Here are 7 things about home loans we should know about before applying for one. Actually, in order NOT to be rejected, please read #1 first before signing on the Sale and Purchase Agreement yeah. Remember, banks love to lend us money. However, if we do not qualify for one, they will play safe instead of having our loans under their Non-Performing-Loan (NPL) category.
#1 – BORROW well within our means. Do not overstretch ourselves for a home which will stretch us to the limit every month. It’s totally possible to upgrade later. Better investors do this too instead of plowing everything they have into one property. Buy based on NEED first. Because of this, it is important to equip ourselves with knowledge about home loans.
#2 – Types of loans. There are many types of loans offered by banks. Some of them include overdrafts, deferred payments, term loans, flexi-loans, Islamic financing, interest-only loans, and a variety of others. Ask the loan officer about your options before deciding which one fits you the most.
#3 – Home Loan lock-in period. Several financial institutions will require us to maintain the mortgage with them for a number of years. Uusually it’s around 1-5 years. Within the lock-in period, one is not allowed to switch to other banks or we will be financially penalised. Generally, home loans with lock-in clause has a fixed interest rate. A good thing about this is that it gives us the stability and security of a fixed monthly repayment.
#4 – Fees and Charges. Beyond just down payment, property price and monthly repayment, a home loan application will come with professional and government-regulated processes such as loan agreement, stamp duty, legal fees and a handful of others. These are normally sustained by the buyer. Understand these costs by asking the loan officer.
#5 – Interest rate. The interest rates differ from one bank to another. Bank Negara Malaysia has a site to refer to effective lending rates (ELR) from banks which you can access it here. On top of that, home loans come with either fixed, floating or a mixture of both interest rate. Understand what it all means and how well it suits into our budget.
#6 – Late Payment Penalty. Make sure we pay all instalment payments on time. Ask about the late payments or any default payments. All these are usually stated clearly in the loan agreement. So, do double-check the loan agreement on the penalty.
#7 – Loan Duration. The earlier we buy, the better it is because we could stretch the loan longer. The home loan period can range from anywhere up to 35 years. This depends on our age. As long as we buy a property before we are 30 years old, it’s possible to get a maximum loan repayment period of up to 35 years. The longer the repayment, the HIGHER the total interest to be paid but the LOWER the monthly repayment will be.
From the list from BNM, the banks with the lowest Effective Lending rates include Maybank Berhad, Public Bank Berhad and Islamic Financial institutions such as Kuwait Finance House (Malaysia) Berhad, Maybank Islamic Berhad and Public Islamic Bank Berhad. Happy considering.
Written by Intern Writer, Dina Batrisyia. Edited by Charles.
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