If you are thinking at the moment to refinance your property but not really sure it is the right time for you to do so, you may want to continue read on this post.
As in 2011 the BLR is on its uptrend and the rate may go even further up in the near future which is very unlikely for us to make a precise prediction. But looking back in 2008, when the global economy was having a downturn, and also the BLR. We been noticed the BLR was went down quite a lot for the following year after 2008.
An example is showing like this:
In year 2010:
BLR is 5.80% and Interest Rate is -1.90%
Thus, the actual interest rate that you need to pay for the home loan would be:
5.80% – 1.90% = 3.90%
While in year 2011:
BLR is 6.60% and Interest Rate is -2.40%
thus, the actual interest rate that you need to pay for the home loan would be:
6.60% – 2.40% = 4.20%
BLR and Interest Rate Tend To Get Fluctuated
In most home loan cases, the monthly installment would be depended on BLR minus Interest Rate. Therefore, even you are managed to receive an initial low monthly installment for the fist few months when you start to repay the loan, the loan will still getting fluctuate based on BLR.
Because of this, when applying for housing loan, you should look at the BLR – X% instead of BLR since BLR is fluctuating from time to time. So when you get a loan offered by a bank, you should just focus on the – X%.
A loan at 2008 that having a BLR – 1.9% will have actual Interest Rate of 5.80% – 1.90% = 3.90%. And in 2011, this actual Interest Rate has increased to 6.60% – 1.90% = 4.70%.
And if you choose to refinance, you will receive a new interest rate of 6.60% – 2.40% = 4.20% which is lower than your previous home package. However, you still need to include the penalty, legal fees and other charges that incurred for your refinance.
In addition, the refinance still need to depends on other issues such as: Do you get a refinancing with lower monthly installment? Can you cash out any money from your property? Are you getting shorter payback tenure?
You are able to get different view points when you make the decision to go for the right home loan package depends on your purpose.
Future BLR and Interest Rate
As of now, U.S. may facing a tough economy but we still having no idea whether the world economy will get affected and end up causing the overall poperty market in Malaysia having decrease in the price, BLR and interest rate.
If you are having no idea on future economy, then it may be good for you to choose for fixed rate package. Currently, the average interest rate is about 4.85% per annum and by doing so you will not having to worry about the BLR fluctuating anymore. Such loan package is rather secure since the monthly installment and also the interest rate is fixed with your loan tenure.
Lets say if you receive BLR – 2.40%, then you will get 6.60% – 2.40% = 4.20% per annum for your loan. And with fixed rate, you will ensure yourself that you will enjoy this rate no matter how the rate going up or down in future.