Home loan - which are the best

Okay, so recall from my previous post to ask all of you to keep the leaflets and what not from the bank sales people. Well, here is the reason why

Every single housing developer has their end financiers and also preferred bankers. What this basically means is that they will give the buyers (like you and me) a better rate. In return, they get more sales and loans (more money for them)

Of course, you can also opt for your own bank which you like (if you are working in a bank or insurance company, you'd get a better rate) but that for a small minority. The reason why I said to keep it was because I found that even within the same bank, they can quote you different rates depending on who the mortgage / loan officer is. I had one from bank XXX (shall not name it just in case I get into a lawsuit) which had quoted me BLR-1.8 and another which had quoted me BLR-2.1 on the same project, same amount and same repayment period !!!

So its wise to keep them, get a few of them to quote you and then decide. NEVER NEVER let the loan officer pressure you into signing the offer letter. If you had signed it, don't fret because you still have a 1 week cooling period... what this basically means is that you can still cancel the deal if you don't like it within a week with no penalty charges. They usually don't tell you this but you can do it . Trust me!

Talking about loans, you will need to decide on what are your requirements. Here is a summary of what I had considered

• Loan amount (after I withdraw from EPF, timed deposits etc)
• Loan period
• Bank offered rates
• Availability of branches and services
• Type of loan:-- term, flexi or conventional
• Fixed rate or variable

The last 2 are actually the biggest concern for most new homebuyers since they cannot decide on what they should do. I weighed the pros and cons of each before deciding and it took me nearly 2 weeks to do so. Heck, this is like my biggest investment so far so I need to think it over wisely.

Usually, banks only allow you to use up to one-third of your nett pay for repayment of loans (includes credit card, cars, hire-purchases etc). So if you are really strapped for cash and the type who needs to know a fixed amount to pay a month then the answer is clearly take a term loan with a fixed rated. You will only then have to pay X amount a month for the next Y amount of months / years before the loan is finally settled.

Next comes the conventional or flexi question. Usually, most people nowadays take flexi and yours truly as well. Flexi loans is like a hybrid between a personal and overdraft. So when you need money, just withdraw and pay more when you feel flushed. What the difference you may ask? Some that I can think of

• Interest from flexi loans are slightly higher but if you put in more money into the linked savings account this reduces your principal hence less interest paid
• Interest is calculated daily and charged to account monthly like credit cards but with flexi loans you have the option to withdraw cash anytime
  

On that note, there are many banks (most if not all) provide some forms of flexi loan or semi-flexi loans. They work on the same principals as others but differences are usually on the repayment terms or withdrawl term etc. Mostly are minor but can be a problem if you are the type who need to withdraw money often. Some banks stipulate a minimum repayment of 2-3 months loan repayment and some banks have no such condition. Some will stipulate a minimum withdrawl of only 5,000 and some do not. There is no quick answer to these so best if you look and apply as many banks as possible before deciding on which bank loan to take.

Here is a picture of a simulated savings which you can get from my banker (supposedly to save RM180,000 compared to conventional loan. This in theory works but reality is I would leave it to you to decide.

Also a word of warning is that bank loan officers usually show you this projected savings etc if you take their loan compared to other banks and make it look so nice and rosy. Never take their word !!! Usually they never compare apples to apples... but apples to oranges , durian etc. Look carefully at their projection and see what I mean. Also, if you are buying a new house like me, these projections are atcually crap since they do not reflect what are the interest you are going to pay.

My personal tips are as follow

• Double check with some of the online calculators to see what are the interest you are going to pay
• Get a loan that gives you the lowest interest during the first 5 years (thats when your interest are highest). Its useless to have the interest reduced after 10 years etc since you would easily have paid 20% of your total loan amount in interest during that same period
• If your house is under construction, get one that gives you lower interest during years 3-7 and not 0% during years 1. You don't save any money doing so.
  

Having said all that, the easiest and simplest method would be to look for a 3rd party loan/mortgage consultant, pay him/her like 150-200 and let them do the rest of searching for loans etc. They will come back to you with what they think is the best and you decide.