My first home loan tenure was for a period of 25 years. It was for a small apartment of 730 sq ft. I stayed there for 4 years. During the time, my brother-in-law stayed for a while, followed by my sister and later my brother too. So, I think it’s well worth what I was paying. I have since sold the property many years ago, during the 9th year I think. It would not make such a huge difference whether the tenure was 25, 30 or even 35 years. Buy a property and use it. Not buying one and wait to flip, I think that’s a very wrong concept to have.
Reported in The Star, according to Bank Negara Malaysia (BNM), the current 35 year maximum tenure is enough for the borrowers to settle their housing loans by their retirement age. It also said that even assuming borrowers were 25 years old when they got the loan, a 35-year tenure would already extend the loan up to the retirement age of 60. It further pointed out that “In addition, increasing the loan tenure to 40 years will further add to the total cost of financing without significant improvements in the affordability of one’s monthly instalment.”
I personally do not think the amount of monthly mortgage will be reduced even when the tenure is extended to 40 years. The reason is very simple, buyers would just buy a more expensive property instead and in the end, still stretched to the limit. Besides, if the bank does not wish to approve the loan application, it would mean that the buyer should buy something cheaper and not skip buying or ask for a longer tenure so that they can still buy the SAME property which they could not in the first place when the tenure was shorter. Come on, 35 years is already a very long one. Of coarsen some developed countries, the tenure is even longer but we will reach it in the future, just not now.
Other interesting facts revealed in the article included the fact that about 75 percent of borrowers (1.5 million borrowers) have just ONE housing loan! It was 84 percent not too long ago. Read here: 84% of homebuyers have only ONE (1) outstanding home loan. 🙂 BNM shared that two main issues should be focused upon. They are affordability and shortage of reasonably priced houses. If I am asked to advice BNM, I would also tell them to advise everyone to be more rational and objective when they buy. That perfect property everyone is looking at is going to be priced so high that only few could afford. Time to expand the choices!
written on 21 Sep 2016
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