If you’re currently in the midst of shopping for a home loan to buy the house of your dream. Comparing your home loan to others in the market is free and could save you thousands of dollars. A home is usually the most expensive asset you’ll own and the average home loan is taken out over as long as 30 years. Combine that with interest calculations and ongoing fees and you’ll find that you pay a significant amount of interest over the whole loan. here are some things you should consider before making what could arguably be the biggest financial decision of your life.
1. Asses your personal and financial situation.
2. Type of home loan
First and foremost, consider what works best for you: a traditional term loan or a flexible home loan (“flexi-loan”). A traditional term loan requires you to pay a fixed amount each month for the entire tenure of your home loan (eg. 30 years), while a flexi-loan gives you the option of reducing your interest whenever you wish (i.e. by saving your extra money into a linked current account. The more you save, the less interest you pay).
If you have a strict and predictable cash-flow pattern, a traditional term loan may be best. If you prefer flexibility in paying off your loan, a flexi-loan is recommended.
3. Interest rate
As of all loans, your priority should probably go to the bank that offers you the lowest interest rate. Citing an example for a home loan of RM500,000 over a period of 30 years, the difference in interest between an interest rate of 4.2% and 4.15% (i.e. a mere 0.05%) could be well over RM5,000!
4. Loan Amount
Depending on many factors which include the value of the property as well as your standing with the bank, different banks may offer you different financial amounts you are able to borrow. As you’ll be required to pay any amount not covered by the home loan upfront, this becomes very important especially if you’re short on cash.
This also depends on the amount you pay up front (down payment). Currently, there is a “My Dream Home” campaign happening on PropertyGuru – a platform designed to assist property buyers in buying the home of their dreams. They are offering a cash prize of RM50,000 to be used on your home down payment. Why not try your luck and you might actually be able to save a nice amount of money to save on your new dream home!!
5. Fees & charges
A home loan application involves professional and government-regulated processes such as preparation and disbursement of loan agreement, payment of stamp duty and processing by the bank, just to name a few. All these processes usually come with fees and charges that will be borne by you, the buyer.
In certain cases, it may also be wholly or partly borne by the banks as part of your loan packages. Hence, is it best to sit down with the loan officers (for all the banks you are considering taking your home loan from) and have them run through the fees and charges with you. The task may be repetitive and time-consuming… but it’ll be time well spent.
6. The bank
Understand that you’ll be dealing with the bank on a very frequent basis for as long as your home loan is in effect (which may be 20 to 30 years). With that in mind, you should probably choose a bank you are very comfortable with. Some of the things you may wish to think about include:
· Do you have an existing savings or current account with the bank (for ease of inter-account transfer)?
· Are you satisfied with their standard of service?
· Do you consider the bank to be trustworthy and reliable?
· Does the bank offer value-added services that will make your life easier for the long haul?
· How is the bank’s reputation as a whole?
· Does the bank provide online banking facilities which allow you to pay your instalments easily?
· Is your loan officer approachable, so that you can phone him or her anytime you have a question?
7. Use comparison websites
It’s always confusing when there’s so many different loan packages. You can always find a vast selection of bank loan packages all on one site www.propertyguru.com.my provides an easy to use calculator to make all the confusion go away in an instant. But if things get too tough to handle, you can always seek expert advice for tailored financial advice.
Bearing all these matters in mind, good luck in finding your next home loan.