Want to learn more about the different housing loans available in Malaysia? Here is a quick run-down of the different home financing products – basic term, semi flexi and full flexi loan – being offered by banks to aspiring home buyers.
Congratulations future homeowner on your next big life decision. Buying a new home can be daunting, especially if you’re unsure about the different types of home loans available.
In Malaysia, housing loans can be divided into three main categories: Basic Term Loan, Semi Flexi Loan, and Full-Flexi Loan. There is also another option, which is the Islamic housing loan . Most of the property loans in the market are variable interest rate loans, whereby the interest rate is tied to the base rate (BR) of banks.
You may think that the loan package with the lowest home loan interest rate might be your best bet, but that may not necessarily be the case. We’ve listed the pros and cons of all four different home loans to help you select the best home loan that suits your purchasing needs.
This is the most no-frills, conventional type of home loan in Malaysia. Most people go for this type of loan due to its simplicity. A basic term loan generally means that you will pay a fixed amount of instalment throughout your loan term, without having the flexibility to reduce the loan interest at any point in time.
With a basic term loan, you have a fixed monthly instalment amount to be paid over the loan term. For example, let’s say your monthly loan instalment is RM1,000 for a 30-year loan tenure. This is the exact amount that you will pay over the next 30 years – so you’ll be certain on whether you can afford the loan repayment and not having to worry about your financial commitment increasing.
In short, this type of home loan offers no flexibility. Let’s say you have the extra money in a certain month and wish to pay more. Either the bank will reject you, or the additional sum will be considered as a prepayment for future months and will not be treated as an advance payment to help reduce your loan interest. On top of that, you may not be able to withdraw additional funds that you paid above the set amount either.
Most banks also include a penalty clause, where approximately 3% will be charged if you were to settle the mortgage earlier, within the first 2-5 years. In any case, you could make a request to the bank for special considerations, but the final decision is up to their discretion.
The semi-flexi loan is the most common loan type offered by most banks in Malaysia, and it offers more flexibility as compared to basic term loan as it allows you to make advance payments on your home loan amount.
By allowing you to make advance payments on www.paydayloansohio.net/cities/miamisburg/ your home loan amount, the semi-flexi loan will reduce your loan interest because the principal amount has been lowered. As a result, you’ll save money in the long run. Plus, going for a semi-flexi loan allows you to withdraw additional sums that you have paid above the set payment schedule.
Depending on the terms and conditions, you may or may not need to make a request to your bank to pay the additional amounts. In addition, when you choose to withdraw additional sums you may be charged with a processing fee, penalty, and/or go through an approval process. The home loan interest rate may also be higher when compared to a basic term loan, but this isn’t always the case so it’s best to “shop around” for several options so you can make an informed decision.