs to use it for emergencies. Upon withdrawal, the interest rate will be charged back.
Islamic Loan: Islamic loans work on the basis of interest-free transactions. Where a conventional loan charges interest and imposes compounding interests on late payments, Islamic loans do not. It works on a `Buy and Sell’ or `Joint Partnership’ agreement where the bank buys the house
and leases it back to the borrower against payment of instalments over a period of time.
Fixed rate loan: These loans have fixed interest rates for the entire tenure. Banks usually offer this package under Islamic loans. The interest rates are higher in this case.
Studies conducted by some bank groups have indicated that residential mortgage growth, which is the largest loan segment of the banking industry’s total loans in Malaysia - 33.4% of the total loans belong to this category - will slow down due to the cautious view of the market. Residential mortgage growth fell from 13.3% in 2014 to only 7.6% in 2018, due to the weak property market arising from the government’s cooling measures implemented between 2010 and 2013.
Some of the popular home loans in the country are:
Maybank MaxiHome Ezy, which offers a stepped-up repayment scheme where the borrower has the option of paying only the interest/profit portion of the loan for the first five years. Full instalment payment only starts from the 6th year onwards.
Citibank Mortgage, which offers tailored mortgage loan solutions with competitive and flexible rates. It also has its 10-minute home loan approval as the shortest wait any applicant in Malaysia would have to. Additionally, borrowers get up to RM30,000 cash back and a guaranteed RM2,000 cash back during a particular time period.
RHB My1 Full Flexi Home Loan, which offers flexi-payments and allows the borrower to make excess payments on top of regular monthly instalments. The borrower can also redraw the excess payment without a fee charge.
The Alliance ONE Account, which is a refinancing service that allows for consolidation of housing loans and outstanding balances on personal loans and credit cards into one account by making use of an overdraft facility.
The Malaysian government has in early 2019 launched the National Home Ownership Campaign, an i nit i at i ve designed to support homebuyers looking to purchasing property. The program also aims to encourage the sale of unsold properties in the country’s housing market. Expected to end on 31 December, the campaign is designed to match aspiring homeowners with homes of their choice available in the market. The campaign has been organized in collaboration with a number of major developers. There are several financial incentives available to the public, including full stamp duty exemption for values up to RM1 million, partial stamp duty exemption for values up to RM2.5 million, exemption from stamp duty for all home buyers who avail of home loans etc. In addition, there is a minimum 10% reduction on the purchasing price of properties listed under the scheme.
A Knight Frank study has also indicated that Malaysia’s property market is poised to gather further momentum moving into the second half of 2019 with residential housing outpacing the cautious commercial market. It said in its latest research report the extended National Home Ownership Campaign would continue to stir interests among homebuyers while providing an opportunity for developers to clear existing stock.
A residential complex in Kuala Lumpur suburbs