1) Type of home loan
First and foremost, consider what works best for you: a traditional term loan or a flexible home loan (“flexi-loan”). A traditional term loan requires you to pay a fixed amount each month for the entire tenure of your home loan (eg. 30 years), while a flexi-loan gives you the option of reducing your interest whenever you wish (i.e. by saving your extra money into a linked current account. The more you save, the less interest you pay).
If you have a strict and predictable cash-flow pattern, a traditional term loan may be best. If you prefer flexibility in paying off your loan, a flexi-loan is recommended.
2) Interest rate
As of all loans, your priority should probably go to the
bank that offers you the lowest interest rate. Citing an example for a
home loan of RM500,000 over a period of 30 years, the difference in
interest between an interest rate of 4.2% and 4.15% (i.e. a mere 0.05%)
could be well over RM5,000! To find out which bank offers the best home
loan interest rate, iMoney.my provides a home loan comparison table.
Lock-in period is the period you’ll incur a penalty (usually 2-3% of the principle loan amount) if you choose to pay off your home loan in full before it reaches the end of its tenure. When it comes to choosing a home loan, it pays to have a lock-in period that is as short as possible with a penalty that is as low as possible. Also, some banks do not charge a penalty at all if sufficient notice is given.
Again, iMoney provides a table comparing lock-in periods of all Malaysian banks.
3) Margin of financing (how much you can borrow)
Depending on various factors which include the value of the
property as well as your standing with the bank, different banks may
offer you different margins of financing. As you’ll be required to pay
any amount not covered by the home loan upfront, this becomes very
important especially if you’re short on cash.
As an example: for a RM500,000 house, you’ll need to pay
RM100,000 upfront if your Margin of Financing is 80%; but you’ll only
need to pay RM50,000 upfront if your Margin of Financing is 90%.
4) Lock-in period
Lock-in period is the period you’ll incur a penalty (usually 2-3% of the principle loan amount) if you choose to pay off your home loan in full before it reaches the end of its tenure. When it comes to choosing a home loan, it pays to have a lock-in period that is as short as possible with a penalty that is as low as possible. Also, some banks do not charge a penalty at all if sufficient notice is given.
Again, iMoney provides a table comparing lock-in periods of all Malaysian banks.
5) Fees & charges
A home loan application involves professional and
government-regulated processes such as preparation and disbursement of
loan agreement, payment of stamp duty and processing by the bank, just
to name a few. All these processes usually come with fees and charges that will be borne by you, the buyer.
In certain cases, it may also be wholly or partly borne by
the banks as part of your loan packages. Hence, is it best to sit down
with the loan officers (for all the banks you are considering taking
your home loan from) and have them run through the fees and charges with
you. The task may be repetitive and time-consuming… but it’ll be time
well spent.
6) The bank
Lastly, understand that you’ll be dealing with the bank on a
very frequent basis for as long as your home loan is in effect (which
may be 20 to 30 years). With that in mind, you should probably choose a
bank you are very comfortable with. Some of the things you may wish to
think about include:
· Do you have an existing savings or current account with the bank (for ease of inter-account transfer)?
· Are you satisfied with their standard of service?
· Is a local branch available near your home or office?
· Do you consider the bank to be trustworthy and reliable?
· Does the bank offer value-added services that will make your life easier for the long haul?
· How is the bank’s reputation as a whole?
· Does the bank provide online banking facilities which allow you to pay your instalments easily?
· Is your loan officer approachable, so that you can phone him or her anytime you have a question?
Bearing all these matters in mind, good luck in finding
your next home loan and we hope that you have a smooth and beneficial
relationship with the bank which provides you that loan.
This article is provided by www.iMoney.my which
compares between the various loans, savings and insurance schemes
available in Malaysia.
