Planning to purchase a property? Why not widen up your financing options by applying for a home loan? Here are some of the best home loans available in Malaysia. Just compare the interest rates and apply as per your convenience.
Do you want to check if you are eligible for a particular mortgage loan? Wonder how much financing you will get from the bank? Using a this loan calculator is an excellent way to give you a rough idea to go about about all these. If you are unsure how to use a housing loan calculator, Here we are to help you.
You can calculate the monthly instalments you would be paying in order to work out the math and come up with the right loan amount you need to borrow. There are calculators available online to help you calculate the instalments. You will also find an illustration on how the monthly instalment amount is split into principal reduction and interest payment.
If you think that the instalment amount isn’t within your budget, you can increase the loan tenure or check if a reduction in interest rate is feasible. You may even try a smaller loan amount so that the monthly payments can be reduced.
When you approach different banks to apply for a loan, it affects your credit history. So instead of approaching banks, you can take a look at the various loan facilities offered by banks and then use a home loan calculator to find out the approximate amount you will be paying every month. This will give you a better idea of your repayment ability.
You can try this formula to calculate your monthly repayments:
P = Loan Amount
i = monthly interest rate
n = loan duration in months
You could try replicating this formula using the following Excel function:
Here is an amortization of home loan repayment to give you an insight on the loan repayment amount you will be paying to the bank, split year-wise. Consider a case where you have borrowed a sum of RM500,000 with a financing margin of 100%. That means you have made 0 down payment for the home. Say, your home loan has a tenure of 35 years and operates at an interest rate of 4.25% p.a.
Based on the information above, you have to make a monthly repayment of RM2,289.47. The table given below shows the repayment schedule with an outlook on what share of your repayment goes towards the principal and the interest components. You will also know the remaining balance at the end of each year.
Amortization refers to the process of paying off a loan or mortgage. An amortization table is a depiction of periodic payment details on a loan. This table generally illustrates the full summary of loan repayment, depicting the years against corresponding interest, principal payments made as well as the outstanding loan amount at each milestone.
For many, owning a home is a long-term goal and one which can’t easily be realised without the aid of a financing facility. Here’s a complete guide to help you understand all you need to know about financing your home.
Planning to purchase a property, but don’t have enough finances? This is where taking a home loan can help you beat the blues.
There are several banks and institutions in Malaysia offering both Islamic and conventional home financing schemes. All you need to do is check choose a scheme, check your eligibility, and apply. However, a deeper understanding of how the property financing scheme works in Malaysia will help you save more on your investment.
Before you take up a loan, make sure you have a clear-cut idea on how the property financing schemes work in Malaysia.
Knowing the different home loan types
Whether you need a conventional or an Islamic home loan, the vast majority of them can be classified into three main categories – term loans, semi-flexible loans, and fully flexible loans. While a term loan comes with a fixed interest rate and loan tenure, it isn’t very flexible when it comes to paying more than your monthly instalment and reducing the overall interest. But, with a fully flexible loan, you can pay additional amounts whenever possible. Semi-flexible loans combine the features of term loans and fully flexible loans.
Keep tabs on the mortgage industry
When it comes to mortgage financing, Bank Negara Malaysia constantly introduces updates and reforms. So, whether it’s policy changes or announcements, be sure to keep a track of all the latest going-ons.
The importance of interest rates
While the interest rate is what most of you would look at when it comes to applying for a home loan, it isn’t the be all and end all. In fact, low-interest loans can mean less flexible terms, such as a lengthy lock-in period or an early settlement penalty.
Pre-qualifying for a home loan
Pre-qualifying involves your bank checking your overall financials, including your current assets, debt, and income. This way, you get a good idea of the mortgage size you qualify for and discuss your individual needs with the lending bank.
Plan your mortgage
The first step to taking out a mortgage is to plan around it. Once you know how much money you’re going to need, you should consider coming up with a repayment plan right away. This way, you’ll know what you need to go through to ensure your payments are made on time always.
Get Mortgage Reducing Term Assurance (MRTA)
The cost of insurance coupled with home loan payments can burn a sizeable hole in most wallets. The best way to protect yourself financially if something unfortunate happens is with MRTA. This way, you can be sure that your loan payments are covered whether you’re permanently disabled or are no more.
Sift through plenty of options
The chances of finding the ideal home loan offer in your first search are pretty remote. So, don’t just settle for the first offer that comes your way. Compare as many options as you can and remember to read the fine print thoroughly so you’re able to zero in on an offer that’s in line with your expectations and financing needs.
The loan schemes for housing offered by different banks in Malaysia come with an array of features and benefits which are as follows:
The Malaysian government provides income tax benefits on your home loan interest payment to a limited extent. You can expect a maximum of RM10,000 tax exemption per year on your loan’s interest amount for a period of the first 3 years from the date of the first drawdown.
If you are a joint applicant for the financing, the tax relief is still RM10,000 per year on the interest. All the applicants will be eligible to get the relief. The eligibility criteria to get the tax relief is listed below:
There are different types of housing loan packages offered by various banks in Malaysia which are as follows.
Conventional Home Loan: It is a standard loan offered by a bank that involves either fixed or floating interest rates. The interest is paid on a monthly basis on the principle amount that you have borrowed from the bank. With the variable interest rate facility, your monthly instalments may fluctuate if there are any changes to the interest rate of the loan. In fixed interest facility, you will pay the same instalment amount throughout your tenure.
Flexi Home Loan: A flexi loan is similar to that of a conventional loan. It allows you to make excess payments and also allows you to withdraw them at any given point of time. Moreover, your current account is linked to the loan account and as such, allows for easier repayment through auto-debit.
Islamic Home Financing: This type of financing works on the Shariah principles of banking that includes concepts, such as Bai’ Bithaman Ajil (BBA) and Musharakah Mutanaqisah (MM).
There are many factors you need to consider when you are shortlisting the financing product to buy your home. Here is a list of a few significant factors:
If you have less commitments, then you can choose a flexible loan where you can make additional payments other than the set monthly instalment. This will help you clear the loan well before the specified tenure.
Also, the property’s value is decided based on the property valuers appointed by the bank. The property value may be decided considering the market value of the property, the current real estate rates in the locality, and other factors. Research and apply for the loan that provides you with highest possible loan amount.
If you miss a payment, the lending institution may levy a late payment penalty.
Base Rate: Base Rate (BR) is a reference standard on which the actual interest rate for a loan is determined. BR is used when your home loan follows a floating/variable interest rate. Each bank follows its own BR. A BR varies when the Overnight Policy Rate (OPR) changes. It is computed using the benchmark cost of funds and the Statutory Reserve Requirement cost. Both conventional and Islamic banking systems follow the base rate.
Down Payment: Down payment is the money you pay when you are entering a deal to purchase a home. The down payment is a certain percentage of the total cost you have agreed to buy the house for. If you get a loan that finances 90% of the total purchase value, you have to arrange the rest 10% from your own pocket to be paid as a down payment.
Foreclosure: It is a situation where the bank/financial institution takes over your property when you stop making payments due to financial issues. The bank/finance institute may sell your property in order to recover the loan amount that is overdue.
Loan Tenure: Loan tenure is the period of time you are given in order to completely repay the borrowed money. You are required to make instalment payments every month during the loan tenure so you can clear the loan on time.
Mortgage Reducing Term Assurance (MRTA): MRTA is one such insurance policy that covers the loan and your family in case of unfortunate events, such as your death or if you are diagnosed with total and permanent disability. Though it is not mandatory to buy one, banks recommend you to subscribe for an MRTA to keep your house on the safer side.
Prepayment: An early repayment of a loan by means of refinancing to get a reduced interest rate is known as prepayment of loan.
|Islamic Mortgage||Conventional Mortgage|
|Risks are shared in cases of natural disasters, discontinued construction, and others.||The lender does not share the risk.|
|Documentation costs are high.||Documentation charges are comparatively less.|
|Many fees and charges are applied even if they are not mentioned beforehand.||A transparent system is followed as all the applicable fees and charges are mentioned.|
|Some banks provide 20% discount on Stamp Duty.||No discounts provided on Stamp Duty.|
|Early settlement does not exist. Even if you settle the loan before the end of tenure, you will end up paying a penalty.||Some banks provide early settlement facility without a penalty.|
|The floating interest rates have a ceiling rate to avoid extreme fluctuations.||The concept of ceiling rate does not exist even if the conventional banking follow floating rates.|
Paying off your loan amount completely is not the end of the story. You need to keep in mind that a mortgage loan or a home loan involves transferring the ownership of the property to the bank during the loan disbursal.
A lawyer has to prepare the documents for the transfer of ownership and a stamp duty is applicable to the process. Given below is the percentage of the property value that will go into it:
Many foreigners stay in Malaysia as part of the government scheme—Malaysia My Second Home (MM2H) scheme. The scheme provides foreigners with a visiting pass valid for a minimum of 10 years. Getting funds to buy a home in Malaysia is easier when you have the pass. However, the margin of finance may be less than 80%.
If not a MM2H license, you at least need to have a valid work permit that does not expire for a considerable period of time.
There are a few restrictions on the type of properties an expat can buy, such as:
Here’s how pre-qualifying for a mortgage and getting a pre-approval on a mortgage loan are different.
Malaysian banks offer a separate loan for you to refurbish your home called a home renovation loan. Usually, such a loan is offered only to a home loan applicant with the bank. Some loan packages in itself contain funding for home renovation as a facility. Banks, such as OCBC Bank allow you to start the instalment payment up to 1 year after the loan disbursement. You can expect a repayment tenure of up to 10 years or up to an age of 70 years, whichever is higher.
The banks in Malaysia go through a huge lot of applications and approve financing only for the applicants who provide valid information and support their statements with valid documentation. Speaking of home loan approvals, a total of RM40 billion was distributed among 152,000 applicants in 2016. The banks approved about 74% of the applications and 75% of the total applicants were first-time buyers.
Maybank plans to provide financing of up to RM10 billion in 2018 under its first-time buyer’s home loan product—MaxiHome Ezy. The bank has recorded a growth of 7.6% year-on-year in mortgage sector.
MBSB Bank together with the Public Sector Home Financing Board (LPSSA) has targeted to disburse financing for residential properties. They plan to give out RM500 million loans over a period of 3 years dedicated to public sector employees.
Due to the probable policy changes after the GE14, Keith Wee, a UOB Kay Hian banking analyst says that a sharp slowdown can be expected in the construction-related loan growth in Malaysia. This could cause a downside to the expected 5% loan growth for the year 2018.
Recent Updates on Mortgage Loans
New lease of life for housing scheme in Johor Bahru
The affordable Rumah Mampu Milik Johor (RMMJ) scheme is to be renamed into the Rumah Mampu Biaya (RMB) scheme. Mentri Besar Datuk Osman Sapian noted that the move shall facilitate easy repayment of housing loans. Under RMMJ, many owners have been unable to repay housing loans, leading to the auction of their houses.
A task force is to be set up to assess the details of the new scheme. Osman noted that the need for affordable public housing has intensified with the presence of 15,000 squatters currently, including foreigners. Additionally, lack of housing space and high rent has raised the demand for more housing space.
The new scheme shall also ease the process of house ownership. Currently, 20% of loan applications are rejected by banks even though eligibility certificates have been issued. The state Housing and Rural Development Committee chairman, Dzulkefly Ahmad, noted that reasons included lack of availability of payslips for some people, or for people servicing other loans.
As a response, the state government plans to provide assistance to the eligible buyers through other measures such as the hire-purchase scheme with 10% of rent as down payment.
The following is the list of banks offering home loans in Malaysia:
The eligibility criteria to get a home loan in Malaysia are as follows:
For an individual or a joint applicant:
For a self-employed applicant:
For an organization:
For a foreign applicant working in Malaysia (salaried or self-employed):
For a Malaysian applicant working overseas (salaried or self-employed):
Offline application: You can go to the nearest branch of the bank of your choice and fill in the loan application form. You need to submit the supporting documents required along with the completed application form to complete the application procedure.
Online application: Some banks allow you to apply for the loan on their website. You are required to fill in the key fields of the application and submit the required documents. A bank representative will get in touch with you and carry the process forward. Certain banks will allow you to express your interest in acquiring a home loan by filling in your details on an online form. Once you submit the form, a representative from the bank will reach out to you and initiate the application process.
|Bank Name||Interest Rates (Estimated)|
|Public Bank||4.35% p.a.|
|BSN||Floating rate pegged to the bank rate|
|RHB Bank||4.75% p.a.|
|Bank Islam||Floating rate pegged to the bank rate|
|AIA||4.99% p.a. to 5.15% p.a.|
|Bank Rakyat||Floating rate pegged to the bank rate|
|Affin Bank||Floating rate pegged to the bank rate|
|HSBC Bank||Floating rate pegged to the bank rate|
|AmBank||Floating rate pegged to the bank rate|
|OCBC Bank||Floating rate pegged to the bank rate|
|CIMB Bank||4.95% p.a. to 5.35% p.a.|
|Hong Leong Bank||Floating rate pegged to the bank rate|
|CIMB Islamic Bank||4.4% p.a. to 6.95% p.a.|
|Maybank||Floating rate pegged to the bank rate|
Following are the basic fees and charges associated with a housing loan:
|Stamp Duty Charges||0.5% of total financing amount as per the Stamp Duty Act 1949 (Revised in 1989).|
|Processing Fee||As per the bank’s discretion (Often waived for new customers or as a special privilege).|
|Disbursement Fee||As per the bank’s discretion (Includes registration fee, stamping fee etc.).|
|Legal Fee (pertaining to securities documentations)||As per the bank’s discretion.|
|Valuation Fee||As per the bank’s discretion (Applicable to completed properties only).|
|Late Payment Charges||Commonly charged at 1% p.a. on the amount in arrears.|
|Early Settlement Fee||As per the bank’s discretion.|
Once you have submitted the application for a housing loan, there are a few steps involved until you get the approval for the same. Let’s have a look at the procedure involved:
Application form assessment: When you submit the application form to the bank, the representatives look into the form and check if all the required fields/information is filled. You are requested to make the application again if there are any mistakes or incomplete information given.
Valuation of documents: The bank staff will evaluate the documents you have submitted. The documents are checked against the factors, such as the validity of the information you have given and tally the information in one document with another if necessary to finalise on the authenticity.
Credit assessment: This is one of the main criteria where the approval or disapproval of the loan is decided. The bank checks your credit score that depends upon your spending habits, investments, savings, and your loan history (if any). A negative credit score may turn out as a reason to deny the loan, whereas a healthy credit score is favourable to grant the loan.
Final call of approval or disapproval: After passing through every stage with scrutiny, the bank then decides whether to grant you a home loan or not.
There is a thin line between a home loan and a mortgage. To understand the exact difference between the two, you need to know the definitions of both. A home loan, as you know, is given by a bank to purchase a residential property or a house. The house acts as collateral so that the loan can be secured against it. If a borrower fails to repay the loan amount, the bank or finance institute can seize the property. Whereas, a mortgage is a type of loan where the borrower needs to give a property or any other security as a mortgage. Here, the mortgage could be a land, insurance, or gold.
Home loan refinancing is a type of loan that is borrowed to pay off an existing home loan. The new loan may include a whole new set of features and obligations. Read below to know how refinancing can benefit you and provide financial security:
Here’s the guideline to help you choose the ideal home loan in Malaysia:
Q. How long can a loan approval procedure take?
A. Loan approval and disbursal may take a period of up to 7 business days. It also depends on the loan amount, tenure, the bank from which the loan is being acquired, and the eligibility of the candidate. If you have not provided complete documentation as specified by the bank, the approval may get delayed.
Q. How is the monthly repayment instalment amount calculated by a bank for a home loan scheme?
A. The monthly repayment instalment is based on the amount financed, loan tenure and the profit or interest rate associated with the scheme. You can get an estimate of the monthly instalment amount by using the calculator tool on the bank’s official website or a bank representative will inform you about the same during the application process.
Q. Can I make additional payments on my home loan apart from the regular monthly instalments?
A. Yes, you can make additional payments, provided the bank offers the facility. The additional payments made by you can be withdrawn at any given point of time if you are in need for some cash.
Q. Can I get a home loan with a joint applicant who is a self-employed individual?
A. In this process, the joint applicant needs to provide valid proof of identity and income as asked by the bank. If his/her income criteria does not match the bank’s designated eligibility, there is a chance that your loan application might get rejected.
Q. What could be the possible effects if I won’t be able to repay my loan?
A. The bank or finance institute may seize your asset that you have secured for the amount financed. However, the bank will send you notice and reminders initially on your missed repayment instalments.