Home Loan Tips – Choosing the right home loan

Tips or guide in choosing the best Home Loan or Housing Loan package. When you are shopping around for the best home loan or housing loan package, what kind of offer do you consider to call it the best? Usually people will look at the lowest interest rate, longer tenure, higher margin of finance (MOF), etc. I would say, do not decide which package is the best based on the items mentioned above. Because sometime, even though the bank offering you with the lowest interest rate and the longest tenure, they might impose you stringent T&C in your offer letter or loan agreement. So what should you do in looking for the best home loan package? I would advise you to shop around first based on the interest rate, tenure, MOF or other item that is important to you. After that, shortlist 2 or 3 banks that you are preferable with and submit your application at the same time to these banks. If your application approved, the bank will issue you an offer letter or loan agreement. Before you make a decision and sign the offer letter or loan agreement, make sure you understand and read the documents. If you are too busy to read, just ask the banker to explain on the following items for verification. How the interest is calculated? – Daily rest or monthly rest. Daily rest is the best. How long is the lock-in period? – Normal practice is 3 to 5 years. If the give you 5 year, nego for 3 years. When the lock-in period started? – This is relevant if you buying house that is still under construction. It's either started from the first draw down, or from the full amount is released. You should ask the lock-in period to start from the first draw down. You can save years on this. How much is the early settlement penalty? – You will have to pay for a penalty if you make a full settlement of the loan or refinance your house within the lock-in period. Normal practice is 3%. Try nego for lower rate. How the early settlement penalty is calculated? – Its either based on loan amount, or outstanding balance. I'm sure you should want it to be based on the outstanding balance. Who is paying for the loan agreement fees and stamp duty? – Try to look for a package with zero-moving-cost. Any monthly account maintenance fees? – Usually there is a monthly maintenance fee for loan that offering overdraft facility or redraw facility. Is MRTA is mandatory? – Actually you can opt either to buy MRTA from the bank, or use your existing life insurance to exclude you from paying the MRTA. Your life insurance coverage should same or more than the loan amount. But some people doesn't want to use their life insurance to cover the outstanding loan amount in case anything happen to them. For property investor especially, you can opt for short tenure of MRTA..i.e. 5 to 10 year if you are targeting to sell the house during that period. This will cost you lesser than MRTA for 30 years. Capital repayment can be made anytime? – Ask whether you need to give notice to bank before you make repayment to reduce the principal. Can I make advance payment? – Let's say your monthly payment is RM1,000. But you want to shorter the tenure and pay RM1,500 every months, or in any month that you want. Check whether this is possible or not. Is redraw facility available? – This is when you want to withdraw extra amount in your loan (the extra amount is from capital repayment or advance payment). Home loan that offering overdraft facility will have the flexibility to withdraw the extra. If you are choosing fix term loan,  then you will have to clarify this, and most probably is No. Hopefully the above tips would help you in choosing the best home loan package. source:http://www.bebas-hutang.com/