If you are considering purchasing a home in Malaysia, one of the crucial decisions you must face is selecting the right bank for your housing loan. With many options available, selecting the best bank can be daunting. Hence, it is essential to navigate this process carefully to secure the most favourable terms and ensure your home purchase aligns with your financial goals.
This guide will teach you about interest rates, loan terms, eligibility criteria, and customer service quality, among other key aspects. By the end of this guide, you will be better equipped to make a decision that aligns with your financial goals and sets you on the path to acquiring the home you have always dreamt of.
Simplify your house-moving journey by checking out this article:
1. Interest Rates
The interest rate on a home loan, expressed as a percentage, is determined by factors such as the bank’s Base Lending Rate (BLR), influenced by the Overnight Policy Rate (OPR) set by Bank Negara Malaysia, and the spread covering the bank’s operational costs and profit margins. While different banks may offer slightly varied rates, even a small percentage difference can translate to significant savings over a 30-year loan term.
Individual credit health plays a crucial role in determining the personalised interest rate the bank offers. Lower credit risk often results in a more favourable rate. Home loans can have fixed or variable interest rates; fixed rates remain constant throughout the loan tenure, while variable rates fluctuate based on the current Base Rate (BR) set by Bank Negara Malaysia.
2. Loan Tenure
There are three main types of home loans or mortgages, including basic term loans, semi-flexi loans, and full-flexi loans. These differ significantly, so it is important to understand your needs best.
| Features | Basic Term Loan | Semi-Flexi Loan | Full-Flexi Loan |
|---|---|---|---|
| Repayment Schedule | Fixed monthly instalments throughout the loan tenure | Fixed monthly instalments with flexibility | Fixed monthly instalments with enhanced flexibility |
| Advance Payments | Unable to make advance payments | Option to make advance payments | Can make advance payments to offset outstanding balance |
| Withdrawal of Funds | Not applicable | Possible, but may involve fees and take time | Easy withdrawal of extra funds without fees |
| Process for Payments | Tedious process for advance payments | More flexible process for advance payments | Enhanced flexibility with a linked current account |
| Current Account Fee | Not applicable | Not applicable | May have a small monthly or annual management fee |
| Common Use | Rarely used in contemporary scenarios | Provides flexibility compared to basic term loans | Offers the most flexibility and interest savings |
3. Margin of Finance (MOF)
Margin of Finance (MOF) represents the funds a bank is willing to lend to purchase a house. It is typically evaluated based on the property type, location, borrower’s age, and, most significantly, their credit health. However, the MOF is not a fixed value and is subject to the bank’s discretion.
First-time homebuyers may secure a high MOF, possibly up to 90%, for completed and under-construction properties. The loan period can extend to 35 years or until the borrower reaches 70, whichever comes earlier. The actual MOF is contingent on the bank’s risk assessment of the borrower’s credit health.
To understand how the Margin of Finance (MOF) operates, consider this scenario:
If you purchase a house valued at RM900,000 and a bank extends a loan with a 90% MOF, the loan amount would be RM810,000 (900,000 x 90%). The remaining 10% constitutes the downpayment, which you must pay directly to the property developer or the current property owner in the case of sub-sale properties.
4. Lock-In Period
iMoney mentioned that a lock-in period is when you may face a penalty if you decide to fully settle your home loan (via full repayment, refinancing, or sale). In Malaysia, this period can range from three to five years or more, and the exit penalty may vary, typically starting at 2% and going up to 5% of your initial loan amount.
It is essential to note that lock-in periods are usually calculated from the first drawdown (when the bank issues the initial payment to the developer), not from the date of signing the legal agreement.
For example, if you have an RM400,000 housing loan with a five-year lock-in period and a 4% exit penalty, choosing to pay off your loan at any time during these five years would result in a penalty of:
Your penalty = 4% × RM400,000 = RM16,000.
5. Fees and Charges
According to RinggitPlus, there are four types of fees and charges associated with obtaining a housing loan in Malaysia, including, but not limited to, the following:
| Types of Fees | Charges |
|---|---|
| Legal Fees for Sale and Purchase Agreement (SPA) and Loan Agreement | 1% for the first RM500,000 (minimum RM500)0.8% for the subsequent RM500,0000.7% for the subsequent RM2,000,0000.6% for the subsequent RM2,000,0000.5% for the subsequent RM2,500,000 |
| Stamp duty fee | 0.5% of the loan amount |
| Legal Disbursement Fee for Facilities Agreement (FA) | Usually, a few hundred Ringgit |
| Bank’s Processing Fee for the Loan | RM50 to RM200 |
6. Documents Needed
Although the necessary documents are generally similar, they vary based on whether you are an employee, self-employed, operating a business, or working abroad. Based on Property Guru, here is the list of documents you have to prepare:
| Malaysians Working In Malaysia (Employee) | Malaysians Working In Malaysia (Self-Employed) |
|---|---|
| Identification Card (NRIC copy) | Identification Card (NRIC copy) |
| Property Booking Receipt | Property Booking Receipt |
| Vendor Sales & Purchase Agreement/Title copy/New Sales & Purchase Agreement | Vendor Sales & Purchase Agreement/Title copy/New Sales & Purchase Agreement |
| The latest 3 months’ pay slip (for Basic Salary) or the latest 6 months’ pay slip (for Basic + Commission Earner) | The latest 6 months’ Company Bank statement |
| The latest 3 months’ personal bank statement (for Basic Salary) or the latest 6 months’ personal bank statement (for Basic + Commission Earner) showing salary credited as per pay slip | The latest 6 months’ Personal Bank statement |
| Latest EA form | Deposit statement (e.g., Fixed Deposit, ASB, or Bonds, if any) to demonstrate the strength of your emergency fund |
| Latest KWSP statement | Business Registration |
| Income Tax – Latest Form B/BE with payment receipt acknowledgement | |
| Deposit statement (e.g., Fixed Deposit, ASB, or Bonds, if any) to demonstrate the strength of your emergency fund |
These documents are essential to demonstrate creditworthiness when purchasing a property in Malaysia, whether you are an employee or self-employed.
7. The Best Housing Loan Providers in Malaysia
If you are in search of top housing loan providers in Malaysia, here is a list of banks along with their lowest interest rates for tenures over 35 years. This list can help provide you with options to choose the most suitable financing for your needs.
While the information may be updated from time to time, it is best to refer directly to the bank of your choice.
8. How to Increase Chances of Getting Approved for a Home Loan?
Navigating the home loan application process can be daunting, especially if you are a first-time buyer. If you are wondering about your eligibility, Hartamas Real Estate has a simplified guide on how to improve your chances of securing approval:
| Factors for Loan Approval | Actions to Take |
|---|---|
| Submit the Right Documents | • Include all income sources (e.g., rental, full-time job) • Submit bank statements aligning with payslip • Double-check the accuracy of the application form • Include additional references when possible |
| Maintain a Healthy Credit and Track Record | • Ensure timely payment of outstanding debts • Review CTOS report for legal actions and company info • Monitor creditworthiness through various reports |
| Understand Your Debt-Service Ratio (DSR) | • Consider all monthly commitments in the CCRIS report • Address study loans like PTPTN in DSR calculations |
| Maintain a Good Employment Record | • • Demonstrate healthy EPF contributions and job continuity |
| Have at Least One Credit Record | • Utilise bank facilities to build a credit record (e.g., fixed deposit, savings account) |
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Disclosure: This list was compiled by the team at My Weekend Plan after extensive research and shared opinions to suggest helpful recommendations for the public. The sequence of brands is in no particular order so if you have any other great suggestions too, please email us support@myweekendplan.asia. For more information, kindly refer to our copyright, privacy & disclosure policy.
