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| 1. |
What is Hong Leong Flexi Property
Financing-i?
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HL
Flexi Property Financing-i adopts similar concept with the
traditional Islamic financing of Bai Bithaman Ajil (BBA).
However, unlike traditional Islamic financing where the profit
rate is fixed throughout the tenure, the Flexi-i has the combination
of fixed and flexible rate.
Under BBA
contract, bank will buy the property from the seller and
re-sell it to the buyer at a profit (Bank' selling price
= Principal amount + Profit), while allowing the buyer to
pay the bank in installments.
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| 2. |
Is the profit rate calculated
based on daily or monthly rest? |
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The profit
rate is calculated based on the daily rest basis. |
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| 3. |
Is the facility available
for property under construction? |
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No. Currently only available for completed property
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| 4. |
What is the
definition of the terms used under Flexi-i? |
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Bank's Purchase Price |
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Bank's Selling Price |
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Contracted Profit Rate
(CPR) |
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Islamic Financing Rate
(IFR) |
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Variance |
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Effective Profit Rate
(EPR) |
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1.
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Bank's Purchase Price
is equivalent to the total financing amount (financing
amount + Takaful
MRTA premium if it's financed by us). |
| 2. |
Bank's Selling Price is
the total amount payable by the customer (total financing
amount +
profit) |
| 3. |
Contracted Profit Rate
(CPR) is the ceiling rate used to calculate the Bank's
Selling Price. It
represents the maximum rate to be charged to the customers. |
| 4. |
Islamic Financing Rate
(IFR) representing the bank's cost of financing. The
concept is similar to
the Conventional Base Lending Rate (BLR). The current
IFR is benchmarked against BLR. |
| 5. |
Variance is the credit
spread in which the concept is similar to the spread
of the conventional
lending (Spread +BLR) |
| 6. |
Effective Profit Rate
(EPR) is the actual rate charged to calculate the monthly
earning (variance
+ IFR/BLR). The change in IFR would have an impact on
EPR since it is pegged against IFR. |
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| 5. |
How does the combination
of fixed and flexible rate work? |
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It works
similar to the Conventional Mortgage Loan where the interest
rate is charged based on the current prescribed interest rate
(Spread + BLR). However, unlike conventional loans, the Flexi-i
financing has a ceiling rate imposed, which act as a protection
if the interest rate are to rise substantially. The ceiling
rate is the maximum rate the bank is allowed to charge. If
the BLR drops, customer will also benefit from the lower rate.
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Customer 's Selling Price
is calculated based on CPR |
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The shaded area under
EPR represents the actual profit charged. The difference
between CPR and
EPR is treated as rebate |
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When the current EPR is
higher than the CPR, bank can only charge the CPR (the
maximum rate
allowed to be charged) |
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| 6. |
How to determine the Bank's
Selling Price? |
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Bank's Selling
Price is the total amount payable to the bank (financing amount
+ profit). The Bank's Selling Price is calculated based on
the Contracted Profit Rate (CPR). If compared with the selling
price of traditional Islamic financing, the selling price
of Flexi-i is higher. Why?
Because the CPR represents the maximum rate the bank can
charge, but the customer is not charged with this rate,
instead the customer is charged at EPR.
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| 7. |
How is the
monthly installment calculated? |
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The monthly installment is calculated based on EPR or the
prescribed rate at the point of application.
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| 8. |
Would monthly installment
vary in the case of EPR increase? |
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No. The monthly installment would remain the same throughout
the tenure. The actual installment would be lower due to
lower profit rate charged. The difference between the existing
installment and actual installment will be given as rebate,
which is allocated to principal, thereby shortening the
financing tenure.
However, if the installment amount is not sufficient to
cover the profit portion (in the event of any hike in EPR),
the installment amount will be adjusted to cover the profit
portion.
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| 9. |
Under Flexi-i, what type
of installment is available, single or multi tiered? |
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At the moment, only single-tiered installment is available
(instalment is calculated based on effective profit rate
at the point of application.)
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| 10. |
Would the customer end
up paying the same amount as the contracted Bank's Selling
Price? |
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No. This is because the difference between CPR and EPR
would be treated as rebate but could only be enjoyed upon
maturity or early settlement.
Since the actual profit rate charged is lower than the
rate used to calculate the Bank's Selling Price, the bigger
portion of the installment amount will be allocated to the
principal. Thus, customer will end up paying lesser profit
to the bank.
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| 11. |
Is prepayment allowed? |
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Yes, prepayment is allowed anytime and no notice is required.
However, to perform prepayment, the payment amount should
be at least 3 monthly installments.
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| 12. |
Is there any penalty charge
for early settlement of account? |
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Yes. The bank will impose 2.5% of penalty charge if account
is early settled within the first 5 years from first drawdown
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| 13. |
Is there a clause for
penalty charge stated anywhere in the LO? |
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Yes, the penalty charge's clause is stated in the LO but
it does not mention the specific rate to be charged, only
on the reduction of total rebate to be given to the customer.
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| 14. |
When will rebate be given
to the customer? |
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Rebate
(or Ibra') will be given in the event of:
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EPR is lower than the
CPR |
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Prepayment is performed |
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Early settlement |
This rebate will be given in the form of reduction in the
Bank's Selling Price (since the total amount payable is being
calculated upfront) and not by cash. |
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| 15. |
What are the differences
between Flexi Property Financing-i and traditional Property
Financing-i? |
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The differences are as follows:
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Traditional Property Financing-i (BBA) |
Flexi Property Financing- i |
| 1. |
Profit rates
are fixed |
Flexible
rates (similar to conventional loan). CPR is used to
calculate bank's selling price |
| 2. |
Bank's Selling Price is calculated
based on fixed multi tiered rates
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Bank's Selling
price is calculated based on CPR |
| 3. |
Monthly installment is calculated
based on multi-tiered rate
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Monthly installment
is calculated based on EPR at the point of application |
| 4. |
Multi-tiered and single-tiered installment
available
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Only single
tiered installment available |
| 5. |
No ceiling rate (CPR) imposed
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The ceiling
rate (CPR) is imposed |
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| 16. |
What are the differences
between Flexi Property Financing-i and Conventional Loan? |
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The differences
between Flexi Property Financing-i and Conventional Loan are
as follows:
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Flexi Property Financing -i |
Conventional Mortgage Loan |
| 1. |
Total amount
payable is capped at Bank's Selling Price |
No cap limit
on the amount payable since it is based on the prescribed
rate (BLR + Spread) |
| 2. |
Profit charged
is not capitalized. |
Interest
charged is capitalized. |
| 3. |
Late charges
is based on 1% of the instalment in arrears and is not
compounded |
Late charges
is based on a minimum of RM10.00 or at the rate of 1%
above the prescribed rate on the sums payable |
| 4. |
No notice
required for principal prepayment |
Notice is
required for principal prepayment |
| 5. |
Rate is capped
at CPR |
No capping
of interest rate charged |
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| 17. |
What are the advantages
of Flexi-i? |
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The advantages are:
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Customer can enjoy more
flexible rates and at the same time they will be protected
against interest rate risk by a ceiling rate (CPR) mechanism
if the interest rate were to rise substantially |
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The offered rates are
as competitive as the conventional rates |
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A fixed monthly repayment
throughout the tenure would enable customer to better
manage his or her cashflow |
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Embrace to the concept
of transparency in the transaction since there is no
hidden cost imposed |
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No notice required for
prepayment |
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Rebate will be given upon
maturity or early settlement |
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| 18. |
Is 3rd party financing
allowed? |
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Yes. |
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| 19. |
Is the OD facility available
under this product? |
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No |
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