Home loans in Malaysia are the financing option that has picked up pace of late. The booming real estate market has opened up new avenues for prospective home owners to look at options in the areas or locations that suit them the best.
While things were a bit different before July 2013, with home loans being offered a tenure of as much as 45 years, a rule imposed by the Bank Negara Malaysia capped the maximum tenure at 35 years. People who are unaware of this change shouldn’t be fretting over it, as this in turn has its own unique advantages. Let’s take a look at some of the obvious ones.
Though the incessant stream of credit cards and loan facilities that keep coming up push us towards a lifestyle wherein we can afford to spend a bit more than we can normally afford. But it’s not nice to abuse the financial leeway that is thus provided.
A home loan for a tenure of 40 or 45 years basically promotes that habit. One could practically find a piece of property lucrative enough to purchase but not account for the future appreciation of lifestyle levels. So, a projection of repayment that would have looked normal in 2015 might not look that appealing in 2030. Shortfall of funds due to tuition payment of kids, insurance payments, rising costs and the like will make financial management a pain.
Contrary to that, a cap of 35 years actually helps. Since the time frame is shorter, banks are more careful in assigning loans to people, being more stringent on the repayment capacity. Consequently, this makes people invest in advance so they have a corpus to fall back on when they have to make the repayments. All in all, it presents a much nicer scenario where people take loans that they can actually afford to pay back with ease.
Though home loans are offered at low interest rates when compared to car loans, personal loan and business loans, they are in effect, loans with a substantial amount of interest. While rates of interest are subject to the base rates of the bank and cannot be lopped off at a moment’s notice, reducing the tenure of the loan basically means you are going to pay interest for a lesser amount of time.
Cutting down on the tenure chops off the interest paying period by 10 years, or by almost 200000 Malaysian Ringgit depending on the interest rate that is charged. That could effectively mean you save enough on the interest to furnish your home properly or even buy a decent vehicle and still have funds to spare.
A larger tenure basically presents one with the illusion that one is paying lesser through affordable installments, when in actuality one is paying interest for a longer period of time, making the entire financial scenario much bleaker. That being said, if you had applied for a home loan before July 2013, you are still going to enjoy a 45 years terms if you had been approved for the same. However, as a new home owner, you need not fret over the lesser time frame, as you are still going to be the winner concerning saving on the interest.
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