Factors to Consider When Choosing A Home Loan

The margin of financing is also known as loan-to-value ratio. It is the home loan amount expressed as a percentage of your property’s value. The lower the margin, the more “equity” there is in the property. The margin of financing can go up to 95% of the value of property, and is assessed based on:
i. Age of borrower
ii. Income of borrower
iii. Type of property
iv. Location of property

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Some mortgage lenders may impose an early settlement penalty if the loan is paid off in full within a lock-in period, including refinance the loan with another lender. However, it depends on the term & size of home loan, the charge can be quite significant.

There are a number of related costs such as professional fees and government charges that you would have to pay when you get a home loan. Some common fees and charges you would expect to pay include:
i. Stamp Duties Fees: Sale & Purchase Agreement – ranged from 0.5% to 1.0%, Loan Agreement – 0.5% and Transfer of Title (MOT) – ranged from 1.0% to 2.0%
ii. Disbursement Fees: vary by state, land office and property type. Includes land search and bankruptcy search
iii. Processing Fees: one off charge by the lenders (can be up to a few hundred ringgit).

The Base Lending Rate (BLR) is a reference interest rate used by central bank to decide how much to charge for various products they offer. It is a rate that takes into consideration banks’ cost of operations, and is typically similar among other banks. If the BLR increases or decreases by a certain amount, the interest rates incurred on flexi rate of housing loans also increase or decrease by the same amount.

An upfront payment or downpayment made by the purchaser is expressed as a percentage of the purchase price. In Malaysia, it’s usually a 10% downpayment of your purchase price. For example, if the purchase price is RM265,000, then your downpayment is RM2,650.

Besides that, we also have to consider about the loan tenure which is the “period” or “number of years” to finance your house. If your home loan has a tenure of 30 years, then it would take 30 years to fully pay off the loan.

After you have done the home buying transaction and signed all the legal agreements, the final step is to decide on the type of mortgage insurance. You can choose either MLTA or MRTA plan to provide protection for your outstanding loan amount in the event of death or total permanent disability of the person insured. The amount of protection reduces over time so as to match the outstanding loan amount.

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