Congrats! You’re now one step closer to making your dream home a reality. Needless to say, your journey to own property can be a sheer rollercoaster of emotions. From excitement to anxiety, it can be confusing to diff
Congrats! You’re now one step closer to making your dream home a reality. Needless to say, your journey to own property can be a sheer rollercoaster of emotions. From excitement to anxiety, it can be confusing to differentiate the types of house loans in Malaysia and choose one that best suits you and your financial circumstances.
To tackle this problem and make your house buying process a little easier, we created this concise yet comprehensive guide to the various types of house loans in Malaysia. Without further ado, let’s dive right in!
Types of House Loans in Malaysia
1. Term Loan
Sometimes, simple is best. Basic term loans are one of the most common types of house loans. This loan has a maximum term of 35 years, and the monthly payment includes both the instalment and the interest rate.
Keep in mind that there are no advantages to paying off a loan early. In fact, completing the payment within the first 3-5 years will result in an estimated 2-3% penalty. Basically, a term loan is great for those who prefer to stick to a rigid payment schedule.
Want to know more? Read our article to understand the difference between a term loan and flexi loan.
2. Overdraft Loan
An overdraft loan is a bit difficult to get, courtesy of its unique nature. Those who opt for this loan will only be responsible for paying the interest rate. The amount will be debited from their current account.
An important advantage of the overdraft loan is that it has no fixed term. Also, borrowers who pay more than their interest rate will reduce their principal. Meanwhile, a major disadvantage would be the fact that overdraft loans have higher than average interest rates.
3. Semi-Flexi Loan
You can consider the semi-flexi loan as a hybrid of the term loan and overdraft loan. Semi-flexi loans are the best choice for those with a cash surplus in their bank account. Unlike term loans, semi-flexi loans enable borrowers to repay their loans in advance.
Those who take out this loan will experience lower interest rates when they deposit more money into their current account. After receiving permission from their respective bank, borrowers can withdraw money from their account (which, in return, will raise their interest rates for the particular month) and put the cash back in once they have more money to lower the interest rates.
However, semi-flexi loan’s flexibility comes with a cost, as its interest rate is higher than your standard term loan. Nowadays, the semi-flexi loan is the default type of loan provided by most Malaysian banks.
4. Flexi Loan
The flexi loan is almost similar to the semi-flexi loan but offers much more versatility. A flexi loan enables borrowers to withdraw excess amounts and make additional payments without any procedure or notice.
Tied to the borrower’s current account, the planned home loan instalment is taken each month automatically. As long as you’ve provided the agreed minimum loan payment, you’re able to withdraw or deposit any additional sum.
Despite its many advantages, a flexi loan is quite limited as the product is not available at every financial institution. To top it off, most banks that do provide flexi loans charge a monthly maintenance fee for your current account, which means adding more financial costs to your repayments.
5. Fixed-Rate Loan
Another popular type of house loan in Malaysia is the fixed-rate loan. As the name implies, the interest rates on this package are fixed for the duration you’ve chosen. By applying for this loan, you won’t have to worry anymore about the fluctuating interest rates as well as the changing Base Rates (BR).
This is an excellent option for those who are looking for long-term loans, as the rates will remain unchanged throughout the life of the loan. As a result, homeowners can easily predict future costs and payments, as well as makes budgeting easier for all!
6. Islamic Loan
For Muslims, there are various Syariah law-compliant loan products for you to choose from. Under the Islamic financing system, banks profit through the transaction of commodities.
Essentially, the bank will buy an asset (your home) from the seller and sell it to the buyer (you) with profit. You can then pay for your house in instalments or through a “rent-to-own” concept gained from the principle of Murabahah.
Take your pick from the many Islamic property financing available in Malaysia, commonly derived from the Islamic Loan concepts below:
- Murabahah
- Musharakah Mutanaqisah
- Al-Bai’ Bithaman Ajil
- Al-Ijarah/Ijarah Muntahiyah Bitamlik
7. Government Housing Loan
This loan is a special loan provided by the Public Sector Home Financing Board or better known as Lembaga Pembiayaan Perumahan Sektor Awam (LPSSA). The loan was initiated to help civil servants in owning their own homes.
But that’s not all! LPPSA offers 7 types of loans, including joint home financing for those who have spouses that are not in the public sector. For more information, visit LPSSA’s official website.
What Happens If I’m Unable to Repay My House Loan?
Since housing loans are typically substantially larger than other types of loans, they can result in more severe penalties.
If you’ve missed more than three months of instalment payments, the bank may initiate foreclosure proceedings. Also, your guarantor is now responsible for your debt and may be blacklisted. Furthermore, whatever asset you’ve put up as collateral for the loan may be confiscated to pay off your debt.
If you’re finding yourself in a predicament, the first thing to do is to approach your lender and negotiate with your lender to avoid foreclosure or bankruptcy. Remember to do this as soon as possible, so you’re able to work out a plan and negotiate as well as modify the terms of your house loan.
Can I Refinance My House Loan?
Absolutely. Refinancing your house loan is a viable option for all. In fact, refinancing can be a rational financial move to save money on interest or generate extra cash flow. While there are various reasons to refinance, below are some of the benefits of refinancing:
- The chance to get a lower interest rate
- The opportunity to shorten the tenure of your housing loan
- Debt consolidation
- Finance other needs or expenses through cash-out refinancing
Better yet, refinancing allows you to change to a different housing loan type. For example, if you anticipate a rise in the interest rates, you could refinance your housing loan to a fixed-rate loan.
How Bluebricks Can Help You
Applying for a house loan can be a difficult feat, especially if you’re a first-time homeowner. Thus, Bluebricks made it its mission to help fellow Malaysians with your housing loan and refinancing application process.
As Malaysia’s leading loan services provider, we are committed to simplifying your tasks and saving your valuable time and money with comprehensive services.
Professional Loan Agency Company at Your Service
As a financial consulting company, Bluebricks helped countless clients to make informed and sound financial decisions. Our financial experts will streamline loan applications, analyse loan agreements, and review your financial status to resolve complicated financial problems with ease.
Loan Rejected Services
We understand that getting loan approval is no easy task. However, don’t give up hope! Together, we’ll review why your loan application may have been declined, assess any room for improvements, and suggest other suitable alternatives for your circumstances.
Talk to us now and let us help you get the loan you need with our reliable refinance housing loan rejected services made to effectively reverse your current financial problem and help you gain a better chance of approval.
Types of House Loans in Malaysia – FAQ
Here, we answer some regular queries about the many types of house loans in Malaysia so you can resolve your problems with ease.
To put it simply, there are three major types of housing loans in Malaysia: Term, Semi-Flexi, and Flexi Loans. However, there are other additional loans, as discussed above, such as overdraft, Islamic loans, government housing loans, and fixed-rate loans.
The most common housing loan in Malaysia is the fixed-rate loan. Another popular housing loan is the Term Loan. These loans are popular amongst homebuyers due to their simple and hassle-free nature.
If you’re facing severe financial difficulties, you can write to your lender, explain your circumstance, and notify your lender that you would like them to auction your property and deduct the loan amount plus interest from the sale profits.
However, this should be your last resort. Before doing this, you could negotiate your terms with your lender or apply to refinance your house loan.
While a lender may impose a waiting period between when you close on a loan and refinance to a new one, there is no restriction on how many times one can refinance their housing loan.
Differentiate the types of house loans in Malaysia and choose one that best suits you and your financial circumstances.
To tackle this problem and make your house buying process a little easier, we created this concise yet comprehensive guide to the various types of house loans in Malaysia. Without further ado, let’s dive right in!
