Understanding Advance Instalment and Capital Repayment in OCBC Bank home loan prepayment mode

OCBC Bank in Malaysia has been giving quite a competitive housing loan facility since they introduced the so-called semi-flexi scheme.

Unlike the fully flexible home loan provided by some other banks, this OCBC semi-flexi home loan is more difficult to understand, more troublesome to manage, and also introduces cost and constraint when come to excess payment (a.k.a. prepayment) redraw.

Anyhow, many people still consider OCBC semi-flexi home loan, as they give among the lowest interest rate, highest possible margin of financing, longest possible serving term, and short lock-in period.

If you were to take up this OCBC semi-flexi home loan, you need to understand about their definition and operation of Advance Instalment and Capital Repayment, which are the 2 options of prepayment for you to put in excess money into your loan account in order to reduce the outstanding balance, and therefore will reduce the overall interest paid as well as shorten the overall loan tenure.

These 2 prepayment modes are clearly spelled out in the Main Terms & Conditions document that come together with your home loan offer letter. I'll summarize it here.

Both Advance Instalment and Capital Repayment will reduce the outstanding balance, and therefore will immediately help you to save on interest charged the next day onwards (since the loan is on daily rests). If you have the current version of the Main Terms & Conditions document, it is stated in Clause 6.6 (a) in that document.

Advance Instalment:

• Non-redrawable. Once you banked in, you cannot take it out from your account.
• You can use it to automatically set off future monthly instalment, provided there is enough Advance Instalment in your account for the deduction. This is useful if you are going away to oversea for a long period, and might not be convenient to serve your monthly home loan repayment for quite some times.
• Can make payment with cash (over the counter), cheque, ATM machine, inter-bank transfer, etc.

Capital Repayment:

• Redrawable to your saving or current account with OCBC Bank, subject to the terms and conditions.
• You still need to serve your monthly home loan repayment on time as usual. The automatic set off mechanism does not apply here.
• Can make payment with cash (over the counter) and cheque only.

The redrawal terms and conditions for Capital Repayment is typically like this:

• Redrawing must be made at the OCBC branch.
• Need to submit the Redrawing Notice to OCBC 3 days before the redrawing occur.
• RM10 will be charged for each redraw.
• Only 1 redrawing per day.
• Redrawing must be in multiples of RM1000.
• Minimum redrawing amount is RM5000.

The mobile view of this blog

Google Analytics shows that about 15% of my visitors to this blog are actually reading with mobile device. Last month, 37.37% of the mobile visits are from iPhone, 29.43% from Android, 27.31% from iPad, 1.86% from Symbian, and the rest from others.

If you are accessing this blog (or any other blogs hosted in Google's Blogger a.k.a. Blogspot platform) with your mobile device, you will be able to browse its mobile view, which is a simpler, faster loading version. Here is how it looks like:

Scroll down to the bottom of the page, you can find the "View web version" option to switch to its web view.

Actually, web view is also pretty nice when browsed with my favourite mobile browser - Dolphin Browser.

It is even better if you rotate your phone to read in landscape mode.

Actually, there is a trick in the blog's URL to switch it to mobile view and vice versa.

• Mobile view - http://voyager8.blogspot.com/?m=1
• Web view - http://voyager8.blogspot.com/?m=0

If you are also blogging on Google's Blogger a.k.a. Blogspot, you can check how your blog looks like in its mobile view by accessing it with your mobile phone, or by accessing from any browser using the mobile view URL as above. There are several templates and settings which you can configure in the Settings > Email & Mobile tab.

The cost of selling a property in Malaysia

If you were to buy a property for investment, you should be well aware of the cost involved in buying the property, as well as the cost to sell it later.

The typical cost of selling the property consists of:
1. Advertisement fee to look for buyer (if any).

2. Agent fee (if you engage property agent to help you to sell your house): between 2%-2.75%. Officially, it is 2.75% if the selling price is below RM500k, and 2% if the selling price is above RM500k. There is a 6% government tax on this agent fee too.

3. Lawyer fee for Sales and Purchase Agreement (calculated based on the property's selling price, if you engage a lawyer on your behalf. You can save on this if you use the buyer's lawyer):

• First RM150k = 1% (or minimum RM300, whichever higher)
• Subsequent up to RM1 million = 0.7%
• Subsequent up to RM3 million = 0.6%
• Subsequent up to RM5 million = 0.5%
• Subsequent up to RM7.5 million = 0.4%
• Above RM7.5 million = negotiable

4. Deed of Receipt & Reassignment, Revocation of Power of Attorney, Letter of Undertaking, Statutory Declaration, etc. = a few hundreds                      

5. Miscellaneous legal fee = at least a few hundreds

6. 6% government tax on total lawyer fee

7. Submission of CKHT 1A form per seller = RM300 (RM600 if the house is jointly owned by 2 owners) 

8. Real Property Gain Tax = 5% of net profit if selling within 5 years of acquisition

9. Penalty payable for early mortgage settlement (if still within lock-in period) = depends on the loan agreement

Besides, you can get back some surrender value (partial refund on premium paid) from the following (if applicable):

• Mortgage Reducing Term Assurance (MRTA)
• Fire insurance

You might probably be interested to also read about:

• The cost of buying and owning a property in Malaysia