Home Loan

What is a home loan?

A home loan is a sum of money that you apply for or borrow from a bank to assist you in purchasing your dream home. Each loan will be charged an interest rate determined by the loan amount and the repayment period. So, keep in mind that each bank will have a different interest rate, and you should do some research before applying for a home loan.

When should I apply for a home loan?

The best timing to apply for a home loan is when:

  • There is no other outstanding loan from your side
  • You have enough money saved for a down payment
  • The interest rate is low
  • All due diligence has been completed

What are the types of home loans available in Malaysia?

In general, certain banks in Malaysia offer 3 types of home loans:

  • Term Loan

    A term loan has a predetermined repayment schedule. You need to pay the same amount per monthly instalment for the loan duration. Furthermore, if you make any additional payments, you will not be able to withdraw the other payments with this term loan.

  • Semi-Flexi Loan

    A semi-flexi loan allows you to make an advance payment of your loan amount, and make your total interest is also reduced due to the advance payment. You can, however, request to withdraw the additional costs you have made, but you will be charged a processing fee. Please keep in mind that processing fees may differ from one bank to another.

  • Flexi Loan

    A flexi loan allows you to make additional payments or withdraw excess funds from your current home loan account without going through the complicated approval process. In which case, the instalment amount will be deducted automatically from your existing account each month. Not just that, you also have the option to withdraw your additional payments at any time you want.

What are the differences between a home loan and other types of loans?

  • Home Loan

    Secured loans that you (borrower) will obtain from a lender (bank) to purchase a property as collateral.

  • Personal Loan

    An unsecured loan obtained from a bank, credit union, or online lender.

  • Educational Loan

    A sum of money borrowed to finance postsecondary education or higher education expenses.

  • Overdraft Loan

    You only have to pay the interest rate on this loan, which will be deducted directly from your current account. There is no repayment period for the loan. However, the interest rate you must pay is higher than usual.

  • Al-Bai’ Bithaman Ajil

    An Islamic home loan based on the buy-and-sell principle. The bank will pay the current market value for the property on your behalf. They will then sell it back to you at an agreed-upon price in monthly instalments.

  • Musharakah Mutanaqisah

    An Islamic home loan in which you and the bank agree to purchase a home. You will become a bank tenant, and your monthly payments will cover both your loan and a portion of the bank’s ownership stake in the property.

What are the eligibility criteria to apply for a home loan?

The common eligibility criteria are:

  • A Malaysian citizen
  • A foreigner with a valid work permit and visa
  • Between 18 to 75 when the loan matures
  • Your joint applicant must be a direct relative, such as a spouse, parents, siblings, or child

Each bank has its own set of eligibility requirements. As a result, consult with a representative bank to obtain accurate information.

How long will a home loan application process take?

Once you have submitted all of the required documentation to the bank of your choice, the application usually takes 2 days to a week. The loan amount, loan term, and eligibility will all influence how fast the process will take. However, once again, it is dependent on the bank you select.

Which platform can I apply for a home loan from?

You can choose and apply for the home loan that you want by going to the selected bank branch or by visiting their official website.

Why did my home loan application get rejected by the bank?

There could be several reasons why your home loan application was rejected, some of which are as follows:

  • Your job stability
  • You applied for the loan at the wrong bank
  • The developer and/ or their project is on the bank’s blacklist
  • You have a large number of loans or commitments that need to bear
  • Poor CTOS and CCRIS report
  • Not eligible due to the current income and financial obligations

There are other reasons why your home loan application was rejected.

Does a home loan generate interest?

In Malaysia, home loan interest rates are determined by Base Rates (BR), which specify the lowest interest rate that banks will offer on home loans. The average annual interest rate is between 1.75% to 2.75% p.a.

Is it possible for me to refinance my home loan?

Yes, you can refinance your home loan based on new terms and conditions according to the bank you choose.

What are the common terms for home loan?

  • “Lock-in period”

    A period during which you will be penalised if you pay off your home loan earlier than agreed. The fine ranges from 2% to 5% of the total amount.

  • “Margin of Finance (MOF)”

    The amount of money that a bank will lend you for your loan determines how much cash you must pay upfront for the property.

  • “Interest rates”

    It is the amount of money you paid to the bank in addition to the principal amount.

  • “Valuation”

    An estimate of the property’s worth and the stamp duty is calculated based on its value.

  • “Base rate”

    The base rate is the interest rate charged by Bank Negara Malaysia to commercial banks for loans.

  • “Base Lending Rates (BLR)”

    A rate set by each bank based on the cost of borrowing the money to be lent to borrowers.

  • “Refinancing”

    Repaying an existing loan and replacing it with a new one with new terms and conditions.