When you seek for a home loan to finance a property, ascertaining the type of loan you want is one of the first and most important questions you have to ask yourself. In Malaysia, that usually means choosing from one of the three major categories of home loans: Basic Term, Semi-Flexi or Full-Flexi.
If you’re relatively inexperienced in home loan products, read
on and allow us to shed some light on the major differences in order to help
you choose a home loan that truly fits your requirement.
) Basic Term Home Loan
A basic term home loan is one that comes with fixed repayment
schedule, where the monthly installment you pay is the same throughout your
entire loan period.
Generally, a loan of this category does NOT allow you (or make
it exceptionally hard for you) to reduce your loan interest with advance
payment. Any additional payment you make is merely treated as pre-payment for future instalments, and in no more
affect the total interest you’re paying on the loan itself. You can,
however, write in to the bank and request for special considerations, which
may, or may not, be granted at the discretion of the bank.
In the past, basic term home loans used to be the most common
type of loan for homebuyers in Malaysia. Nowadays, they are not as
prevalent as they simply do not offer the kind of repayment flexibility
required by the modern home owners.
2) Semi-Flexi Home Loan
A semi-flexi home loan is a type of home loan that comes with a
built-in facility enabling borrowers to make advance payment to lower their
home loan interest without the need to make any formal request to the bank.
With a semi-flexi home loan, any additional amount you repay on
top of the normal monthly installment is automatically used to reduce the
principle loan amount, subsequently lowering the amount of interest you’re
being charged for your home loan. If you like, you could also make a
request with the bank to withdraw the additional payment you’ve made, though
you’re likely to incur some charges during the process.
Along with the full-flexi home loan, a semi-flexi home loan is
considered a preferred option for those with spare cash and flexible income,
due to the potential to save on loan interest.
3) Full-Flexi Home Loan
Full-flexi home loan (or just “flexi loan”) takes the notion of
flexible payment to the next level, enabling borrowers to make advance payment
to lower their home loan interest AND withdraw the additional payments they’ve
made whenever they like, without the need for complicated procedures.
In a typical flexi loan package, you get a home loan account
that is linked to a current account with a chequebook. Every month, loan
instalment is automatically deducted from the current account and paid to the
home loan account. By depositing additional sum of money into the said
current account, you’ll also be able to offset your principle loan amount and
reduce the interest on your home loan.
An Example:
Say you have a flexi loan of RM300,000 and you’ve deposited
RM100,000 into the linked current account, your loan interest will based on
RM300,000 – RM100,000 = RM200,000.
Just like a semi-flexi home loan, you’ll be able to withdraw the
additional payment you’ve made, simply by writing a cheque using the chequebook
provided. The process is much easier because you do not need to make a
request with the bank, as in the case for a semi-flexi home loan.
Take note that most flexi loans do come with a fixed monthly
fees (usually RM10 per month) to maintain the current account, so you might
need to evaluate the financial commitment against the convenience of a
flexi-loan before you make a decision.
Choosing a Home Loan Category
To most Malaysian homebuyers today, choosing a home loan usually
boils down to a choice between a semi-flexi home loan and a full-flexi home
loan, due mainly to the repayment flexibility that they provide. But if
you do not envisage having additional cash to make advance payment on your home
loan, there is nothing wrong with going for a basic term loan (especially if
you manage to secure a better interest rate compared to flexi loans).
For those of you who’re still stuck in a dilemma after reading this
article, our recommendation is to go with a semi or full flexi loan if you
can. After all, it’s always better to have options than none. For
those looking for a full-flexi loan above RM500,000, you may wish to start off
by looking at this home loan package by CIMB Bank.
Alternatively, you can also make use of our home loan comparison table to find a package that fits your
specific criteria.
Source: iMoney.my
