Things to do about home loans…the beginners guide
At the age of 25, I bought my 1st home. With no 1 in the family to guide (as some people think cars are more important then houses), lucky I had friends who were slightly older and settled down then: King and Chua – Thanks!!.
So to help the new at these big junction..I came out with this post in my blog..see if I could guide any1
During the 1st quarter of 2009, markets plummet and banks were cutting interest rates.
Most home owners took this opportunity to refinance/even talk to their banks on request to serve lower interest as markets were quite competitive then.
1st you must understand what type of home loan that you are looking for.
Housing loans in general have few types, which mainly are:
- Fluid – This are mostly offered by banks. It follows Bank Negara Malaysia (ups and downs) BLR interest rates.
- Fixed – Some banks, but mostly insurance company provides these options. They tend to lock the customers to certain years with a certain fixed BLR interest rates.
Both Fluid and Fixed types of home loans have their pros and cons:
Pros: Good for those with lots of $$ to spare to pump around. Market BLR falls, so you pay less also.
Cons: When markets & BLR rises, so those your monthly repayment.
Pros: When markets & BLR rises, your rates and monthly repayment stays
Cons: When markets & BLR falls, your rates and monthly repayment stays. So, too bad then.
These are all in general, as many banks and agency has always every change their packages according to times and trends.
2nd, we look at the amount we want to borrow from the bank and also which bank to go to.
Usually for new properties, they have panel of banks and special offers already given. For refinancing, this tip is also viableJ
Do some homework and comparison of the packages that they have and also the fine prints that comes with it.
Banks have many offers, but advice is to prioritize the banks you have Savings/Current Accounts with. Why say so? It’s because, convenient and easier for you to:
- Pay your loan (no need to keep online transfer every month)
- Manage your finances better (wanting to pay more every month and etc)
- Easier for you to know how much balance of payment
- Printing of transaction statements and other admin stuff/paper work
Now we hunt for the banks
Newspapers always have all these adverts/promotions. You can always walk into any bank and enquire, they are always willing to assist (because you are giving them $$ & biz in the long term – 30yrs I mind you).
Things to bring to assist the banks (to faster process any loan application)
- EPF Copy
- 3 months payslip
- Income Tax Form and Payment Receipy
- Employment Letter
- Bank Book
- Land Title (Completed Projects, Usually for Refinancing)
- Sales and Purchase Agreement
- Lawyer Letter (New Projects)
- MBSA and Hasil Tanah Receipt and Bill (Usually for Refinancing)
- Previous Bank Agreement and Payment Receipts (Usually for Refinancing)
After all the quotes and offers from the bank, use your good friend, Excel Spreadsheet to help make all data aligned clearer. You can download and look at the example below. Do bear in mind that this is just a sample based on BLR and bank offers for June 2009.
Previously my current home loan was with AmBank, thus I use it as a benchmark, to compare with other banks that I have approached.
Look at the Annex 1:
- Listed down all the banks that I have approached (keep a sample of minimum 5 Banks)
- Put in the loan amount
- Include in the current BNM
- How long is the tenure
- Categorize some of the different tiers of payment, according to years (if applicable)
This will assist you with getting the 1st parts of the ground work done, knowing which bank has lower rates and shorter tenure for the amount of $ you want to loan.
Looking at Annex 2, it will drill down further:
- What type of interest (normally is calculated on a daily rest basis)
- MRTA included in the loan amount / FOC by the bank?
- Legal fees (New projects usually absorbed by Developer, but if not check with the Bank)
- How does extra monthly repayment affect your loan (go for deducting of principal amount)
With Annex 3, more towards the fine prints:
- Check the lockdown period (usually banks wont allow you to fully settle the loan within a certain period of time..if you do so, they will loose $$, thus there will be a penalty)
- Some banks do impose Loan processing fees
- Some banks offer overdraft and charges for it..but my advise: DO NOT OVERDRAFT!!
- And some other nitty gritty details and charges.
After all the homework done, then you can highlight a 2 or 3 best choices and start bargaining with them. After that, you are on your way to well bargained home loan for you and your family (as well as your pocket).
As I mentioned earlier, this is just based on my experience. Just wanting to share. Anything you can drop me an email. Would gladly help and answer any questions (if I know ya).
Good luck with your home loan..