Buying a home is a big step, and for most, it requires a housing loan.
Like any big-ticket item, knowing how much financing you qualify for will determine if you can proceed with the purchase. Besides the downpayment, which can be 10% to 30% of the property price, there are other things to consider.
Expenditures such as stamp duties and the Sale And Purchase Agreement (SPA) will add to your purchase, plus legal fees for a lawyer to review the SPA and protect your interests.
Once you have most of these covered and factored in, it’s time to visit the bank and sort out the mortgage.
In Malaysia, there are three common types of housing loans: Basic Term, Semi-Flexi and Full-Flexi. Choosing the right one does more than safeguard your financial well-being but will also make your real estate journey a pleasant one for years to come.
The Basic Term Loan
A Basic Term Loan is the most traditional and straightforward type of housing loan.
With this loan, you make fixed monthly payments that cover the principal amount and interest. The loan is repaid over a set period with a fixed interest rate.
However, let’s say you experience durian runtuh and find yourself with stacks of money, and you want to reduce your loan interest by paying extra every month.
Unfortunately, a Basic Term Loan has minimal repayment flexibility, so you cannot pay more than the stipulated amount monthly. Even if it is allowed, there may be a penalty – always check and understand the T&Cs of your loan agreement before signing.
Pros And Cons Of Basic Term Loans
| Pros | Cons |
| Simple and transparent loan terms. | Limited repayment flexibility with early settlement or advance payments may not be permitted. |
| Fixed interest rate offers better stability. | Penalties may apply for prepayment or early loan termination. |
| Monthly payments remain the same, making it easier to budget. |
Who Is It Ideal For?
Likely first-time homebuyers who want a simple, manageable monthly mortgage; or wage earners with stable incomes who can make consistent monthly payments.
The clear and stable structure of the Basic Term Loan is ideal for those who plan to stay in the property for many years and can afford the long-term repayments.
The Semi-Flexi Loan
Compared to the Basic Term Loan, the Semi-Flexi Loan offers more flexibility while maintaining some of its simplicities.
The main advantage is that it allows you to make additional repayments without severe penalties, which reduces the principal and potentially lowers the total interest paid.
It usually has a floating interest rate – the Base Rate (BR), or Base Lending Rate (BLR), influenced by the Overnight Policy Rate (OPR) set by Bank Negara Malaysia (BNM) – so your monthly payments can change over time. If the BR/BLR increases, so does your monthly repayment and vice versa.
Pros And Cons Of Semi-Flexi Loans
| Pros | Cons |
| Flexible repayment structure allows borrowers to make extra repayments without the risk of penalties. | Increased flexibility may come at the cost of slightly elevated interest compared to Basic Term Loans. |
| Enables faster loan settlement and improved long-term financial management. | May have limitations on additional repayments, with possible restrictions on the frequency or amount of early repayments. |
| Interest savings through additional repayments to reduce the outstanding loan balance or total interest paid over the loan tenure. | May limit the borrower’s ability to fully optimise the repayment flexibility. |
| Extended repayment period of up to 30 years with the option to shorten the loan duration through advanced payments. |
Who Is It Ideal For?
Those who want the flexibility to make extra payments when they can afford it, thus reducing their interest and paying off the loan faster.
Semi-Flexi Loans are also suitable for those who want to adjust repayments and pay off their loan quicker as their financial situation improves.
The Full-Flexi Loan
Among all the mortgage loan options in Malaysia, the Full-Flexi Loan offers the highest level of flexibility, making it the most adaptable option for borrowers.
With this loan, you can make additional repayments, reduce the loan principal, and even access funds when needed. As such, you can pay off your loan early, withdraw excess payments, and adjust repayments according to your financial needs.
Pros And Cons Of Full-Flexi Loans
| Pros | Cons |
| Maximum financial flexibility. | Greater flexibility typically comes with increased borrowing costs. |
| Suitable for borrowers seeking greater control over their mortgage repayments. | The option to withdraw surplus funds may encourage excessive borrowing. |
| Enables adjustment of monthly instalments in line with changes in income or financial circumstances. | Could lead to higher debt levels if not managed prudently. |
| Enhanced loan management, allowing borrowers to tailor their repayment strategy based on personal financial goals. | Complex loan management requires active oversight and financial discipline. |
| Promotes efficient use of surplus funds to reduce interest and loan tenure. | The more complex structure may not be suitable for all borrowers. |
Who Is It Ideal For?
Those who are disciplined with their finances and want more manageability for their mortgage.
The Full-Flexi Loan is also suitable for individuals whose income may fluctuate and for homeowners who require liquidity. In essence, those who need to access funds or make changes to their loan quickly in response to changing financial circumstances.
Mortgage Loans Overview: Basic, Semi-Flexi, And Full-Flexi Loans
| Loan Type And Benefits | Basic Term Loan | Semi-Flexi Loan | Full-Flexi Loan |
|---|---|---|---|
| Flexibility | None | Some flexibility | Maximum flexibility |
| Extra Repayments | Not allowed | Allowed with restrictions | Fully allowed |
| Withdrawal of Funds | Not allowed | Not allowed | Allowed |
| Monthly Payments | Fixed | Adjusts based on extra payments | Flexible |
| Best For | Stable income, no extra payments | Extra savings, steady income | Irregular income, flexible payments |
Be it a standard and fuss-free Basic Term Loan, a flexible Semi-Flexi Loan, or the ultimate control with a Full-Flexi Loan, each option offers different benefits.
Moreover, before approving your loan, banks will evaluate your credit score, debt service ratio, financial health, and income to assess the loan amount and the monthly repayments.
If you want to know what you can afford before deciding to buy a property, use our home loan calculator to make a wise calculation! The tenure of a mortgage loan is usually 30 years and above, making it a long-term decision you can’t think short-term about.