• Home
  • Attractions
  • Hotels
  • Map & Misc
  • News
  • MM2H

Malacca Malaysia

All you need to know to enjoy your stay in Malacca Malaysia.

Q&A: Is it better to go for fixed rate or BLR-based loan?

December 27, 2010
extracted: starproperty.my

Dear Azizi Ali,

The current market seems to be positive as prices of houses are soaring high especially in the Klang Valley area. Banks too had started to readjust the loan rates. BLR began to increase. This means that the sum that we are paying now may not be the sum that we will continue to pay in the next few years. I heard that in year 1997, the loan rate is as high as 11%. I am not sure how true that is, as I was still in secondary school at that time.

My question here is, as I’m buying a house for investment purposes (for renting), my payback period will definitely be 30 years and will not shorter than that. Do you think that it is better to go for fixed rate loan or BLR-based loan?

If the monthly rental I collect, let’s say RM900 and monthly loan instalment is RM600, I will still get RM300 monthly from the house. I worry that if BLR changes, my monthly loan instalment will be higher than my rental, which means that I need to dig from my own pocket to pay the difference.

Please advice based on your experience as millionaire property investor.

Thank you.

Regards,
Kevin

——————————————————————————–

Dear Kevin,

I’m not sure about the exact height the interest rate climbed to in 1997 as I was also in school at that time! (Actually, I was visiting my daughter at her school.) But yes, you are right, the interest rate climbed to double digits during that time. This increase meant that the monthly repayments of all the variable interest rate mortgages climbed up as well, which torpedoed the budget of many a borrower. A lot of them saw their monthly payments rising by 10 or 20 percent. Not surprisingly, this hefty increase led to much problems, heartaches and even arguments between couples.

Fortunately though, the situation did not last for too long as the then Prime Minister, Tun Mahathir, decided to take matters into his own hands. He fired the Finance Minister, took over the post himself and promptly reduced the interest rate back to single digits.

After that very brief history lesson, let me now get back to your question. I must say that you are a very smart young man as you are already concerned about the long-term interest rate, Kevin. (When I was your age, I was more concerned about my sports car!) No one knows what the interest rate will be in 5 years’ time, let alone thirty years. A lot of things can and will happen in that time. Some will be good; some will not be so good. The one sure thing is that things will be different in the coming decade. In fact, there will be some major upheavals that will turn everything upside down, and then some. As to what these upheavals may be, it could be hyper inflation, explosion of derivatives, collapse of paper currency or God forbid, another World War.

One of the negative effects of all the upheavals is that the interest rate could rise to double digits again. And when that happens, the same monster will reappear – the monthly repayments of all the variable interest rate mortgages will shoot up, hammering the innocent, the unwary and the greedy borrowers like a freight train. And unlike in 1997, there may not be a saviour to save the day this time. You may be on your own.

So the answer to your question is this – take a fixed interest rate mortgage. While the interest rate charged for a fixed interest rate mortgage may be slightly higher than the interest charged for a variable interest rate mortgage today, you should be paying a lower total repayment in the long run. Next, the fixed repayments mean that you can plan your cashflow better, reduce your workload and also your problems. Most important of all, you will be protected from interest rate rises throughout the period. And oh ya, it will help you sleep better at night.

————

Azizi Ali runs property seminars in Malaysia. For more information on his upcoming seminars, call 03-7880 1051 or visit www.MillionairesPlanet.com.


Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Search

Latest Travel & Property Posts

  • Travel to Malaysia
  • Bayu Ferringhi Condominiums
  • Oasis Serviced Suites, Ara Damansara
  • Ritze Perdana 2
  • Malaysia property cycle and how to mitigate its risk?
  • Buyers complain of prime units being taken up before launch
  • Glut dampens market value and rental of condos
  • Makings of a choice location
  • Property players concerned over new housing loan criteria proposal
  • TO BUY OR NOT TO BUY, THAT IS THE QUESTION

Index : Travel & Real Estate in Malaysia

  • Accommodation
  • Attractions
  • Featured
  • For Rent
  • For Sale
  • Hotels
  • Malacca News
  • Map & Misc
  • MM2H
  • News
  • Property
  • Real Estate Jokes

3 more pages…

  • About
  • Friends
  • Wallpapers

Search

Pages

  • Privacy Policy
  • Sitemap

Property Pages

  • All You Need to Know about Property Forums
  • Bombshell from Bank Negara – LTV of 70% for Third Residential Property and above
  • Property Agents/Negotiators – A Blessing and a Pain?
  • Pros and cons of selling a tenanted property
  • Real Estate Appraisal
  • Real Estate Bird Dogs
  • Robert Allen Multiple Streams of Income
  • The Role of Real Estate Agents
  • What to do with bad tenants

About

Malacca Malaysia Summarized

This site shows you Melaka Malaysia seen through the eyes of a retiree - Hantu Putih in Malay... - staying in Malaysia under the MM2H program: a 10 year multiple entry visa to Malaysia.

Malaysian are very friendly, Malaysia has no winter and you can stretch your European dollars even more in Melaka than in the capital Kuala Lumpur or in the MM2H town of preference: Penang.

Malaysia My 2nd Home

Malaysia My 2nd Home (MM2H) is a 10 year multiple entry tourist visa for retirees, planning to retire and buy property in Malaysia.

Read the latest news and updates about the Malaysia My 2nd Home Programme.

Travel to Penang

  • Destination Batu Ferringhi
  • Bayu Ferringhi Condominiums

© 2021 · Malacca Malaysia · Listed at : Local Business Directory - BTS Local Travel Travel & Leisure - Top Blogs Philippines

7ads6x98y