If you’re a home owner with a bank loan in your property in Malaysia, have you checked if your current rate is still competitive? The loan market in Malaysia has been very healthy and changes quite significantly every six months.
Although the base lending rate (BLR) has steadily increased over the past few quarters, banks are coming up with new packages that are even attractive to current loaners. Some offer 1 to 3 percent interest rates for the first 1 to 5 years, while others continue to promote consistently lower than BLR rates, as low as BLR -2 percent.
Refinancing a home loan is even tangible for those that are less than the agreed period, typically five years, where termination comes with a monetary penalty. Competition has resulted in competing banks offering positive savings even after paying the penalty to your current bank.
A newer trend in home loans or mortgage loans is in attaching a cash deposit account that is linked to the loan. This encourages you to deposit your savings and income to the account, which is then used by the bank as collateral to reduce the daily interest charged on the balance of your home loan. As long as you maintain and/or add more funds into the account, the home loan interest is significantly reduced on a daily basis. In the end, you can effectively reduce your loan tenure by a few years! By the way, you also have the flexibility to withdraw from the account, just like your standard expenses account.
Review and refinance your home loan every few years because such products from the banks change often. Just like the credit business, debts are big dollar business for banks and financial institutions.
My current bank was not particularly keen on keeping customers when I called to enquire if I can enjoy the better terms on newer loan packages that it was offering. When they said they could not help me at all, I decided to look elsewhere for better rates. Another lesson I learnt is that the international banks are more aggressive in their offerings compared to the local banks, a good sign and wake-up call for the laggard banks here.
A good site to learn more on how you can save interests on home loans and consolidate debts to be more financially free, I recommend Rebuild.org. The site offers tips and links to loan products that may just save you years of interest, the number one enemy (and sometimes friend) to your personal wealth.