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:

Banking Frontiers - - Contents -

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:

LOAN TYPES

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.

POP­U­LAR LOANS

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.

NHOC PRO­GRAM

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

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