After having decided on your dream property and paying a booking fee for it, the next decision to make in owning a home / property is to decide on a property loan – this is where all Ringgits and Sen’s make sense. There are a number of things you should consider when getting a property loan, and this article outlines the top 5 things you need to know.
Types of Home Loan
A Traditional Term Loan and a Flexible Home Loan (“Flexi-loan”) are different types of home loan, so you would need to know the difference before deciding which works best for you. A Traditional Term Loan requires you to pay a fixed amount each month for the entire tenure of your home loan; this may be best if you have a strict and predictable cashflow pattern. With a Flexi-loan, you can have the flexibility of reducing your interest whenever you wish (ie. by saving extra money into a linked current account) – the more money saved, you pay less interest.
As with all loans, you should prioritise the financial institution that offers you the lowest interest rate – a small interest in percentage can mean thousand of RM saved throughout the tenure of your loan! Be wise and compare various loan packages from different banks, and go for the one with the best offered rates.
Margin of Financing
Depending on various factors which include the value of the property and your standing with the bank, and in some cases, the number of property you currently own, different banks may offer you different margins of financing. Excluding the amount you need to pay upfront that is not covered by the home loan, this is a very important figure to know.
This is the period you will incur a penalty if you choose to pay off your home loan in full before it reaches its tenure end (usually 2% – 3% of the principle loan amount). It is advisable to choose a home loan that has a shorter lock-in period so that the penalty is as low as possible. Some banks do not charge a penalty at all, if sufficient notice is given. So ask around, and compare the lock-in periods of the loans that you may be offered.
Fees and Charges
As with all official documentation and processes, a home loan application involves professional and government-regulated processes that usually come with fees and charges that will be borne by the buyer, ie. YOU. In certain cases, these fees may be partly or wholly borne by the banks as part of your loan package. Again, carefully compare amongst the loan packages you have to discern the best for you.