10 July, 2008

Housing Loan Saving??

Scheme to help lower-income group cope with housing loans

I was so surprise that government is annoucing the possibility to extend the bank loan as acclaimed below,

For example, a person who has managed to repay half the amount of his 20-year loan of RM300,000 within 10 years might be given 20 years instead of 10 to repay the rest of the loan.

The monthly loan repayment would thus be reduced, giving the buyer additional disposable income, he added.

I believe most of the banks are very happy with such proposed sheme as it can prolong its loan tenure and collect more interest. Mortgage interest is always a stable income to banks.

There are few points I would like to raise here,

Loan amount is usually justified with the proportional of total income, averagely, it is 1/3 of the total income. or some bank is offering 40% of total income.

RM 300,00 loan with 20 years repayment is about monthly repayment of RM 2,300 to RM 2,500.

If it is 1/3 of the income, means that the person income of RM 6,900 to RM 7,500. WIth such income, still under lower-income group ?

Prolong the loan tenure, mean the borrower need to pay more interest. In short term, it is good to have more disposable money on monthly basis. who will be benefit at this extension, i believe it is bank but not the borrower.

Study this proposal and forecast it in the farther sight. The US subprime mortgage issue was initiated with such idea at the beginning i suppose. Refinance and refinance, until one day the inflation and loan repayment cannot come in balance.. Then the market slump.. it wont happen now. US takes a few decade for the property bubble to burst. Let see how long Malaysia can stand with it.

Must analyse your own capability before take a move to join the so-called best scheme. Move wisely, Otherwise, Don't Move!