Currently, in the market there are two most widely known Property Financing. There are Term Loan and Flexi Loan. But for many of people, they have no idea what are the different between them & which one to choose when buying a property. Actually, in addition to Term Loan and Flexi Loan, there is a hybrid product called Semi-flexi Term Loan. This will make the confusion even worse.
In terms of interest calculation between Term Loan, Flexi Loan or semi-flexi Term Loan, actually no different between them. All of them use the same principal where interest is calculated base on principal balance. Nowdays, most of the Property Financing or Mortgage loan are based on “daily rest” calculations. In simple word interest is calculated daily based on the outstanding balance.
Also, monthly installment for Term Loan, Flexi Loan and Semi-flexi Term Loan are fixed unless there is change in BLR or BFR.
The main different between Term Loan, Flexi Loan and Semi-flexi Term Loan are,
* Bank allow you to make extra payment to reduce principals but sometimes you have to inform them prior to that. Depending on the Letter Offer, sometimes Term Loan does not allow for extra payment.
* Bank doesn’t allow you to withdraw the additional amount you paid earlier in case you need to use it in the future.
* Bank will provide you with additional Current Account that link with the Loan Account. Bank allow you to make extra payment to reduce principals by depositing either through Loan Account or Current Account. At the end of the day, both account will be synchronized. You do not need to inform the bank regrading extra payment.
* Bank allow you to withdraw the additional deposit at any time by withdrawing via ATM or writing a cheque. You do not need to inform the bank.
* Bank will impose monthly charge of around RM10 but some banks may give a waiver for this.
Semi-flexi Term Loan
* Bank allow you to make extra payment to reduce principals but sometimes you have to inform them prior to that.
* Bank allow you to withdraw the additional amount you paid earlier but bank will charge you processing fee for each withdrawal. The fee is between RM10 to RM50 depending on banks. Some banks also place a limit on the number of withdrawal per year.
In conclusion, I definitely prefer Flexi Loan. It gives me flexibility to manage my money. Imagine that, if you combine all of your saving, FD & even salary to your flexi account, immediately you will save on the daily interest. And, if you need to use that money, you can withdraw it anytime as you wish. No limit what so ever. At the end of the day, you will save the interest and reduce your principal at a faster pace and finally shorten the loan tenure.
I am currently having a Mortgage loan from CIMB. I choose Flexi Home Financing-i. It is much better than conventional Flexi Loan as there is no monthly charge of RM10.