Types of Home Loans in Malaysia
Once you have decided on a property to buy and know what documents you need to prepare, you will next need to know what are your property loan options. There are many choices in the market, and making the best choice may help you save more money in the long run. We list them down below:
1. Term Loan
The term loan is once of the most common loans in the market. It has the typical maximum tenure of 35 years, and the interest rates are budged together with the principal payment in the monthly instalments. There are no benefits to completing payments early or making extra payments. Opting out of the loan within the first 3 to 5 years will also result in a penalty.
2. Fixed Rate Loans
Similar to the Term Loan, Fixed Rate Loans also have a fixed monthly payment. For those who worry that the occasional changes in Base Lending Rate (BLR) may affect them, this is the safest plan for them.
Of all the loans in the market, the overdraft is the rarest and is rarely issued by any banks anymore. The Overdraft is unique in the sense that a borrower only needs to pay the interest of the loan. There is no tenure for this loan, and when making the monthly payment on the interest rates, the buyer can choose to pay extra to reduce the principal loan. The disadvantage to this loan is that its interest rates are higher than the norm.
4. Flexi Loan
Flexi loans are popular with people who have cash in the bank. This is a combination of term loan and overdraft facility. Because it is linked to a checking account, the person receiving this loan will have a low interest rate if they deposit a lot of money in the checking account and can withdraw money from the checking account at any time. However, if you withdraw money from your checking deposit, interest rates will rise again until the borrower returns the money to your checking deposit.
5. Islamic Credit
Islamic loans are a completely different ball game that anyone can apply for. This loan is popular with short-term real estate investors because it is compliant with Shariah law and there is usually no penalty for early termination of the loan. However, the terms vary from bank to bank, so you should carefully review the terms before signing the document. The most popular Islamic loans on the market include AlBai` Bithaman Ajil Loan, AlIjarah / Ijarah Muntahiyah Bittamlik, Musharakah Mutanaqisah and Murabahah.
Refinancing is not exactly a loan. It’s about getting a loan for a property that you already have a loan for. This type of loan is typically used by people who are unable to pay their real estate monthly and need to refinance at another bank that can offer better interest rates, or real estate investors who want to add value to their real estate. Cash out value over the years. By refinancing an asset whose price has risen, the borrower receives “cash back” that can be used to finance new businesses or invest in other areas. Here is a complete guide to refinancing from real estate professionals.
7. Government Loans
This loan is actually self-explanatory – it’s a loan for civil servants. Strict rules apply to this real estate loan. (A.) You can apply for a government loan from only one office, even if two different offices are filled with vacant seats, and you can only use a government mortgage twice in your lifetime. It is also permitted to lend to certain items only with government mortgages such as: (B.) Buy land, a house, renovate a house and pay other debt to buy any of the above items. There are seven types of government mortgages, two of which follow Al Bai Bithamin’s Ajil concept, the Treasury’s residential land scheme and the Islamic mortgage scheme.
8. Guarantor Loans
Guarantor Loans are suitable for people who cannot afford to buy their own property due to lack of income or poor credit. In such cases, the borrower can look for a higher-income or creditworthy person to be part of the loan agreement. This party is usually a parent, sibling, or spouse. Under the usual agreement, once payment is complete, the co-borrower has no claim on the asset and the primary borrower must make monthly repayments on time without affecting the co-borrower. But on the other hand, all of these terms are negotiable and depend on the agreement between the parties.
Credits to: Arix Foo (Citibank DREAP Relationship Manager)
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