Just like buying a home, getting the right home loan is serious business. Sign up for the right one, and you’ll be benefiting from your decision many years down the road. Get one that doesn’t suit your needs, and you just might find yourself cursing your bank every month end when it’s time to service your instalment.
For those who need help in getting a home loan that’s just right for you, here’s a quick guide on what you can do:
1) Think About What’s Right For You. Before you do anything else, it helps to sit down and think about what you want from your loan. For most people, it boils down to a choice between a Flexi Loan and a Term Loan. If you want flexibility and think you might settle your loan earlier than the loan period, a Flexi Loan works best. If you prefer a clear-cut instalment amount for each and every month, consider a Term Loan.
2) Preliminary Comparison. The interest rate should be THE most important consideration when it comes to home loan. At this juncture, your priority is to approach as many banks as possible to find out what their board rates are, then apply with ALL the banks that offer you board rates you’re comfortable with (i.e. it’s a lot of effort and we’ll come to why later). To save some time, try using an online home loan comparison table such as this so you don’t have to visit each and every bank in person.
3) Read Your Letters of Offer. Approximately a week later, you should start receiving Letters of Offer from the banks you applied with. Now, compare the interest rates again. Sometimes, they could be different from the board rates depending on the property and your standing with the bank. At this point, DO NOT sign any Letters of Offer.
4) Negotiation. Remember when we asked you to approach as many banks as possible? We’re about to get to the reason why. With your Letters of Offer, you now have plenty of bargaining chips to negotiate for better margin of financing (i.e. how much money they’re willing to loan you) and interest rates with the banks! Here are a few ways to do it:
– If your preference is with Bank A, but Bank B gives you a better deal; Bank A would be more ready to give you the same rate if you have proof of Bank B’s offer.
– If all banks give you the same deal, some loan officers might be more ready to hear you out if you tell them your preference lies with the bank that gives you a better rate by 0.05%.
Though the above is not guaranteed to work, you’ll want to try your hardest because a mere difference of 0.05% for a home loan of RM500,000 for 30 years would cost you more than RM5,000 – money you’re far better off using elsewhere.
5) Final Round Comparison. After all the hard work and negotiations, you could be left with 2 or 3 qualified offers sitting on your table. Now, it’s time to do some final comparisons on other tangible and intangible factors, such as:
– Lock-In Period and Prepayment Penalty: the lower the better, preferably none.
– Legal Fees & Charges: some banks might offer to absorb part of the fees.
– Monthly Maintenance Charges: it is generally accepted that Flexi Loans do charge a fee of RM10 per month, see if any bank waives this for you.
– Location: you’ll be dealing with the bank for a really long time so make sure a branch is located near or right next to you.
– And of course, that it is indeed the type of loan (Term or Flexi) and the loan period you need!
6) Sign Up. Looking back, it is hard to imagine that all the above would have taken place in a matter of 2 – 3 weeks, which is the usual timeline property developers offer to homebuyers. However, you can now sign up for your chosen home loan, knowing you’ve minimised your chances of getting nasty surprises for the years to come!
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