09/12/2022
In Malaysia, can be divided into Semi Flexi Loans, and Full-Flexi Loans.
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 to help you select the best home loan that suits your purchasing needs.
1. Semi-Flexi Loan
The semi-flexi loan is the most common loan type offered by most
banks in Malaysia, and it offers more flexibility as it allows you to
make advance payments on your home loan amount.
By allowing you to make advance payments on 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 a processing fee, or 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.
2. Full- Flexi Loan
With a full-flexi loan, you have the benefit of depositing additional funds or withdrawing your advance payments at any time. The loan amount will automatically be withdrawn from the money parked in your current account as per the loan repayment schedule set out by your bank.
Moreover, when you add additional funds to
this current account, this will reduce your property loan interest.
Please take note that in the event that you withdraw the additional amount paid previously, the interest that you saved will be chargeable. Flexi loan borrowers are also subjected to
a fixed monthly fee of around RM5 to RM10.
While the cost is negligible, it’s still an extra cost on top of your monthly home loan payment. Flexi loans aren’t available at most banks in Malaysia either, so it can be hard to shop around for the best flexi loan rates. Additionally, the interest rates for full-flexi loans can be comparatively higher than the ones offered by term loans.
Example of reducing loan interest⬇️
Let’s say your loan amount is RM800,000. Sometime in the future, you have accumulated some savings and
wish to pay a sum of RM300,000 into your home loan account. Your loan interest will be reduced by the amount of advance payment paid, calculated upon the outstanding balance of:
RM800,000 – RM300,000 = RM500,000