The Difference Between Basic term, Semi-Flexi and Full-Flexi Loan

The Difference Between Basic term, Semi-Flexi and Full-Flexi Loan

With a standard term loan, you’ll know exactly how much you’ll have to pay on a monthly basis for your house loan. While a basic term loan lacks flexibility, you may be able to get a lower home loan interest rate when compared to a semi-flexi or flexi loan.

Applying for a semi-flexi loan may result in a lower housing loan interest rate, especially if you have the financial means to pay off a portion of your principal balance in the future. It is also the most prevalent loan option offered by banks, giving you more options to compare and choose from.

You have complete flexibility with a full-flexi loan. Your loan payments are made automatically through a linked bank account, and you can access your funds at any time. You can obtain a cheaper home loan interest rate if you save more money in the account to balance your principle amount.

Basic term loan  

Pros of a basic term loan include:

  • Home loan with a fixed monthly payment
  • The possibility of a cheaper interest rate on a home loan
  • When it comes to budgeting, this is the best option.

Cons:

  • No room for manoeuvre — you won’t be able to pay more if you want to.
  • You won’t be able to get any money back if you paid more than the predetermined monthly home loan amount.
  • If you don’t pay your mortgage on time, you’ll be charged a penalty clause.

 

Semi-flexi loan   

Pros of a semi-flexi loan include:

  • It’s the most prevalent loan option, and you can compare banks.
  • If you can make advance payments on your mortgage, you can save money in the long term.
  • You’ll be able to withdraw any additional funds you’ve paid above and beyond the agreed-upon payment schedule.
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Cons:

  • You may need to contact your bank to seek payment of the additional funds.
  • You may be required to pay a processing fee, penalty charges, and/or go through a withdrawal approval process.

 

Full flexi loan     

Pros:

  • Loan payments are made automatically.
  • Money can be withdrawn at any time – a checkbook and a current account are provided.
  • If you make advance payments to balance the principle amount on your home loan, you can save money on interest.

Cons:

  • If you withdraw the previously paid additional cash, the interest you saved will be charged
  • There is a fixed monthly fee of roughly RM5 to RM10.
  • Unavailable in most Malaysian banks, making comparisons difficult

The OPR, or overnight policy rate, is a rate set by Bank Negara Malaysia that specifies the rate of interest that financial institutions must pay each other for overnight loans. This is significant in terms of your mortgage decision since an increase or decrease in the OPR has a direct impact on the interest rate on your home loan.

Malaysia’s OPR has been updated multiple times in recent years, the most recent being on July 7, 2020. The OPR rate was slashed to 1.75 percent, the lowest on record.

A lower OPR means you’ll get a reduced effective lending rate (ELR) on your current variable or floating rate house loan. Existing borrowers, in other terms, will gain from either:

  • Monthly instalment payments are lower. When the BR/BLR rate is changed, banks are obligated to send out a notification letter with the amended instalment amount. This must be completed at least seven calendar days before the amended monthly instalment is due.
  • A loan with a shorter term (if the old monthly instalment sum is maintained). Even if banks are obligated to reduce monthly instalments on variable home loans by default, consumers will have the option of shortening their loan term instead.
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How do you pick the best house loan?

Because everyone’s demands and circumstances are unique, it’s critical to select a house loan that best meets your requirements rather than jumping on the bandwagon with everyone else.

When compared to the semi-flexi loan or full-flexi loan options, a basic term loan may be the better offer for homebuyers on a tight budget because you can get a better loan interest rate and more certainty with your monthly installments. However, prospective homeowners who anticipate better work prospects or extra cash in the bank may be better off taking out a semi-flexi loan or a full-flexi loan, since you may save money on interest over time.

Finally, undertake a cost-benefit analysis before making a decision – for example, would spending RM5 to RM10 per month for a full-flexi loan be worthwhile in the long term when compared to the potential interest savings in the future? Only you have the ability to do the arithmetic and make an educated conclusion.

In the end, everything comes down to the borrower’s goal. However, before applying for a home loan, use the debt-to-service ratio (DSR) approach to determine your maximum home loan eligibility among 17 Malaysian banks. This is simple to perform with LoanCare, iProperty’s Home Loan Eligibility Tool. Alternatively, consult a professional before making a decision.

Now that you know about the various home loans accessible in Malaysia, find out if buying a house during a recession is a good idea.

 

 

 

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