Friday, April 4, 2008

Reduce your home loan interest rate

For most people like me, home loan is our biggest borrowing in our lifetime that span for many years to settle off. The interest rate of our mortgage loan is a crucial factor that determine the amount of money and the repayment time we need to pay back to the bank.

Over the past few years, the interest rate offered by banks has been gradually dropping to historical low level, and is currently around 5%. Therefore, if your home loan interest rate is far higher than 5%, you should consider lowering it to tremendously save the cost and time for you to repay the bank. If you signed up your current home loan package by more than 3 years ago, there is a great possibility that your loan is bearing an interest rate of more than 6% (or higher than BLR-0.75% in other words) with the current Base Lending Rate of most banks in Malaysia standing at 6.75% now.

How to lower your interest rate? This is my advice.

The 1st attempt is to write a letter to the mortgage business manager of your bank, requesting for a reduction to your home loan interest rate with the bank. This is exactly what I did recently, and I received the reply from my bank 2 weeks after I sent out the letter to them, offering to reduce the interest rate 2% lower from the existing. Immediately, I saved a huge amount of money at the cost of just sending out a letter to the bank (cost of paper, ink, envelop and postal stamp, which is close to zero).

If your 1st attempt failed, either denied or ignored by the bank, the 2nd attempt is to refinance your home loan to another bank. I'm sure you can easily get an interest rate of below 5% with zero moving cost offered by another bank nowadays. There are plenty of such packages around.

Take out your home loan offer letter and check your interest rate now. You could save an amount of at least 5 figures RM of your hard earned money by this interest rate reduction attempt.


Unknown said... Reply To This Comment

That truly Brilliant Idea!
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Unknown said... Reply To This Comment

Hey, Um....sorry aren't everyone is doing this? Given all Home Loans comes with offset account. How does the 2nd investment property work if you took the rent income from that and put it in the home loan? what happening to the loan with the 2nd property?
Thanks a lot........
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