By National House Buyers Association
Published in Iproperty Magazine
| |
|
2002
|
11,956
|
|
2003
|
12,376
|
|
2004
|
16,251
|
|
2005
|
15,868
|
|
2006
|
13,590
|
Source: http://www.mier.org.my/presentations/archives/pdf/CEB2007.pdf
From the same source, 25% of the defaulters are said to be on car and
housing loans. At an average of 14,000 new cases per year, 3,500 will be
losing their cars or houses. If you have noticed, the number of
properties advertised for auction in the local papers is rising as
well.
| Commercial Banks: Non-Performing loans
by Sector |
RM million |
| Purchase of residential property |
2006
Sept |
2006
Dec |
2007
Mar |
| <= 25k |
321.8 |
314.8 |
308.6 |
| >25k to 60k |
1,609.2 |
1,627.2 |
1,680.9 |
| >60k to 100k |
2,797.3 |
2,853.4 |
2,862.0 |
| >100k to 150k |
2,931.7 |
2,967.3 |
2,997.4 |
| >150k to 250k |
3,482.9 |
3,551.5 |
3,574.1 |
| >250k |
2,641.0 |
2,737.1 |
2,809.9 |
| |
13,783.8 |
14,051.4 |
14,232.8 |
Source : www.bnm.gov.my
According to the Glossary provided in the Bank
Negara’s website, non-performing loans refer to the outstanding amount
of loans (principle and interest) classified as non-performing when
principle or interest is six months or more in arrears.
A rough estimate on the number of purchasers
according to the property type and the non-performing loans amount in
the Mar 2007 column is 114,500.
Can you even afford a house right now?
Assuming you can afford a house, how much can you afford? These are
important questions that many people do not research, focusing on what
their mortgage payments will be, ignoring other monthly payments. This
oversight puts many people down the wrong path to bad debt.
For example, your monthly expenditures will be more than just the
housing loan, there will also be all kinds of insurance, utilities &
phone bills, contributions to maintenance fund, medical bill, groceries,
unexpected household/auto repairs, lunch money, and many other
obligations. They must all be accounted for in your budget spreadsheet.
For many of us the purchase of our house or investment property is the
largest financial commitment we will ever make. This makes arranging the
most suitable housing loan just as important.
Make sure you know all the costs of entering into the loan and
purchasing the property. These costs include conveyancing costs,
application fees, valuation and legal fees, mortgage insurance (if
necessary) and sometimes extra life insurance premiums.
Some lenders will tell you the advantages of whatever housing
loans they are trying to squeeze you into, but rarely will they tell you
the disadvantages.
Be ready when it happens and things will go your way.
According to an article in a business magazine, the banking system is
flushed with RM140 billion liquidity. This explains the increasingly
aggressive sales promotions undertaken by financial institutions for the
housing industry. Even credit card holders’ recruitment has taken to the
shopping malls, hypermarket concourses and popular food stalls.
Whilst we will leave it to our economic gurus to
analyse as to whether these are good indicators or not, one thing is for
sure; the securing of a housing loan is now a less intimidating effort.
Always look at the total deal, not some
dangling carrots in front of your face. Compare the entire housing loan
cost of several different lenders to determine which type is best for
you.
We would like to discuss some of the lenders’ offers
that may not be as attractive as they appear. We will start with the
special low interest offered for the first year. Such an offer is
usually given during a sales campaign and it usually carries a fixed
calendar period with a run-out date.
‘Honeymoon’ start
Thus, even if a house buyer commenced his application
process immediately upon the launching of the campaign, by the time the
loan is approved and disbursements commenced, the period remaining to
enjoy this special low interest rate will certainly be much less than
one year.
If he were to start the application process a few
months after the start of the campaign, it is likely that he will enjoy
the special low rate for only a very short period.
Another point for thought is that due to our unique
system of progressive payments to the developers, the mean average of
the amount disbursed by the banks during the “first year low interest
offer,” is really lower than the loan amount.
Thus any saving on interests is really much less than
it seems. And these have all been figured out already by those marketing
experts in the banks. A more sincere approach would be to offer the
special low interest rate to apply during the progressive payment period
and to continue to run for one year after the date when the loan is
fully disbursed. Only then can such offers bear some element of
sincerity. We believe that anything short of that makes the offer a
sales gimmick.
There are other clauses that put house buyers in
disadvantaged situations. Some lenders include clauses in the Loan
Agreements that give them the absolute rights to alter both the Base
Lending Rates and/or the margin of interests.
Doesn’t this in effect nullify their typical
attractive sales brochures offer of “BLR plus X % for following years”?
One cannot make a special low interest offer in the
sales campaign and then contractually (through the Loan Agreement)
creates a clause to allow that special offer interest rate to be
invalidated. That would make the special offer a sales gimmick.
Make sure you know all the costs of early
discharge of the loan.
One other clause to look out for is on the redemption
of the loan. A house buyer may wish to sell the house or perhaps have
made enough money and wishes to fully settle the loan for whatever
reasons.
This is where the conditions for full settlement
differ from one institution to another. Think long term. Do not be in a
disadvantaged position when the day comes and you wish to redeem the
loan.
When one takes a loan, one spends a much longer
period servicing the loan beyond the first year or even the second and
the third year. So do not be taken in by the very attractive offers
during the honeymoon year/s of the tenure of your loan.
Remember, the remaining of the 25 years is more
important. Do not go for short-term gains only to lose out heavily on
the long remaining years.
We would advise house buyers to look beyond the first
year of so-called low interest when shopping for housing loans. With the
stiff competition going on among the various lenders today, one should
seriously take some trouble to shop around and to scrutinise each and
every offer before commencing the application process. Talk to your
banker, lawyer friends or seek advice at National House Buyers
Association.
We wish to stress that once the application process
starts, it is unlikely that one will have time for any change of mind.
By the time the formal letter of offer is received and if one does not
agree with any of the conditions within, there is usually no more time
to reapply to another financier without incurring the late payment
penalty to the developer.
One really has to scrutinise the fine prints before
making a decision as to which financial institution to apply to for a
loan. Housing developers usually start charging interests as soon as the
date for payment is reached (with perhaps a 2 weeks’ grace at best).
Hence if by then one still has not secured a loan and the banks are not
ready to start disbursement, one starts to incur interests for nothing.
So scout around and study each and every scheme carefully before you
even apply. There are subtle but material difference between the various
schemes and offers among the lenders.
Talk to the lenders concerned. Seek your banker, accountant, financial
planners and lawyer friends’ opinions. Do not be taken in by the short
term attractions. Think long term. Look beyond the first 3 years.
Think about the clauses and the interest rates during the remaining long
25 years that you will be grappling with that loan.
Where to go for help
If you have a problem managing your finances and wants badly to keep
your home, the Bank Negara provides counseling and advice on financial
management as well as a Debt Management Programme and Financial
Education through the Credit Counseling and Debt Management Agency.
Credit Counseling and Debt Management Agency
Kuala Lumpur Headquarters
Level 8, Maju Junction Mall
1001, Jalan Sultan Ismail
50250 Kuala Lumpur
Toll Free Number : 1800 88 2575
General Line : 03-2698 8575
Fax Number : 03-2698 1575
Email to : enquiry @ akpk.org.my
Website: http://www.akpk.org.my/
Most of the complaints HBA receives from house buyers are on late
payment interest, due to end-financiers disbursing loans late or banks
slow in approving loans and communication problems. For disputes with
banks who are members of the Financial Mediation Bureau, which is an
independent body, contact them at this address:
The Financial Mediation Bureau
Level 25 Dataran Kewangan Darul Takaful
No. 4, Jalan Sultan Sulaiman 50000 Kuala Lumpur.
Telephone : 03-22722811
Fax : 03-22745752
Website: http://www.fmb.org.my/
