Can you afford to service your SPEF loan?

House Buyers Association advises would-be prospective borrowers against being misled by the lower instalments during the first five years.

PETALING JAYA: A consumer group has voiced concern that those who opt for a government financing scheme to buy houses may find the loan instalments unaffordable.

Speaking to FMT about the Special PR1MA End-Financing (SPEF) scheme, National House Buyers Association (HBA) secretary general Chang Kim Loong noted that borrowers would start to repay the principal amount in the sixth year. Before that, they would be paying the interest in instalments.

Chang said numbers provided by PR1MA showed that the annual compounded increase in instalments could reach 8.25%

“This could mean that the expected annual rate of increase in loan instalments would be higher than the annual expected increase in salaries,” he said.

“Prospective borrowers must plan ahead and ask whether they can afford the revised loan instalment when it actually kicks in.”

He advised prospective borrowers against being misled by the lower instalments during the first five years. In assessing their future repayment capability, they must consider lifestyle changes, such as those brought about by the birth of children, he said.

“We do not want a situation where there is a massive foreclosure of PR1MA properties because the owners cannot afford the revised loan instalments.”

Chang said the SPEF could not be regarded as a permanent solution to the problem of housing for the target group. The root of the problem was that property prices were beyond the reach of a majority of the Bottom 40 and Middle 40 groups, he added.

He also said the scheme, which provides financing of up to 110%, might encourage PR1MA developers to increase house prices rather than force them to be more efficient.

He said PR1MA properties should not be a “zero entry cost” product as this would encourage speculation and impulse buying.

“Buying a property is a long term financial commitment which requires detailed financial planning. Prospective buyers must prepare to service their loans by saving money from an early age.”

Otherwise, he said, a house buyer would be slaving for a bank throughout his life as a higher loan meant a higher loan repayment.

He said his association would encourage prospective buyers to continue renting. “With the current economic slowdown, it is a tenant’s market, and prospective buyers can use this opportunity to find properties with attractive rental rates and start saving for their dream homes.”

PR1MA CEO Abdul Mutalib Alias has been quoted as saying that SPEF would help some 15,000 Malaysians who had been unable to secure bank loans for PR1MA homes.

As of last year, he said, 60% of successful home applicants had had to forgo the PR1MA offer because their loan applications were rejected.

Last September, citing the difficulty faced by prospective house buyers in securing loans, Urban Wellbeing, Housing and Local Government Minister Noh Omar proposed that housing developers be given money-lending licences so that they could give loans to house buyers. -FMT