Basic Term VS Semi-Flexi VS Full-Flexi Home Loans

When seeking a home loan to finance a property, ascertaining the type of loan you want is one of the first and most important questions you have to ask yourself. In Malaysia, that usually means choosing from one of the three major categories of home loans: Basic Term, Semi-Flexi or Full-Flexi.

If you’re relatively inexperienced in home loan products, read on and allow us to shed some light on the major differences in order to help you choose a home loan that truly fits your requirement.

1) Basic Term Home Loan

A basic term home loan is one that comes with fixed repayment schedule, where the monthly instalment you pay is the same throughout your entire loan period.

Generally, a loan of this category does NOT allow you (or make it exceptionally hard for you) to reduce your loan interest with advance payment. Any additional payment you make is merely treated as pre-payment for future instalments, and in no more affect the total interest you’re paying on the loan itself. You can, however, write in to the bank and request for special considerations, which may, or may not, be granted at the discretion of the bank.

In the past, basic term home loans used to be the most common type of loan for homebuyers in Malaysia. Nowadays, they are not as prevalent as they simply do not offer the kind of repayment flexibility required by the modern home owners.

2) Semi-Flexi Home Loan

A semi-flexi home loan is a type of home loan that comes with a built-in facility enabling borrowers to make advance payment to lower their home loan interest without the need to make any formal request to the bank.

With a semi-flexi home loan, any additional amount you repay on top of the normal monthly instalment is automatically used to reduce the principle loan amount, subsequently lowering the amount of interest you’re being charged for your home loan. If you like, you could also make a request with the bank to withdraw the additional payment you’ve made, though you’re likely to incur some charges during the process.

Along with the full-flexi home loan, a semi-flexi home loan is considered a preferred option for those with spare cash and flexible income, due to the potential to save on loan interest.

3) Full-Flexi Home Loan

Full-flexi home loan (or just “flexi loan”) takes the notion of flexible payment to the next level, enabling borrowers to make advance payment to lower their home loan interest AND withdraw the additional payments they’ve made whenever they like, without the need for complicated procedures.

In a typical flexi loan package, you get a home loan account that is linked to a current account with a chequebook. Every month, loan instalment is automatically deducted from the current account and paid to the home loan account. By depositing additional sum of money into the said current account, you’ll also be able to offset your principle loan amount and reduce the interest on your home loan.

Example:

Say you have a flexi loan of RM300,000 and you’ve deposited RM100,000 into the linked current account, your loan interest will based on RM300,000 – RM100,000 = RM200,000.

Just like a semi-flexi home loan, you’ll be able to withdraw the additional payment you’ve made, simply by writing a cheque using the chequebook provided. The process is much easier because you do not need to make a request with the bank, as in the case for a semi-flexi home loan.

Take note that most flexi loans do come with a fixed monthly fees (usually RM10 per month) to maintain the current account, so you might need to evaluate the financial commitment against the convenience of a flexi-loan before you make a decision.

Choosing a Home Loan Category

To most Malaysian homebuyers today, choosing a home loan usually boils down to a choice between a semi-flexi home loan and a full-flexi home loan, due mainly to the repayment flexibility that they provide. But if you do not envisage having additional cash to make advance payment on your home loan, there is nothing wrong with going for a basic term loan (especially if you manage to secure a better interest rate compared to flexi loans).

For those of you who’re still stuck in a dilemma after reading this article, our recommendation is to go with a semi or full flexi loan if you can. After all, it’s always better to have options than none. For those looking for a full-flexi loan above RM500,000, you may wish to start off by looking at this home loan package by CIMB Bank. Alternatively, you can also make use of our home loan comparison table to find a package that fits your specific criteria.


About the author
Mr Ching is the CEO and co-founder of iMoney, a leading price comparison website in Malaysia. Prior to iMoney, he was an investment consultant, advising clients ranging from $5 million to $500 million on investment related matters. He is also a CFA & CAIA Charterholder, two prestigious professional qualifications in the finance field.


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