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Suburban House

What is a Housing Loan?

A housing loan, or mortgage, is money lent by a financial institution to buy a property. The institution holds your property's deed as security until the loan is fully repaid.

The Four Factors that Defined Housing Loan:

  • Principal: The purchase price minus your down payment and fees.

  • Interest Rate: The yearly percentage paid on the remaining loan balance.

  • Term: The loan repayment period, usually 5 to 30 years.

  • Repayment Frequency: How often payments are made, typically monthly or weekly.

Types of Housing Loans:

  • Basic Term Loan: Fixed installments throughout the loan term; early payments don’t reduce interest.

  • Semi-Flexi Loan: Allows extra payments to reduce interest, but withdrawals of advanced payments may have limitations.

  • Full-Flexi Loan: Same as Semi-Flexi, but you can withdraw advanced payments without penalties. Interest applies on withdrawals.

  • Islamic Loan: Interest-free, based on the Murabahah concept (credit sale under Islamic law).

  • Fixed-Rate Loan: Interest rate is fixed for the entire loan term, often offered under Islamic loans. Ideal for those worried about fluctuating rates.

Housing Loan

10 Considerations When Choosing a Housing Loan:

  • Is prepayment allowed? Does it reduce the principal?

  • Are there limits on principal reduction? Any notice required?

  • Can capital be repaid early? Any penalties?

  • Flexible repayment options (weekly, fortnightly)? Minimum amount?

  • Redraw facility for earlier principal reductions? Rules and procedures?

  • Is interest calculated daily or monthly?

  • Fixed or fluctuating interest rate? Current market rate?

  • Is Mortgage Reducing Term Assurance (MRTA) optional? Can Life Mortgage Insurance replace it?

  • Additional fees (processing, valuation, legal, discharge)?

  • Refinance options? Limitations and penalties?

Other Considerations:

  • Can it be split into Term Loan & Overdraft?

  • Can installments start before full loan release?

  • Any value-added services?

  • Is Houseowner Insurance sum assured sufficient? Don't replace it with Fire Insurance.

  • Late payment penalty and grace period?

Since the latest products available are more and more complicated, please contact us for a free explanation!

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