When it comes to buying a home in Malaysia, one of the biggest challenges you’ll face is finding the right home loan option.
With so many home loan products available, choosing the one that’s best for you can be overwhelming.
In this article, we’ll take a closer look at four popular types of home loans in Malaysia: traditional home loans, semi-flexi home loans, full-flexi home loans, and fixed-rate home loans.
Traditional Home Loans
Traditional home loans are Malaysia’s most well-known type of home loan.
Banks and other financial institutions offer these loans, and they are typically designed for borrowers who are looking for a straightforward, no-frills home loan option.
Individuals who opt for a traditional home loan typically prefer a simple and uncomplicated loan transaction with the bank. They prioritize a straightforward home loan without any additional features or complexities.
A traditional home loan offers the benefit of not incurring monthly or redraw fees, as this type of home loan does not come with any special features.
With a traditional home loan, borrowers are typically not allowed to make additional payments to their loan account in order to save on interest.
In fact, some banks may impose penalties on borrowers who attempt to make such payments.
Semi-Flexi Home Loans
Semi-flexi home loans are a newer type of home loan that has become increasingly popular in Malaysia in recent years.
With a semi-flexi home loan, you have the option to make prepayments on your loan, which can help you pay it off faster and save on interest charges.
One of the key benefits of a semi-flexi home loan is that you can make prepayments without incurring any penalties.
This can be especially helpful if you receive a bonus or windfall and want to put that money toward paying off your home loan.
The features of Semi-Flexi home loans can be slightly varied from one bank to another, so it is recommended to carefully review the terms and conditions before committing to this type of loan.
Additionally, a key feature of a semi-flexi home loan is the ability for borrowers to redraw their prepayment amount in the future, typically with a minimal redraw fee ranging from RM10 to RM50, depending on the bank.
However, borrowers are typically required to give the bank advance notice before any transfer is made to their savings account.
All these features are the main selling points of semi-flexi home loan products.
Full Flexi Home Loans
Full-Flexi home loans are almost similar to semi-flexi home loans, but with one key difference: they offer greater flexibility and control over your home loan payments.
With a full-flexi home loan, you can make prepayments, withdraw funds, and even take a payment holiday if necessary without any notice to the bank.
Another benefit of a full-flexi home loan is that it can help you save on interest charges.
Because you can make prepayments whenever you have extra cash on hand, you’ll pay less in interest over the life of the loan.
Previously, borrowers had the option to make a 100% prepayment in order to offset their outstanding loan amount.
For instance, if a borrower has an outstanding loan amount of RM200,000 and makes a prepayment of RM200,000, the whole monthly installment payments will only deduct for the principal amount, with zero amount going towards the interest portion.
Zero interest?!
As a result of this loophole, most banks have implemented changes to their full-flexi home loan products.
Currently, many full-flexi home loans include a margin cap of around 70-75%, effectively limiting the amount of prepayment that can be made in order to offset the outstanding loan.
If you want to learn more about which banks do not have a capping on their full-flexi home loans, please do not hesitate to contact us.
Full-Flexi home loans are often a popular choice for self-employed individuals or business owners, as they offer greater flexibility in terms of payment and withdrawal options with fewer restrictions.
However, keep in mind that Full-Flexi home loans often come with
Monthly maintenance fee of RM10 and account set up fee of RM200.
Fixed-Rate Home Loans
Finally, fixed-rate home loans are a popular choice for borrowers who want the security of knowing exactly what their monthly payments will be for the life of the loan.
With a fixed-rate home loan, your interest rate will stay the same throughout the loan term, regardless of any changes in market conditions.
One of the benefits of a fixed-rate home loan is that it can protect you against rising interest rates in the future.
You’ll know exactly what your monthly payments will be for the life of the loan, even if the OPR rate increased. This makes it easier to budget and plan for the future.
However, keep in mind that fixed-rate home loans may come with higher interest rates than other types of home loans, and you may have to pay penalties if you decide to refinance or pay off the loan early, like less than five years.
Fixed-rate home loans do not typically offer the same level of flexibility as semi-flexi or full-flexi home loans.
In fact, fixed-rate home loans are more similar to traditional home loans, with the primary difference being a fixed interest rate for the duration of the loan term.
However, it allows for prepayment and doesn’t penalize borrowers.
Choosing the Right Home Loan for You
Ultimately, the right home loan for you will depend on your individual financial situation and goals.
When comparing home loan options, be sure to consider factors like interest rates, loan terms, fees, and prepayment options.
If you want to ensure that you are making the right decisions when it comes to your home loan, we highly recommend working with a reputable mortgage consultant like us.
Don’t hesitate to reach out to us for more information on how we can assist you in finding the best home loan options for your unique needs and financial situation.
We look forward to hearing from you soon.
Contact us today if you have any more questions.
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