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Wednesday, October 15, 2008

5 Most Important Things To Watch Out When Taking Housing Loans

Look out for the lock-in period.
This is the time frame set by the banks to tie you down with them. Usually they won't allow you to swith to other financial organisations within this period. They also would not like you to pay off the debts earlier than scheduled. If you do any of the above, it is possible for them to charge a fee which would be between 5%-10% of the loan amount.

Choose the right package
Though there would be various packages offered, they can be summarised into 3 broad categoried:-
-starting off with a very low interest rate and later have a BLR (base lending rate) + x%
-a fixed interest rate throughout the loan tenure
-initial high interest and gradually lowering the rates, or having a BLR -x% for the main portion of the tenure.

Now the question is, which is the best package? Well, it all depends on you. The type of organisation you are working for or running your own business, are you on a tight budget now and how you foresee your income growth in the future.

See whether the lawyer's fee/MRTA is absorbed by the bank or passed on to the customers.
In an economic situation like this, most banks try to absorb the legal cost involved and give free MRTA (Mortgage Reducing Term Assurance) coverage.

Choose a bank with the best service offer
When applying for loans, try to apply to as many banks at once. In fact, instead of going to different locations, looking for these banks, if there is any expos going on for new homes, you can get most of the banks having a counter there. Or simply give a call to them and get a sales representative to see you. You can then choose the fastest service provider or the one that really satisfies your condition of customer service. If you face problems in the beginning itself, most likely you would have problems too later on.

Get a longer tenure for the loan
Whichever institutions giving you the longest loan period, grab them!
Though it will boil down to having to pay more in terms of interest, our aim would be to pay more than the stipulated amount monthly. Most banks charge lesser interest rates when the duration is longer. And we can make use of this point to our advantage. When paying off 100 or 200 extra every month, the duration of the loan will be reduced automatically and in bad times, you can choose to pay lesser than what you are used to pay every month and you will feel a great relieve for that.

In Malaysia, there are many banks offering home loans that varies in its packaging. I list some of the more popular ones below:
1. Standard Chartered

2. Public Bank Berhad

3. HSBC Bank Malaysia Berhad

4. Hong Leong Bank Berhad

5. AmBank Berhad

6. MaybankBerhad

7. Citibank Berhad

No, I'm not being paid to list the above banks and neither am I biased towards any one of them. It's just through my own experience of getting a home loan. I finally ended up taking a home loan from Public Bank as it met with most of my requirements.

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