Property Hunter Magazine August Issue 2014 | Page 39

Many loan borrowers complain that why after many
years of loan repayment, the principal reduction on their
original loan is very minimal. Well, increment in tenure and
maintaining your original loan installment would mean you
will be paying more towards the interest and lesser principal.

Mortgage Comparison Calculator
Original
(6.6% - 2.2%)
LOAN AMOUNT

$

Increase 25 bps
(6.85% - 2.2%)

300,000

$

Increasa 50 bps
(7.10% - 2.2%)

300,000

$

Increased 100 bps
(7.6% - 2.2%)

300,000

$

300,000

INTEREST RATE

4.40%

4.65%

4.90%

5.4%

LOAN TENURE

35

35

35

35

MONTHLY INSTALLMENT

$

1,401.25

$

1,447.77

$

1,494.98

$

1,591.44

TOTAL INTEREST

$

288,524.00

$

308,062.00

$

327,893.00

$

368,406.00

* BLR = 6.6 %minus Interest Spread 2.2%

From the above calculation you can see that the impact of 25 bps on your loan installment for a RM300,000 loan is only an increase of RM46.52. Let’s be realistic
here. You should be able to cover the difference by sacrificing 3 cups of Starbucks or Coffee Bean coffee. The Impact is not that much and I think most people
will be able to absorb the difference. If BLR were to go up to 100 bps or 1% than the difference will be larger at RM190. Again I feel that with proper adjustment
to your spending habits this should not pose a problem to most people.
For those of you who are thinking of buying or investing your property, I know you are of two minds now whether to buy or not to buy.
If my research and instinct are right the interest spread will adjust by itself. Remember the time when BLR was at its lowest at 5.5%? The spread at that time
was around minus 1.2 and you got a net interest rate of 4.3%. At 6.6% the banks adjusted the spread to minus 2.2%- 2.4% and you still got a net interest rate
of around 4.3%. Thanks to competition among the banks for business, they reduced the spread and we the consumers benefited. I hope this time round the
banks will adjust the spread again to stay competitive. If this happens, it will not affect your borrowing and property transactions will still be active.
Don’t get too worried about this as the market will adjust by itself as it always does. With this increment I do not think it will affect the property market overall.

NOTES

Come and join me at my one-day seminar in Penang and Kuala Lumpur in August to learn more about Mortgage Financing in Malaysia.
For more information visit www.gmtrainingacademy.com.my/seminars/mortgage/

www.PropertyHunter.com.my

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