When it comes to buying a new house, a home loan is considered a viable option as it allows you to pay for the property over a long repayment tenure. However, such long tenures can be a deterrent in itself to most people.
With the government doing everything in its power to ensure every Malaysian citizen owns a house soon enough, there hasn’t been a better time to buy your dream home. Before you take the plunge, it’s important that you know how mortgage loans work.
Is a Repayment Tenure of 35 Years Sufficient?
There’s a certain logic to Bank Negara Malaysia’s decision to introduce a maximum repayment tenure of 35 years for a housing loan. According to this logic, BNM expects a Malaysian individual to buy his/her first home at the age of 25 years.
Once you begin repaying the instalments at the age of 25 years, you will own the house completely once you attain the age of 60 years – by the time of your retirement.
BNM also throws light on the effects of increasing the repayment tenure to 40 years. If the repayment tenure is increased further, it adds to the total cost of financing thereby reducing the affordability factor when it comes to making monthly payments.
The whole point of having a 35-year tenure for a home loan is that your capacity to pay the monthly instalments on time throughout the loan tenure is given utmost importance.
Features and Benefits of a 35-Year Tenure Home Loan
Home loans are offered to Malaysian citizens – residents and non-residents. Very few banks provide housing loans to foreigners. You can apply for the loan individually or with a joint applicant. Your age must be 18 years or more to be eligible to get a home loan.
Generally, Malaysian banks would finance a minimum amount of RM10,000 to RM30,000 depending on the bank’s discretion. However, the property value must be a minimum of RM75,000. Keep in mind that banks provide financing of about 85% to 100% of the total market value of the property.
Things to Keep in Mind
- Buy property that has resale value so you can get your investment back if you ever sell it.
- Be wary of your expenses during the loan repayment tenure.
- Save interest in every way possible. Check if your bank allows you to put in additional payments, which can reduce the outstanding balance of your loan.
- Avoid taking on additional loans or spending too much on your credit card. You may end up taking funds set aside for the home loan to pay your other debt.
- Maintain a good credit score so you can get the home loan at a lower interest rate.
- Check the type of home loan you need – term loan or flexi loan.
- Check the type of interest rate offered – flat, floating or fixed interest rate.
- Verify if another bank provides higher financing.
- Contact the bank to know if a lock-in period is applicable.
- Ask the bank staff if there’s a penalty in case of early settlement of the home loan.
A housing loan with a repayment period of 35 years can provide you with an affordable and convenient way of owning your dream home. Remember to check if you can afford the monthly payments and make a decision accordingly.
If you think the payments are too high, check if you can get a longer repayment tenure or just choose another property that’s more affordable.