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As the saying goes “There’s no place like Home”. Buying your own home is one of the  biggest financial decisions we make during our lifetime. The Majority of people, regardless of whether they buy as an investment or to live in, will finance their home through a housing loan. Without a guidebook, it can be challenging yet engrossing to compare different housing loans that fit into your needs, for example interest rates, withdrawal options and lock-in periods. 

Does it sound similar to your current situation? Let’s take a look at some of the common questions listed below before making your move.

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Which banks offer the best rates?

“Which banks offer the best housing loan rates?” is often the first question that comes to mind.  However, there is no absolute answer for this question because interest rates vary with numerous factors such as the  loan amount, loan tenure,  credit history (http://www.loanstreet.com.my/learning-centre/5-things-banks-look-for-when-applying-home-loan) and so on. Is it true to say that the lower the interest rate, the lower your payment?. Generally, yes. Nevertheless, solely looking at the interest rate alone may lead you to making a suboptimal decision. Be reminded that you should also pay attention to the terms & conditions (T&C) on paper because they affect your loan instalment amount as much as the interest rate does. For example, imagine that the T&C states that the loan is bundled with 5 years lock in period (early termination) and 5% penalty fee. It means that without paying a 5% penalty based on your outstanding balance, you cannot pay off the outstanding balance or refinance the loan within the first 5 years. 

The statement above is not meant to undermine the importance of interest rates in a loan agreement. Interest rates do play a crucial role in your monthly instalment and the compounding effect scales up your total payment. In other words, even a slight interest rate difference in your monthly installment will eventually accumulate to a huge amount of money paid additionally when you look back at the end of the loan tenure. 

Which bank provides full flexi loan service?

Some people may not be aware of the effect of flexi, semi-flexi and non-flexi loan option when comparing housing loans. Essentially, a flexi option allows you to put withdrawable additional money in your loan account. A full flexi loan allows you to withdraw without incurring any charges whilst a semi flexi loan charges you when withdrawing money from the account.  Read Loanstreet's article about full flexi vs. non flexi property loan (http://loanstreet.com.my/learning-centre/flexi-vs-non-flexi-property-loan-options) to find out more about the different options.

In this respect, we recommend you to go for full flexi loan if you have additional money to make advance payment in order to reduce your outstanding balance. Furthermore, the cash balance in the account will be excluded from the outstanding balance during interest calculation. This gives you more flexibility and just imagine how much you can save by paying less interest! Nonetheless, you might have different needs and there is nothing wrong with applying for a non-flexi loan because the interest rate could be lower still.

For those who are interested in applying for full flexi loan, you can refer to the table below to kick start your selection process.

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Which loan package has the shortest lock in period?

Lock in period is another factor that you should consider. As the name implies, the lock in period is the time range when penalty fees are imposed if you intend to pay off the loan early. The penalty fees also applies to any changes in T&C of the contract as well as cancellation and conversion of the loan agreement. In general, penalty fees ranges from 2% to 5% of the outstanding loan balance. Should the loan packages in comparison consist of lock in period, it is always wiser to choose the shortest lock in period with low penalty. However, some banks do not charge a penalty if advance notice is given. Moreover, for loan packages with zero lock in period, it might have higher interest rate as compared with loan packages with lock in period. You can check our home loan comparison (http://www.loanstreet.com.my/home-loan) tool to see the different lock in periods offered by different banks.   

Which bank approves loan application in the shortest period of time? 

It is very difficult to determine which bank has the shortest approval time because banks have different procedures and different requirements for applications. On an average, it takes them about one to two weeks to approve the loan if complete documents are submitted. To prevent any delay of approval time, prepare yourself a checklist of the documents required by the banks. 

Conclusion

Buying a house can be a major milestone in your life, that’s why you need to plan carefully when searching for a housing loan to prevent any regretful decisions. Although housing loans benefit you by spreading the cost over a longer period of time, we still see borrowers suffer from paying their monthly instalments due to the lack of planning on their finances. To avoid plunging into this financial predicament, do yourself a favour by consulting the experts before taking on a loan. 

(Written by: Loanstreet - http://www.loanstreet.com.my)

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Come and join our discussions with topics similar to this article:

1) Which bank offers the best loan rates? - http://www.propsocial.my/topic/15/which-bank-offers-the-best-loan-rates-posted-by-wernloong

2) What is base rate and how will it affect housing loan? - http://www.propsocial.my/topic/19/what-is-base-rate-and-how-it-will-affect-our-property-loan-posted-by-nicholas-ng

3) The road map to property buying - http://www.propsocial.my/topic/58/the-road-map-to-property-buying-posted-by-propsocial-editor

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Ah... My first major milestone. Honestly, buying my first home was the least of my concerns. Wait 'til you start financing it (the monthly instalments and the endless bills that come with the home!), managing it and maintaining it (more money goes out at this two stages). Once you've gotten past the buying stage and start paying your first monthly instalment, that's when the stress kicks in.

At least, that was the case for me. It could be different for other first homebuyers :)

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My consideration:
1. Type of loan: Flexi / term / fixed rate
Personally I always choose Flexi for both own stay and investment. Some people argued that fixed rate is best for own stay but I'd rather dump in all the cash I have to save on interest - provided I don't have an better use of the cash at that point of time.

2. Interest rate
Needless to say the lower the better :P

3. Convenience of the bank facilities
One of the bank loans I have is with XXX bank. For asking an old bank statement, I need to travel down to their HQ. It was not located at a convenient location. Public transport can't bring you there (yes, even taxi did not want to go there). Walked about 3km under afternoon sun.

4. Lock in period
For high rise investment, I don't mind get locked for 3 years. But nowadays I see more banks do not have lock-in period.

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Things to Look For When Applying A Housing Loan - A good banker!

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Other considerations - MRTA requirement, free lawyer fees loan agreement, ease of application, good customer service of the bank staff...

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But in situations like when you are buying a new property during launching by developer, usually they have only about 2 - 3 panel banks for you to choose from and usually these are the ones that can provide good rates as compared to if you go direct.

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I think UOB and Maybank provide good loan rates.

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If you plan to sell off your property soon (flipping)... not wise to take any MRTA, most banks don't require you to take MRTA nowadays.

Can consider MLTA instead.

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welcome to get an MLTA with me :) haha. 

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MLTA is Investment Linked Policy right? Most commission for insurance agents I think. 

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usually basic term insurance is not non-investment link insurance. you may get an financial planner/agent to advice you further on that part.

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Ngoi, what's the difference between MLTA and MRTA? I always get confused between these 2.

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https://www.imoney.my/articles/mrta-vs-mlta-need

MRTA Vs MLTA: Which Do You Need?  

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Do banks make it compulsory to buy MRTA or MLTA... just like property insurance is a must?

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Dominic, some banks make it compulsory upon taking up home loan from them. Such as UOB Bank.

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Does UOB offer better rates? since they are so "careful" when giving out loans...

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Now which bank is more lenient and still offer decent amount of loan with good rates?

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