The valuation fee will be borne by you. Some financial institutions charge loan processing fee before the loan is disbursed. You will also need to pay two sets of legal fees, one for the execution of the Sale and Purchase Agreement and the other for the loan agreement prepared by the financial institution's panel lawyer. There may also be fees for the Memorandum of Transfer of the ownership of your property.
You should also take into account the other costs of homeownership such as quit rent, assessment fees, fire insurance, utilities bills and management service fees, if applicable. This will give you an idea of how much you could afford for the monthly housing loan instalments. Many financial institutions' websites have housing loan calculator to help you estimate the amount you could borrow based on the monthly instalments you can afford to repay.
Different housing loans have different features to meet different customer needs. Make sure you understand the options and features when you shop for a housing loan. This will help you choose a loan that best suits your needs and financial circumstances. Two key factors are the loan tenure and interest rate type.
The loan tenure refers to the length of time it will take you to fully repay your housing loan. The longer the tenure, the lower your monthly instalments.
However, the longer you take to pay off your loan, the more you will pay in interest charges. The maximum tenure for a housing loan is 35 years. For a housing loan of RM, with interest rate at 4. If your housing loan tenure extends into your retirement age, you should have a plan on how to service your repayments after your retire. As for a floating-rate loan, the interest rate can rise and fall during the loan tenure. The interest rate is usually tied to the Base Rate. Your financial institution must disclose how the Base Rate is derived and the possible scenarios that could result in a change to the Base Rate.
The key advantage of a floating-rate loan is that any decrease in the interest rate will reduce your monthly repayments. The opposite also applies, your monthly instalments will increase if the interest rate goes up.
Keep in mind that the rise and fall of interest rates are difficult to predict. Make sure that you will be able to adjust your budget in case your monthly repayments increase. Some financial institutions may offer a promotional rate for the first 3 to 5 years to attract new customers. Before you accept a promotional rate offer, make sure you know what rate you will pay and how much your monthly instalments will increase when the promotional rate period is over.
The financial institution may impose an early settlement penalty if you fully settle the housing loan before the end of the promotional rate period commonly known as the lock-in period. And, on the contrary by choosing a longer tenure, the EMI burden is less but the interest cost is high. If the monthly difference of Rs 6, is invested at an assumed growth rate of 12 per cent per annum for 25 years, the accumulated corpus is about Rs 1. Since October 1, , all loans from banks are linked to an external benchmark.
After a comparison of effective home loan interest rate across banks, an important parameter is the tenure of the home loan. RLLR meaning, comparison vs MCLR No matter whether you choose a shorter tenure or a longer tenure, it is better to finish the home loan as early as possible. Ideally, as one grows in the career, the prepaying capacity increases. Choosing shorter or longer tenure of home loan should be based on your affordability but ideally, go for a shorter tenure. Also, the early you prepay your home loan, the better it is for your savings earmarked for other financial goals in life.
Like us on Facebook and follow us on Twitter. Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates. Compare Cards. Calculate your property financing eligibility. Use the calculator below to understand how much financing you can get for your home or property. The calculator will also help you estimate your monthly home loan instalment. Gross Monthly Income. Net Monthly Income. Existing Monthly Commitments. Car Loan. Personal Loan.
Credit Card 2. Do not plan for your children in isolation. Let all your goals be a part of your expense planning, it will help you balance better. Keeping a spouse in the dark on money matters not only increases stress in a marriage but also precludes your chances of finding a more cost effective solution. Maybe your wife or husband has some spare money which can help you avoid taking the loan altogether.
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