How to Choose a Home Loan
Selecting a home loan can be a challenging task for the average person,
akin to choosing the property itself. If you are currently in the process of
shopping for a home loan to purchase your dream house, there are six
critical factors to consider before making what could be the most
significant financial decision of your life.
Type of home loan: The first and foremost thing to consider is what works
best for you: a traditional term loan or a flexible home loan (flexi-loan).
If you have a predictable cash flow, a traditional term loan may be ideal,
while a flexi-loan provides the flexibility to reduce interest whenever you
wish.
Interest rate: As with any loan, your primary concern should be to seek the
bank that offers you the lowest interest rate. The difference in interest
payment between an interest rate of 4.2% and 4.15% can be significant,
amounting to well over RM5,000 for a home loan of RM500,000 over a period of
30 years.
Margin of financing: The amount of financing you can receive from the bank
depends on various factors such as the property value and your relationship
with the bank. This is critical, particularly if you are short on cash, as
you will have to pay any amount not covered by the home loan upfront.
Lock-in period: The lock-in period is the period during which you will be
charged a penalty if you decide to pay off your home loan before it reaches
the end of its tenure. When selecting a home loan, look for a lock-in period
that is as short as possible with a low penalty or none at all.
Fees and charges: Home loan applications involve numerous professional and
government-regulated processes that come with fees and charges. Make sure to
go through these with the loan officers of the banks you are considering and
understand which ones you will be responsible for and which ones are part of
the loan package.
The bank: Lastly, consider that you will be dealing with the bank regularly
for the duration of your home loan. Choose a bank you are comfortable with
and consider factors such as their level of service, proximity to your home
or office, online banking facilities, and value-added services that can make
your life easier.
undo Home Loan FAQs