We have a long-time client, and she asked How To Reduce Housing Loan Interest? She has a home loan account with OCBC bank.

So, how do you reduce housing loan interest? Well. I’d say there are many ways out there, but before you decide which to use, it’s essential to get to know the product itself.

In this case, The Product is OCBC Home Loan.

So, OCBC Home Loan is not foreign to me. I used to sell a lot of OCBC Home Loan in the days. And, we even get some recognition for it. But that’s the good old days.

I love to sell OCBC Home Loan because it’s straightforward and quite a simple product to understand.

As you know, in the market, there are full Flexi home loans and semi-Flexi home loans. OCBC Home Loan is a semi-Flexi home loan.

Typically, the semi-Flexi home loan allows you to put in extra payment and withdraw it back with a minimum fee.

For OCBC Home Loan, the withdrawal fee is RM10 per transaction. And nowadays, you can withdraw it online.

So, how to make an extra payment?

There are two ways to do it.

  1. Advance Payment (AP)
  2. Capital Repayment (CR)

how to reduce housing loan interest

Advance Payment (AP)

Now, you can make an extra payment, and this additional payment will consider as Advance Payment.

Example of Advance Payment

Let assume your installment is RM2000 per month. If you have extra money, from other saving or bonuses, you pay RM3000 on the particular month. The additional RM1000 will be treated as advance payment.

The RM1000 will also be used to reduce the principal loan outstanding. By doing this, you will immediately save the interest charged due to daily interest calculation.

Let say you did this three times consecutively, so you made an extra payment of RM3000 in total.

On the next installment, you suddenly run out of money because of some emergency.

OCBC Bank will deduct RM2000 from your extra Payment of RM3000 and treat it as your regular installment. So, you no need to worried about having arrears in your loan account. Where everyone knows, it going to look bad in the CCRIS report if you have arrears.

how to reduce housing loan interest

How to make Advance payment?

You can make Advance Payment in a lot of ways, like over the counter, ATM, or even online.

As soon as the system triggers an extra payment, it will treat as an Advance Payment unless there is a remark over the counter saying the additional amount is for Capital Repayment.

Now you know, Advance Payment can be used to deduct the home loan principal, and eventually, it will save you interest.

And we also know that Advance Payment will be used by the bank to deduct as installment.

The Downside of Advance Payment

However, there is a downside to the Advance Payment.

The Advance Payment doesn’t allow for any withdrawals. Meaning, the extra payment that you make earlier – RM3000 is not permitted to be withdrawn from the account.

You only can deduct your installment and save your interest. And that’s it!

For some people, this might be a bummer.

Conclusion About Advance Payment

So to conclude, the features of Advance Payment are as below.

  1. The bank will use Advance Payment to offset due installment.
  2. Advance Payment will be used to deduct the principal and save interest.
  3. You can make Advance Payment over the counter, ATM, and online.
  4. There is no withdrawal facility for Advance Payment.

ocbc home loan

Capital Repayment (CR)

Another way of making extra payment is by way of Capital Repayment. Capital Repayment allows you to make an additional payment, just like Advance Payment.

Like Advance Repayment, Capital Repayment will reduce the principal part of your outstanding loan. Hence, this will save you some interest.

You can find this clause in the OCBC Letter offer stated something like this.

“All Prepayment whether Redrawable Prepayment or Non-Redrawable Prepayment will be applied towards the reduction of the balance outstanding under the Term Loan Account(s) after settling all overdue interest, installments, charges, and fees. Computation of interest for the Term Loan Account(s) will be based on the balance outstanding less the Redrawble Prepayment or Non-Redrawable Prepayment.

  • Redrawable Prepayment = Capital Repayment
  • Non-Redrawable Prepayment = Advance Payment

Capital Repayment also is known as Redrawable Prepayment, and Advance Payment is Non-Redrawable Prepayment.

How to make Capital Repayment?

Capital Repayment only can be made over the counter and at the ATMs. So, this can be seen as inconvenient to some people.

When you do it over the counter, you have to mention that you want to make a Capital Repayment.

While for the ATM Machine, you have an option to choose Advance Payment or Capital Repayment.

Whenever the system tags the extra payment as Capital Repayment, only Capital Repayment features will apply.

ocbc home loan

Here are the features of Capital Repayment.

  1. The extra payment under Capital Repayment will be able to reduce the principal and save interest.
  2. Under Capital Repayment, all extra cash is allowed to withdraw for future use with minimum withdrawal fees of RM10.
  3. Capital Repayment will not be used to offset home loan arrears. (Bizzare? But true. You have to withdraw it first; then you can make the installment)

The Condition Of Redrawing

  1. Each redrawing must be multiples of RM1000 subject to a minimum amount of RM5000.
  2. Only allow one redrawing per day.
  3. The redrawing fee is RM10 per transaction.
  4. The borrower has to give bank notice, and the bank will process it within three business days.
  5. There is no event of default in the home loan account.

Method Of Redrawing

  1. Over the counter.
  2. You can request to redraw through the OCBC internet banking.
  3. Call OCBC Customer Service to put in the request.

( Subject to customer service officer, some might request you walk in the branch.)

Come back to the question of How To Reduce OCBC Housing Loan Interest?

My answer is to pay more.

But with OCBC Home Loan, you have to decide to pay more for Advance Payment or Capital Repayment?

There is another way to How To Reduce Housing Loan Interest?

Well, we always advise our client to visit back the bank and request for reduction of interest rates.

You can write in or fill up a form in the branch. Typically, the bank will look at the overall of the home loan account before reviewing its decision.

It might be a long shot. But, at least you tried.

Special note:

It is crucial to note that banks in Malaysia have different terms when it comes to extra payments made in cash, which include advance payment, prepayment, and capital repayment. Each bank has its own interpretation of these terms, so it is advisable to contact your bank and clarify the specific terms and their corresponding definitions.

It is best to avoid any unpleasant surprises that might arise from making extra payments with the expectation of a reduction in home loan interest, only to find out that the payments were not applied accordingly.

Please also take note, all home loan products are subject to terms and conditions apply.

If you’re interested in applying for OCBC Home Loan, feel free to call us today at 012-6946746, and we will introduce our vibrant OCBC Sales Personnel to you.

If you enjoy this article, feel free to share this article with your friends and family. And I see you in the next one.


Melissa Lee

Online Mortgage Consultant

012-6946746 (David)


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