Tips for Getting Home Loan

Tips for getting home loan.| Most Malaysians probably thinking there is nothing more intimidating which is signing up for home loan to buy a house for the very first time like your very first strata title house in Malaysia. Not only you are making final decision that could affect the best part of working life; you will also need to deal with bank letters of offer that contain jargon's that you don’t understand  and loan officers saying words like “lock-in period” and “variable rate” with seemingly intention other than to make you confuse. 

While finding a new home can be exciting, whether by using a real estate agent service or doing everything all on your own, navigating the mortgage process can be overwhelming for some. Knowing what steps you need to take can help the process go more smoothly. Our house wont just be our home for a while, on the long run it will be a very lucrative investment once it value have appreciated. We could build our dream house from the money gained by selling the house. Once you have an accepted offer, here’s what you need to know to make sure your mortgage application stays on track. 

Here are some questions for you to ask:

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Question 1: What is this home loan about?

First off, the basic and easiest question, find out if the loan offered is a Term Loan or a Flexi Loan. In layman terms, the term loan is a standard home loan account, as for flexi loan is linked to current account. For flexi loan, you are able to deposit extra money into linked current account to reduce your principle loan amount or withdraw extra money that you have deposited as you may see fit. Usually, it is just a fee of RM10 per month to maintain the said current account. 

Like any big project, a successful home buying experience is all about getting the details right from start to finish. Buying a home is a big financial decision for most of us as it is a long-term commitment. Choosing the housing loan to pay for the new home is just as important. Both these decisions require careful planning in order to choose the right home and the right housing loan that best suits your personal needs. We need to plan well ahead, failing to plan is planning to fail. This could lead to losing our livelihood or in worst case scenario ending our marriage. Something we would definitely want to avoid at all cost. That’s why we need to consider all the options including the house inheritance if bad things happen in life.

Question 2: Is this interest rate the best offer for you yet?

With any matter involves in borrowing money, keeping the loan interest as low as possible is ideal for now. Based on sharing experiences from many home buyers, it is common tendency that for loan officers to let you know that “all loan rates are the same”. But, there is something as small as 0.05% difference could yield thousands of Ringgits in savings so that it would be in your best interest to get the best interest rate. 

You may apply for multiple numbers of home loans as much as three for comparison purposes, as long as you don’t sign the offer letter. You can bargain and negotiate for better rates with all the banks you are interested to sign up with. 

Question 3: Is the interest rate fixed or variable?

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Most of the home loans are calculated based on Base Lending Rate (BLR) that’s regulated by the Bank Negara Malaysia, click here to check for the updated news on BLR. For example the current BLR is 6.6% p.a. and the bank offers you at 2.4% p.a. this shows that your home loan is being charge at the interest of 6.6% - 2.4% = 4.2% per annum. You tend to pay more if BLR goes up and lesser interest when the BLR goes down. This calculation is also known as Variable Rate. 

Meanwhile, some banks may offer you Fixed Rate, which remains the rate unchanged throughout loan period. For example, you’re offered a fixed rate of 4.2% p.a. in your offer letter. Basically, you will be paying the same 4.2% during your loan tenure no matter how the BLR changes. 

Being a home buyer, there isn’t really “golden formula” to determine better option though many believers insist interest rates as a whole about to increase. If you get a low fixed rate, it would be good to lock in your home loan at this rate. 

Question 4: What happens if I settled the loan early?

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At times, you wish to refinance your home loan, shorten your loan period or pay it off entirely. This requires you to cancel your loan agreement before the loan period in the form of an early settlement.  If this happens during the “lock-in” period, you will have to pay a penalty. In Malaysia, the “lock-in” period is usually three to five years though some do not have lock-in periods at all. The penalty charges range from 2% to 3% of the full loan amount. If your loan package indicates an overly lengthy lock-in period or ridiculous penalty charges. Well, you’re better off finding other banks’ offerings. 

Hopefully, with all the questions above, you will be certain some of the most important terms of your home loan. But along the way, there will be more complicated questions but it’s alright. At least you have gone through the basic issues for now. 

Also read : TIPS TO BUY HOME

All the best!