Property Financing in Malaysia

There are hundreds of different home loan products on the market that fit into each of the types of loans explained below. With so many loan packages offered by Banks and Financial Institutions, how do you know which one suits you best? We have provided some pro’s and con’s to help you understand each loan type.

Refinance
Refinancing your home loan to save on your current interest rate and reduce monthly repayments and/or loan tenure and to tap into your home equity for additional funds for emergency and other ventures if your home has increased substantially in value. If your home loan is more than 5 years old, it is likely that you are servicing your loan at a higher interest rate than what is on offer by financial institutions today. However, with the many competitive home loans products on offer especially ones that will cover any refinancing costs including the exit penalty fee exploring refinancing is a worthwhile for loan which is still under lock-in period. Refinancing is to reduce your current interest rate, monthly repayments and/or loan tenure and also consolidate your debts and deposits for better cash flow management

Longest Loan Tenure Ability to redraw all that you have paid into your loan. Revolving credit limit increases as your property appreciates. Older borrowers. Those with insufficient retirement savings.Revolving credit that increases as home value increases. Re-use all sums paid into loan.Penalty for prepayment fees.

Zero Payment (During Construction) Allow you to pay nothing during the whole contruction period. Construction property. Borrowers who are low on deposits but still want that dream house. Also those who may have money in high interest yielding investments and prefer not to cash-out to raise the deposit for the new house. Pay nothing during construction period.

Fully Revolving Credit Loan Fully revolving credit term loan. Prepay and redraw as much as you like. Free personal accident insurance. Any home buyer.Flexible repayment. Full revolving term loanSlightly higher rates.

100% Margin of Finance (SPA Price) Enjoy up to 100% of loan financing. Suitable for those who are strapped for cash at the beginning of the home loan.0 or low outlay from your ownA high margin, which is rarely disclosed, can result in a substantially higher interest rate than you were expecting.

Deposit Linked Flexi Home Loan A home loan and Checking Account combined into 1. The more money you have in deposit, the lower interest you pay on the loan. Allows pre-payments and withdrawals of pre-paid amounts anytime. Suits business / self-employed people. Those who sometimes have excess cash and who are cash-strapped at other times.You can achieve cost savings if you have a windfall, while having the flexibility to redraw on the money should you need it.Require discipline in managing funds. Interest rates may be higher than loans without such features.

Fixed Rate Loan Enjoy a peace of mind knowing that your repayment will never fluctuate with the economy. Enjoy the lowest fixed rate in history. Anyone who values certainty in his monthly payments.Ease in budgeting and assurance that you won’t be paying more, allows you to hedge against future interest-rate hikes.For insurance lenders, insurance is compulsory.

Islamic Home Financing Syariah compliant Home Financings. Those wishing to have syariah compliant financing.”Halal” and rates are fixed. No penalties chargedMay appear more expensive, however, some lenders offer “rabates”.

Floating Rate Loan Packages with rates that fluctuate with Base Lending Rate or BLR less a spread. Any home buyerUsually have a low interest rate. Repayments are also lower.May not offer the features or flexibility of other home loans. Plus installments will increase as rates increase.

Investors’ Home Loan / Low or 0 Lock In Buy and sell, then turn in a quick profit. Check out home loans with zero or low ‘Lock-In’ periods. These home loans allows you to sell the property and pay off the loan early without penalties. Suitable for those who buy and sell, then turn in a quick profit. Allows you to sell the property and pay off the home loan early without penalties.This home loan normally is higher in interest rates.

Low Deposit Loans Low on deposit? Check out home loan that offer high Margin Of Finance or interest servicing only. May benefit 1st Time Owners. Suitable for those who are strapped for cash at the beginning of the home loan.You may be able to take on a bigger home loan, on the assumption that your income will grow.Payments usually increase after few years. May revert to standard.

Hybrid Loans (Fixed & Floating) A home loan to enjoy fixed rates for a few years then revert to floating rates subsequently. Those who value certainty for a fixed period or think that interest rates may drop in the medium term.This type of home loan provide certainty for a fixed period of time. Be prepared for a jump in installments when the rate reverts to floating status, especially if interest rates creep up during the fixed-rate period.

Source: Real Estate Information & Investment in Malaysia Blog