Will a 40-year loan tenure really benefit a buyer?

A 40-year loan tenure. SERIOUSLY not sure if this is in the best interests of the buyer.

There’s also the question if there were consultations with working professionals in regard to this issue. Perhaps they have far more professionals who have browsed through far more data than any working professionals out there.

In an article published in the TheEdgeMarkets.com, Housing and Local Government Minister Zuraida Kamaruddin said, “Bank Negara Malaysia (BNM) is proposing a more flexible loan package with flexible interest rates and an extended maximum loan tenure for affordable home buyers.”

She added, “We have engaged with Bank Negara and a few banks during a few sessions and Bank Negara has come up with some more flexible and relaxed terms with regard to loan application and approval. One of it is the extension of maximum loan tenure from the current 35 years to up to 40 years.”

Currently, the maximum loan tenure is 35 years or until the borrower turns 70 years old, whichever is earlier.

Beyond that 40-year loan, there will also be flexi loans, flexi interest rates and a step-up scheme, which allows the amount of repayment to commensurate with the growth of the borrower’s income over time.

The minister also said, “This is something that is easier and more relaxed for the homebuyer so that they can plan themselves. With this sort of approach, we hope Malaysians can change our mentality and know how to plan [according to their] financial capability.

“As an industry, we cannot remain static. We must know the needs of the market and respond positively to the demands of our customers. Our doors are always open for discussion, let us know how we can assist the industry to enhance efficiency.”

She also said her ministry would be working towards consolidating data and information and at the same time addressing data gaps that may exist, so that policy makers, the authorities and stakeholders can all count on an efficient centralised data or property information system that is effective, accurate, useful and timely.

Dear minister, if the majority of all homebuyers can PLAN for themselves, they would not need so many flexibilities. Truth is, there are MANY who know how to plan accordingly and it’s best that they are the examples to follow.

By the way, what will stop buyers who can afford a RM300,000 home to now try for a RM350,000 home because the tenure is longer and thus the monthly repayment is the same?

Are we also providing enough information so that these buyers can really decide for themselves the kind of property they can afford instead of trying to buy something even more expensive?

As usual, wait for the formal announcements. The new housing policy is still pending announcement…

This article first appeared in kopiandproperty.com

Charles Tan blogs at property investment site kopiandproperty. He dislikes property speculators and disagrees that renting is better than buying. He thinks it’s either property or poverty. He is presently the CEO of an auction house auctioning assets beyond just properties.