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fixed rate term loans vs flexi mortgage one type loans

 
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krazy



Joined: 30 Dec 2005
Posts: 77

PostPosted: Fri Dec 30, 2005 12:47 am    Post subject: fixed rate term loans vs flexi mortgage one type loans Reply with quote

need all advice and opinions a s a p..
am buying a property for my own use and going to take a 600k loan (80% of price).. property still under construction but completing in july 2006..
right now i'm considering two housing loans..
1) fixed rate from I N G, they offered me 6.1% for 30 yrs. but mrta will be compulsory plus very stricy bout which lawyers you use (big firms no discounts)..
pros: fixed interest, can make extra payments but max 5k each time, no exit penalty
cons: rigid, difficult payment, no withdrawals Crying or Very sad

or

2) mortgage plus from h l b, 1% first year, blr - 1% second, blr + 0% third to fifthyear, blr + 0.15% therafter, current account linked to loan account any balance in account to reduce interest charged.. exit penalty firstfive years, mrta not necessary Shocked plus lawyers negotiable
pros: stress free cash flow, canput every single cent you have in current account without worrying that you might need it later, easy payments every branch has a cash deposit machine, daily rest interest
cons: BLR will definately rise Sad

well then any opinions??
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syfzzz



Joined: 24 Nov 2005
Posts: 19
Location: Penang

PostPosted: Fri Dec 30, 2005 2:53 pm    Post subject: Reply with quote

If you are earning fix income and planning to settle the loan according to the long-term (30 years) plan, then fix rated plan will saves more money in LONG TERM, since the rate is locked-in during the historical low of BLR. I don't see any difficulty in payment, you can just send them post dated cheques in one shot.

If you are bussinessman with high cash flow, then the flexibility of Morgate One may fit your need better. However, please take note of the so called '1st year' term in the loan agreement. It may start from the date you sign the offer letter.

Well, you have another alternative too: sign-up the Morgate-One plan, enjoy the low rate for first 5 years, then refinance with another bank to enjoy another few years of low interest rate! There should be financial institute that willing to offer zero moving cost package for refinancing of >100K loan...
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jasonloh



Joined: 12 Jun 2005
Posts: 312

PostPosted: Sun Jan 01, 2006 3:04 pm    Post subject: Reply with quote

Was also in the same dilemma about 2 months back. Was trying to weigh the pros and cons of each package but when BLR finally moved, it was a simple decision for me. I went with AIA's fixed rate package. I chose fixed rate package because of the following reasons :-

a) My house has just started construction. Although the usual bank's loan package would offer "low" interest in the first 2-3 years, I would not fully benefit from it as the savings is not on the full loan amount.

b) BLR is bound to move up. Being a wage earner and not liquidity flushed, I feel safer knowing exactly how much I need to pay every month. No need to worry if BLR is going to move higher. However, if I have plenty of cash to move about, flexi loans like Mortgage One would probably be a better choice. If not, the high rates of such loans would be a real burden.

c) Interest is daily res and I can pay more if I want to. Although having the flexibility to make withdrawals is desirable, I don't foresee myself making any withdrawals. I just have to plan my finances more carefully so that I have the cash when I need it.

d) MRTA / MLTA / Term life is compulsory but I don't really mind. The protection may come in handy, you never know. I opted for term life instead because of the flexibility to assign it to other loans (if ever I am to refinance) and the cash value that would accumulate. If I didn't want to protection anymore 15-20 years down the road, I can redeem the cash value to settle my balance o/s loan.

End of the day, it's really about your financial needs. How do you foresee yourself managing your loan? Fixed payments every month? Or you got plenty of extra cash which you can "park" in the loan account to mobilise later?
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jasonloh



Joined: 12 Jun 2005
Posts: 312

PostPosted: Sun Jan 01, 2006 3:09 pm    Post subject: Reply with quote

syfzzz wrote:

Well, you have another alternative too: sign-up the Morgate-One plan, enjoy the low rate for first 5 years, then refinance with another bank to enjoy another few years of low interest rate! There should be financial institute that willing to offer zero moving cost package for refinancing of >100K loan...


Hmmm.. correct me if I am mistaken but it may not be as straight-forward. Interest is always heavy up front as the installments in the early years would be allocated more to interest than principal. Thus, when refinancing, the principal o/s may not have reduced much and with the new loan, the whole cycle would start again with interest being serviced up front.

To see whether it's worthwhile, would have to calculate the total interest paid.
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syfzzz



Joined: 24 Nov 2005
Posts: 19
Location: Penang

PostPosted: Fri Jan 06, 2006 11:20 am    Post subject: Reply with quote

Quote:

d) MRTA / MLTA / Term life is compulsory but I don't really mind. The protection may come in handy, you never know. I opted for term life instead because of the flexibility to assign it to other loans (if ever I am to refinance) and the cash value that would accumulate. If I didn't want to protection anymore 15-20 years down the road, I can redeem the cash value to settle my balance o/s loan.

Hello jasonloh,
Would you mind to share what is the %difference for the premium of MRTA, MLTA, and Term Life policy as in your case. Is all 3 types of policy offered by AIA, or will AIA accepts policy from other party?
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krazy



Joined: 30 Dec 2005
Posts: 77

PostPosted: Fri Jan 06, 2006 9:42 pm    Post subject: Reply with quote

thanks for the reply guys..
anyways.. i'm not a fixed income earner but..
for the mortgaga one type loans: calculating moving cash, let's estimate about 20k a month.. (ie about 20k in beginning of the month and nothing left by the end of it, not including the monthly instalments) you average out about 7k amonth saved on interest (it's not wholly accurate but it's quite a close estimation) at 6% a year you only save about 420 a year.. which is rather insignificant... the kay to this system is if you have a lot of extra backup cash.. ie if you're taking a 200k loan but you have another 100k of fail safe money that you can't risk placing into the loan you save alot of money as most of your monthly installments are used to reduce the principle and not servicing the interest. you normally clear the loan in half the time period..
anyway jason, i don't think there's any disadvantage with the discount period (provided loan is fully fexible some banks still require notice if you pay more during the first few years ie if you haven settled at least 85%( i think) of your principle) cause if you ignore the first few years offer and just pay your full monthly installments the sum would still be used to offset the principle later on when payment in full is given.
regarding syfzzz question, you can include mlta and mrta in the loan (ie lump sum payed at onset, but the balance value is crap.. ie if you refinance you lose big), term life is like your usual life insurance policy so you pay the monthly/yearly instalments on your own, aia and ing are very strict bout this, only accept their own policies.(so if you're wit aia and you wanna refinance wit ing.. sorry you have toi buy the policy again) for those who didn't know if you have a life insurance policy you can pledge it to your bank and not buy mrta. even if your policy is not big enuf to cover the total loan you can top up (with your insurance policy or mrta)
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krazy



Joined: 30 Dec 2005
Posts: 77

PostPosted: Fri Jan 06, 2006 10:30 pm    Post subject: Reply with quote

oh.. with mlta and term life, they always ask you to top up for cover for critical illnesses, so that they make more!! insurance companies.. seech.. seriously.. loss of thumbs, one hand or leg, eyesight, hearing is not covered (unless you bought a personal accident rider (only for term life) even then the payout is really low).. so take note..
anyways, critical illnesses is important.. so term life is better.. plus got money back.. some anyway..
back to the loans..
it still boils down to the BLR.. many estimate it to go up to 7% around 2007 then rise till 8% and remain there.. but it's impossible to know for sure..
the thing you have to realise is that with the first few years discount you can knock a significant chunk of your principle.. (normally about 10-12% off if not completed; 5-7%off for refinancing for the first two years itself) so i'm really thinking about syfzzz's idea of refinancing every five.. just don't know if there-s some hidden shit cost that we aren't aware of..
help please?? time's running out for me..
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jasonloh



Joined: 12 Jun 2005
Posts: 312

PostPosted: Fri Jan 06, 2006 10:56 pm    Post subject: Reply with quote

krazy wrote:

anyway jason, i don't think there's any disadvantage with the discount period (provided loan is fully fexible some banks still require notice if you pay more during the first few years ie if you haven settled at least 85%( i think) of your principle) cause if you ignore the first few years offer and just pay your full monthly installments the sum would still be used to offset the principle later on when payment in full is given.


Hmm.. true.. but you can also do that with a fixed rate loan. i.e. pay full installments before full drawdown, thus, reducing the principal.

I don't think discounts for the 1st few years is a disadvantage, just that I think it's more of a gimmick as I won't reap the full benefits of it, especially the 1st 2 years when the property is still under construction. Although I save on interest during these first few years, if I am taking a long tenure loan (say, 20-30 years), I may end up incurring a lot of additional interest since I will be exposed to BLR fluctuations. However, if I foresee myself fully settling the loan in the short term, I may consider such loans.
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nick1994



Joined: 24 Apr 2005
Posts: 6116

PostPosted: Tue Jan 10, 2006 9:55 pm    Post subject: Reply with quote

...making sure u'r dependants r protected by insurance shld always take precedent over buying a property and if this had been done, MRTA , MLTA, term or whatever requested by banks or insurance coys r redundant & unecessary costs........
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Josh



Joined: 18 Jan 2006
Posts: 2

PostPosted: Thu Jan 19, 2006 9:06 am    Post subject: Reply with quote

Hi Jasonloh,

I also got offer letter from AIA home loan, they offer me 5.99%. its low and interesting, but can u spot the downside of it? i also got offer from other bank and need to finalize the loan in this week. so far aia is the best.
U took MRTA or MLTA?
krazy said
Quote:
with mlta and term life, they always ask you to top up for cover for critical illnesses
--- top up? [/quote]
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jasonloh



Joined: 12 Jun 2005
Posts: 312

PostPosted: Thu Jan 19, 2006 9:24 pm    Post subject: Reply with quote

Josh wrote:
Hi Jasonloh,

I also got offer letter from AIA home loan, they offer me 5.99%. its low and interesting, but can u spot the downside of it? i also got offer from other bank and need to finalize the loan in this week. so far aia is the best.
U took MRTA or MLTA?


good rate you got there. They don't usually offer 5.99% for properties under construction unless it's by a reputable developer. what project did you buy into?

Insurance is compulsory so I opted for term life instead.

hmmm.. downside? well, it all boils down to your needs as discussed above.
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jasonloh



Joined: 12 Jun 2005
Posts: 312

PostPosted: Thu Jan 19, 2006 9:26 pm    Post subject: Reply with quote

syfzzz wrote:
Quote:

d) MRTA / MLTA / Term life is compulsory but I don't really mind. The protection may come in handy, you never know. I opted for term life instead because of the flexibility to assign it to other loans (if ever I am to refinance) and the cash value that would accumulate. If I didn't want to protection anymore 15-20 years down the road, I can redeem the cash value to settle my balance o/s loan.

Hello jasonloh,
Would you mind to share what is the %difference for the premium of MRTA, MLTA, and Term Life policy as in your case. Is all 3 types of policy offered by AIA, or will AIA accepts policy from other party?


sorry, I don't remember it offhand.. roughly, MLTA was about 40% expensive than MRTA.. and term life is about 100% more expensive than MLTA..
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jasonloh



Joined: 12 Jun 2005
Posts: 312

PostPosted: Thu Jan 19, 2006 9:33 pm    Post subject: Reply with quote

By the way, anybody thinking of getting an AIA home loan should look up Homelink from the forum. Got mine from him... Two thumbs up for efficient and professional service. He certainly knows his stuff and was able to offer sound advice and pros / cons of each type of loan.

Dealing with him was refreshing as I was kinda tired of asking questions to sales staff that only knew their own company's products.. and even more frustrating was some didn't even know their own products well..
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krazy



Joined: 30 Dec 2005
Posts: 77

PostPosted: Fri Jan 20, 2006 12:17 am    Post subject: Reply with quote

hi josh,
in my opinion if you're a fixed income earner the rate from aia is the BEST no need to consider.. unless you have lot's of money lying around that you cannot risk putting into the loan,then you better to get the mortgage plus accounts.. the BLR will surely move up.. barring massive inflation..
for mrta, you will be insured only the balance of your loan so as your loan balance reduces, the less you are insured. hence the cheaper rate. you cannot top up, ie add riders/ additional terms and conditions to this kinda policies, as far as i know.
for mlta, you will be insured a fixed sum tru out the entire term of the loan, ie if something unfortunate happens to you, your dependants get the balance sum of the money. point to take note is that all policies only protect you if you die or are permanently disabled. paying more for a critical illness rider protects you from the major disabling illnesses ie cancer, kidney failure, stroke.. etc.. insurance companies are iritating cause if you don't lose full function of at least two of the four appendages(2hands and 2feet) you DON"T qualify for permanently disabled, and cannot claim the insurance (READ YOUR POLICIES) how many people can work with cancer or if you're too sick or if you lost a hand?? our insurers are still very backward in this essence. plus they never explain this part.... Sad
term life is your normal insurance la, so got a lot more options, it's tranferable, most of the time, and more importantly you get MORE money back after the policy expires, you do get money back form mlta and mrta if you finish paying of early or if you refinance but you really lose a lot of the money.
finally, if you're taking the aia loan, it is unlikely you will refinance, the rate is unlikely to ever ever ever get this low again. insurance companies give you these good rates cause they want you to buy mrta, mlta and term insurance from them, statisticly it's practically money in the bag.
cheers!
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krazy



Joined: 30 Dec 2005
Posts: 77

PostPosted: Fri Jan 20, 2006 12:22 am    Post subject: Reply with quote

hh jasonloh,
ING didn't want to accept any other term life policies that i had, so i'm wondering if AIA will accept third party policies?
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jasonloh



Joined: 12 Jun 2005
Posts: 312

PostPosted: Fri Jan 20, 2006 11:12 pm    Post subject: Reply with quote

krazy wrote:
hh jasonloh,
ING didn't want to accept any other term life policies that i had, so i'm wondering if AIA will accept third party policies?


hmm.. i am not certain but i don't think they would accept as well.. maybe u can pop Homelink a PM..
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kll



Joined: 17 Feb 2006
Posts: 49

PostPosted: Mon Feb 27, 2006 7:37 pm    Post subject: Reply with quote

krazy,

looks like I am encountering the same situation as you did.

so, have you decided and why?

thanks. Smile
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Homelink



Joined: 19 Jun 2005
Posts: 268
Location: Kuala Lumpur

PostPosted: Tue Feb 28, 2006 4:05 am    Post subject: Reply with quote

jasonloh wrote:
By the way, anybody thinking of getting an AIA home loan should look up Homelink from the forum. Got mine from him... Two thumbs up for efficient and professional service. He certainly knows his stuff and was able to offer sound advice and pros / cons of each type of loan.

Dealing with him was refreshing as I was kinda tired of asking questions to sales staff that only knew their own company's products.. and even more frustrating was some didn't even know their own products well..


Dear Jason,

I'm flattened with ur word. It's my pleasure to enlighten those who really sincerely need it as 4 myself, I need to improved more to serve our society. Compared to United State, They r more advance & a head of us. we need more ppl to join us in this career as i felt qualified advisor are in shortage supply & not easily to become 1 as Bank Negara is setting a higher standard - Registered Financial Planner <- I'm still working hard 2 become a qualified person Wink

jasonloh wrote:
krazy wrote:
hh jasonloh,
ING didn't want to accept any other term life policies that i had, so i'm wondering if AIA will accept third party policies?


hmm.. i am not certain but i don't think they would accept as well.. maybe u can pop Homelink a PM..


Dear Krazy, Ur policy is not accepted it's b'cos the ins.co is not in their panel. 4 Eg : if d exisitng policy is not in panel then d financial institution have difficulty to access ur policy in d event there is a claim happen & they have no right to do so.

For AIA & ING, u have 2 buy their mortgage protection plan / life for their easy accessment. Therefore those who r planning 2 buy a life policy, get it from a big company. like AIA - they've been most bank panel b4 new ins.co exist (Not to promote AIA) - These company has a international worldwide reputation. Able to provide loan product due to financial strength.

Apologises to other insurance agent/co - no mean to flame on ins.co issues - it's a fact. Embarassed

PERFORMANCE DETERMINE RESULTS
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krazy



Joined: 30 Dec 2005
Posts: 77

PostPosted: Mon Mar 06, 2006 1:49 am    Post subject: Reply with quote

hi kll,
decided not to take the fixed rate loan, reason being i do have somespare cash in hand that i dun feel comfortable dumping in to the loan, i took hong leong's blr - 0.5 first ten then blr -0.7, taking into consideration that my 50-100k that i leave in the bank will already off set at least another 0.5-1% off the interest rate plus the 0.5% the bank is givin me, provided the blr doesn't rise above 7%/7.5% i still have more savings in interest. another point is that as the loan amount/ principle shrinks, your interest savings will actually be more. they are hiden cost tho there's a rm10 charge a month for this type of amounts. some might argue that blr will rise to bout 8+% which is the average, but i hope that by that time my principle amount has been reducedenough to offset the blr increase, and if it doesn't go up, all the better...
if you have a lot of spare cash, take the flexi loans, cause you'll never know when oportunity knocks for you to make money with that cash, especially when you need it urgently..
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kll



Joined: 17 Feb 2006
Posts: 49

PostPosted: Tue Mar 07, 2006 7:54 pm    Post subject: Reply with quote

thanks krazy.

guess you may be right. besides the mrta and life policy which is compulsory for the whole tenure for fixed rate products are rather expensive.
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krazy



Joined: 30 Dec 2005
Posts: 77

PostPosted: Tue Mar 07, 2006 11:01 pm    Post subject: Reply with quote

hi kll,
another reason why i took hlbb was i needn't buy mrta (as long property completed or if they're EF) plus they were very cincai about me choosing my own lawyer and fire insurance. ( i just felt more comfortable using my frens so i get better service and i dun get overcharged)
anyways blr will definately rise, ING is most competetive wit fixed rate loans coz the want a bigger share of the market, last i heard they were offering 5.89% Shocked even after blr was raised to 6.5%. it is a great offer.. tough call... good luck!! cheers!!
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kll



Joined: 17 Feb 2006
Posts: 49

PostPosted: Wed Mar 08, 2006 9:00 pm    Post subject: Reply with quote

krazy wrote:
hi kll,
another reason why i took hlbb was i needn't buy mrta (as long property completed or if they're EF) plus they were very cincai about me choosing my own lawyer and fire insurance. ( i just felt more comfortable using my frens so i get better service and i dun get overcharged)
anyways blr will definately rise, ING is most competetive wit fixed rate loans coz the want a bigger share of the market, last i heard they were offering 5.89% Shocked even after blr was raised to 6.5%. it is a great offer.. tough call... good luck!! cheers!!



ING's offer - is it true that they calculate based on monthly rest and not daily rest?
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krazy



Joined: 30 Dec 2005
Posts: 77

PostPosted: Thu Mar 09, 2006 11:44 pm    Post subject: Reply with quote

hi kll,
ing monthly rest.. Sad win some lose some loh.. aia also givin 5.89% check out the thread la..
read in the newspaper today sbb offerin blr-0.8.. same type of accounting, provided you dun need cheque facilities, very good offer.. but not sure if they're so flexible wit mrta or lawyers..
another reason why i took hlb was it's branch is walking distance from where i work wit proper 24hr bankin facilities.. which was avery important consideration forme as well..
anyways if you need any contacts gimme a private message.
cheers!!
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jasonloh



Joined: 12 Jun 2005
Posts: 312

PostPosted: Sat Mar 11, 2006 12:53 pm    Post subject: Reply with quote

I believe ING is also daily rest. Their call-in support ppl are quite bad, they still think it's monthly but when I spoke to one of their more experienced agents, he confirmed it's daily rest.
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