The home loan Interest rate is the amount which needs to be paid as fees to banks for lending you money for your home purchase. It is basically the rent you are being charged for loaning money to buy your house. The general trend in Malaysia for housing loan interest rates is that it is is quoted as a percentage below or above the Base Lending Rate (BLR). For instance, let us assume that the current BLR is 6.6%. If the interest rate on a BLR is 2.1% the loan would be 4.5%. The BLR is basically a part of the home loan interest rate that helps to decide the pricing of various lending products. The rate includes in its accounts expenses such as bank’s operation costs.
Types of Housing Rates in Malaysia
Fixed Interest Rate:
This type of interest rates as the name suggests never experiences any changes and stays fixed throughout the loan repayment tenure.
Variable Interest Rate:
On the contrary, a variable interest rate for a home loan are generally changing under differential rates over the BLR, calculated as BLR+Variable Rate.
How is the interest rate calculated in a Housing Loan?
Banks charge a variable interest rate on the loan amount that is not paid for the housing loan in Malaysia. Generally the interest is calculated on a monthly basis with the help of compound interest calculation over the months.
Daily Rest vs Monthly Rest:
Based on the agreement on the loan, a house loan is calculated at a daily rest or monthly rest basis. Daily rest is considered better since one can save on the interest charges on a daily basis and hence you save a lot if you make large repayments towards the loan mid-way through the month.
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