Beware of the Lock-in Period of your Home Loan Offer Letter

Posted By KCLau On July 16, 2007 @ 8:08 am In Wealth ana!ement " 8 Comments
When you a#e ta$%n! u& home loan to '%nan(e you# house &u#(hase, I u#!e that you ta$e the t%me
to #ead e)e#y *o#ds %n the o''e# lette# +e'o#e you s%!n %t, I' you '%nd that the#e %s too mu(h deta%ls
'o# you to loo$ at them %n de&th, as$ these %m&o#tant -uest%ons
.1/
'o# tho#ou!h e0&lanat%on +e'o#e
you s%!n the mo#t!a!e o''e# lette#,
One th%n! to +e a*a#e o' %s the lo($1%n &e#%od, Lock-in period %s the t%me '#ame *hen you do a
'ull settlement o' you# loan %n the '%#st 'e* %n%t%al yea#s o' you# loan tenu#e, the lende# 2o# the
+an$3 (an %m&ose a &enalty, 4h%s %s a sam&le o' the 'ull #edem&t%on (lause ta$en '#om my o*n
home loan o''e# lette#,
Image: Full redemption term in a home loan offer letter.
5ot%(e that %' I settle the loan *%th%n '%)e yea#s '#om the '%#st d#a* do*n date, I *%ll ha)e to &ay
67 '#om the o#%!%nal loan amount o# 89000 *h%(he)e# %s h%!he#,
:o# e0am&le, %' my o#%!%nal loan amount %s 8200,000, *hen I (hoose to settle the loan o#
#e'%nan(e
.2/
%t to othe# +an$%n! %nst%tut%on, the amount I need to &ay 'o# &enalty %s:
8200,000 0 67 ; 86,000
Be'o#e you s%!n the o''e# lette#, the#e a#e t*o &a#t%(ula# %ssues that you need to unde#stand:
1. Draw down date or disbursement date
<#a* do*n date %s the date *hen the +an$ #elease &ayment, It %s also $no*n as d%s+u#sement
date, :o# (om&leted +u%ld%n!, th%s *on=t +e an %ssue, But %' you a#e '%nan(%n! home *h%(h %s st%ll
unde# (onst#u(t%on, &lease +e a*a#e, :o# e0am&le, you# home %s st%ll %n(om&lete, C: 2Ce#t%'%(ate
o' :%tness3 %s not yet o+ta%ned, >ou +ou!ht %t %n yea# Jan 2009, 4he +an$ *%ll #elease a &o#t%on o'
you# loan to the de)elo&e# +y sta!es, Let=s assume that %t ta$es 2 yea#s 'o# you# home to +e
(om&leted,
Image: Home loan draw down date illustration
I' the +an$e# (al(ulates the lo($1%n &e#%od '#om the 1st d#a* do*n date, you *on=t +e &enal%?ed
%' you #e'%nan(e you# home loan on @&#%l 2010, I' the &e#%od (ommen(es '#om the 'ull d#a*
do*n date, you *ould ha)e to *a%t unt%l 2012 Jan to 'ully settle you# loan penalty-free, 4hat
means you a#e actually locked-in more than 5 years total.
onclusion! Demand the lock in period commencement on the first draw down
date.
". Penalty on outstandin# loan or ori#inal loan amount
Aome +an$e#s (al(ulate the &enalty on the outstand%n! loan &lus all the (a&%tal #e&ayment
.6/
,
Aome +an$e#s (ha#!e &enalty on the o#%!%nal loan amount, Let= say you %ntend to settle you# loan
ea#l%e# a'te# 6 yea#s, the 'o#me# *%ll %m&ose less &enalty (om&a#ed to the late#,
B0am&le:
O#%!%nal loan amount 1 8200,000
Outstand%n! loan amount at the t%me o' settlement 1 8180,000
Cal(ulate '#om o#%!%nal loan amount: &enalty ; 8200,000 0 67 ; 86,000
Cal(ulate '#om outstand%n! loan amount: &enalty ; 8180,000 0 67 ; 89,C00
onclusion! Demand penalty to be calculated based on outstandin# loan amount
plus capital repayment instead of the ori#inal loan amount.
I *%sh that you *%ll +e a+le to ne!ot%ate a +ette# deal 'o# you# home loan th#ou!h th%s a#t%(le,
@#t%(le &#%nted '#om KCLau,(om: http!$$kclau.com
D8L to a#t%(le: http!$$kclau.com$wealth-mana#ement$beware-of-the-lock-in-period-of-your-
home-loan-offer-letter$
D8Ls %n th%s &ost:
.1/ as$ these %m&o#tant -uest%ons: http!$$kclau.com$"%%&$%'$"($)uestion-you-should-ask-
before-you-si#n-the-home-loan-offer-letter$
.2/ #e'%nan(e: http!$$kclau.com$"%%&$%'$"&$refinancin#-home-loan-sa*e-mort#a#e-interest$
.6/ (a&%tal #e&ayment: http!$$kclau.com$"%%&$%&$15$how-to-settle-your-loans-earlier$
8e'%nan(%n! Eome Loan: Aa)e o#t!a!e Inte#est
Posted By KCLau On June 27, 2007 @ 8:00 am In oney Aa)%n! 4%&s, Wealth ana!ement " 28
Comments
8e'%nan(%n! you# e0%st%n! home loan (an sa)e you a lot o' mo#t!a!e %nte#est, In (e#ta%n (ases,
you (an eas%ly sa)e mo#e than a hund#ed thousand #%n!!%ts %' you +o##o* a su+stant%al amount o'
money to +uy you# #es%dent%al house,
+he reason to refinance mort#a#e:
to sa)e %nte#est (ost *%th +ette# home loan &a($a!e o''e#ed +y othe# +an$s
to #edu(e monthly &ayment
to #edu(e o# &#olon! loan tenu#e
to (ash out the home e-u%ty 'o# eme#!en(%es o# othe# needs su(h as (h%ld#en edu(at%on
and +us%ness )entu#e,
may+e %t=s Fust s%m&ly to enFoy +ette# 'le0%+%l%ty %n mana!%n! (ash 'lo*
.1/
to (onsol%date all othe# de+t %nto one *%th the lo*est %nte#est (ha#!es
How much can you sa*e by refinancin# home loan,
:o# %llust#at%on &u#&ose, I *%ll use an e0am&le o' an en!%nee# to (al(ulate ho* mu(h he (an sa)e
+y do%n! #e'%nan(%n!
Eome loan deta%ls:
Ata#t &ay%n! monthly %nstallment on 1st Janua#y 200C
loan tenu#e 60 yea#s
mo#t!a!e %nte#est #ate *%th h%s e0%st%n! +an$: '%#st yea# 2,97, 2nd yea# 77, 6#d yea#
7,97, Cth yea#s on*a#d 7,797
8e'e# the s(hedule o' &ayment +elo*:
@'te# the lo($ %n &e#%od o' th#ee yea#s *%th the e0%st%n! +an$, I ad)%(ed h%m to #e'%nan(e h%s
mo#t!a!e to OCBC +an$ on Janua#y 2007, 4he#e *%ll +e no &enalty on ea#ly settlement a'te# the
lo($ %n &e#%od o' '%#st th#ee yea#s, Cu##ently OCBC %s o''e#%n! '%0ed #ate &a($a!e o'
1st to 9th yea# 6,187
BL8 1 1,997 the#ea'te# 2 BL8 o# +ase lend%n! #ate ; 6,7973
mo)%n! 'ees %s a+so#+ed +y +an$
4o (om&a#e a&&le to a&&le, I (al(ulate us%n! the #ema%n%n! tenu#e o' 27 yea#s and only #e'%nan(e
the &#%n(%&le o' 81G1,20C,99
4he ne* s(hedule loo$s l%$e +elo*:
Be'o#e #e'%nan(%n!, he *ould ha)e to &ay 81C10Hmonth %nstallment,
@'te# #e'%nan(%n! to OCBC +an$, he only &ays 8121C,67Hmonth, pro*idin# him a positi*e
cash flow of -."%%$month,
Com&a#e the total amount o' %nstallment &a%d a'te# 60 yea#s:
1, 5o #e'%nan(%n!: 8CG8,629,6G
2, W%th #e'%nan(%n! on Cth yea#s: 8C08G62,28
+otal sa*in# %s -.(/0'/1.11,
Ee (an sa)e e)en mo#e +y do%n! #e'%nan(%n! a'te# se#)%n! OCBC mo#t!a!e loan %nstallment 'o#
'%)e yea#s, *h%(h %s the lo($ %n &e#%od &#a(t%(ed +y +an$ at th%s moment, It %s a s%m&le st#ate!y to
al*ays #e'%nan(e you# home loan a'te# the lo($ %n &e#%od, 4h%s *%ll de'%n%tely sa)e you a lot o'
mo#t!a!e %nte#est (ost,
I' you a#e %nte#ested to !et an amo#t%?at%on ta+le o# loan s(hedule 'o# you# (u##ent mo#t!a!e, 'eel
'#ee to (onta(t me
.2/
,
:o# mo#e %n'o#mat%on and t#%($s on mo#t!a!e loan, #ead my othe# #elated a#t%(les:
Aa)e %nte#est on homeloan
.6/
o#t!a!e: the (hea&est de+t
.C/
Buy Eouse +e'o#e Ca#
.9/
alays%a Eome Loan 8esou#(es
.6/
2nformation needed to calculate cost sa*in#s for refinancin#
outstand%n! loan
%nstallment amount
%nte#est #ate
(u##ent loan tenu#e
lo($ %n &e#%od at e0%st%n! +an$ 2no#mally 619 yea#s3
I' you '%nd %t ha#d to !et the %n'o#mat%on a+o)e, may+e you lost the o''e# lette# o# loan a!#eement,
you (an (all you# +an$ (ustome# se#)%(e (ente#:
ustomer 3er*ice all enter of the Banks in .alaysia!
@mBan$ 0612178 8888
@I@ 0612096 6207
@ll%an(e Ban$ 0619916 G000
CIB Ban$ 1600 88 0G00
C%t%+an$ 0612686 0000
BO5 Ban$ 06121C8 8077
EABC 0612090 7878
Eon! Leon! Ban$ 1 0617626 88GG
ay+an$ 160018816688
OCBC 160018819000
Pu+l%( Ban$ 0612176 6000
8EB Ban$ 18001881GG22
Atanda#d Cha#te#ed Ban$ 0617711 8888
Dn%ted O)e#seas Ban$ 0612612 8121
Home Loan alculators!
8e'%nan(e (al(ulato# +y >KConsultan(y
.7/
Loan @mo#t%?at%on Cal(ulato# +y alays%a 8eal Bstate Po#tal
.8/
Loan Cal(ulato#s +y Atanda#d Cha#te#ed +an$
.G/
Loan Cal(ulato# +y ay+an$
.10/
o#t!a!e (al(ulato#s at :%s(al W%se
.11/
Loan Cal(ulato# +y OCBC
.12/
Com&a#e loan at B>IE4
.16/
A%m&le loan (al(ulato# +y esh%o
.1C/
Other rele*ant articles about buyin# house in .alaysia!
Eome loan :@J +y %P#o&e#ty
.19/
Eome loan +y alays%an +an$ at P#o&e#ty alays%a
.16/
o#t!a!e (ate!o#y at y Eome %n alays%a
.17/
Buy%n! a house at @lloe0&at
.18/
4e(hno#at% 4a!s: home loan
.1G/
, mo#t!a!e
.20/
, #e'%nan(%n!
.21/
, sa)e %nte#est
.22/
@#t%(le &#%nted '#om KCLau,(om: http!$$kclau.com
D8L to a#t%(le: http!$$kclau.com$money-sa*in#-tips$refinancin#-home-loan-sa*e-mort#a#e-
interest$
D8Ls %n th%s &ost:
.1/ (ash 'lo*: http!$$kclau.com$wealth-mana#ement$hackin#-your-cash-flow-net-worth-
chart$
.2/ (onta(t me: http!$$kclau.com$contact-us$
.6/ Aa)e %nte#est on homeloan: http!$$kclau.com$"%%'$1"$11$sa*e-interest-on-homeloan$
.C/ o#t!a!e: the (hea&est de+t: http!$$kclau.com$"%%'$1"$11$mort#a#e-the-cheapest-debt$
.9/ Buy Eouse +e'o#e Ca#: http!$$kclau.com$"%%'$1"$1/$buy-house-before-car$
.6/ alays%a Eome Loan 8esou#(es: http!$$www.s)uidoo.com$home-loan-refinancin#-
malaysia-benefits-sa*in#s$
.7/ >KConsultan(y: http!$$www.ykconsultancy.com$refinance.htm
.8/ alays%a 8eal Bstate Po#tal: http!$$www.realestate.net.my$mcal.html
.G/ Atanda#d Cha#te#ed +an$:
http!$$www.standardchartered.com.my$cb$loan$loan4calculators.html
.10/ ay+an$: http!$$www.maybank"u.com.my$consumer$online4loans$inde5.shtml6
.11/ :%s(al W%se: http!$$www.fiscal-
wise.com.my$7iscal8ise8eb$.ort#a#e$Popupate#oryPacka#e2nfo.asp5,
ate#ory2D9(:ate#ory;ame97loatin#<-ate<="(BL-="%.inus="/
.12/ OCBC: http!$$www.ocbc.com.my$personal-
bankin#$calculators$tools4calculator4loan.asp5
.16/ B>IE4:
http!$$www.emy#ht.com$7inancialProduct$HomeLoan$Purchase$Default.asp5
.1C/ esh%o: http!$$www.meshio.com$inde5.php$home-loan-calculator$
.19/ %P#o&e#ty: http!$$www.iproperty.com.my$financin#$#uides.htm
.16/ P#o&e#ty alays%a: http!$$propertymalaysia.blo#some.com$"%%'$%>$"'$"&&$
.17/ y Eome %n alays%a: http!$$www.myhomemalaysia.com$,cat9"
.18/ @lloe0&at: http!$$www.alloe5pat.com$malaysia4e5pat4forum$*iewtopic.php,p9'1'&1
.1G/ home loan: http!$$technorati.com$ta#$home="%loan
.20/ mo#t!a!e: http!$$technorati.com$ta#$mort#a#e
.21/ #e'%nan(%n!: http!$$technorati.com$ta#$refinancin#
.22/ sa)e %nte#est: http!$$technorati.com$ta#$sa*e="%interest