Housing Loans in Malaysia: Key Information & What to Keep Track Of

Buying a home is a major milestone, and for most Malaysians, securing a housing loan (mortgage) is essential to making this dream a reality. However, understanding the terms, financial commitments, and legal aspects of a housing loan can be overwhelming. In this guide, we’ll cover the types of housing loans, key factors to consider, and important things to keep track of throughout the loan period.

Housing Loans in Malaysia

Types of Housing Loans in Malaysia

Before applying for a home loan, it’s crucial to understand the different types of housing loans available in Malaysia:

1. Term Loan

A standard fixed repayment loan where borrowers make monthly payments covering principal and interest. It has a fixed tenure and is suitable for those who prefer stable repayments.

2. Flexi Loan

This loan allows borrowers to link their loan account to a current account, enabling them to reduce interest by depositing extra cash into the account. It provides flexibility but may come with higher fees.

3. Semi-Flexi Loan

A mix between a term loan and a flexi loan, where extra payments can be made to reduce interest, but withdrawals of extra payments may require bank approval and additional charges.

4. Islamic Home Loan (Musharakah & Murabahah)

Shariah-compliant home financing where the bank purchases the property and sells it back to the borrower at a profit instead of charging interest.

Things to Keep Track Of When Taking a Housing Loan

1. Loan Interest Rates & Bank Packages

Interest rates can significantly impact your monthly repayments. In Malaysia, interest rates are based on the Base Rate (BR) set by individual banks, plus a margin. Be sure to compare different banks to get the most favorable loan package.

2. Loan-to-Value (LTV) Ratio & Down Payment

Banks typically offer up to 90% financing for the first two residential properties, meaning you’ll need to pay at least 10% down payment. For third property purchases, financing may be lower (around 70% or less).

3. Legal Fees & Stamp Duty

Apart from the down payment, homebuyers must also budget for:

• Stamp Duty – Charged on the Sale & Purchase Agreement (SPA) and loan agreement.

• Legal Fees – For preparing loan agreements, SPA, and conveyancing services.

• Valuation Fees – If required for property assessment.

4. MRTA vs. MLTA Insurance

Mortgage insurance is crucial in protecting homeowners:

• Mortgage Reducing Term Assurance (MRTA): Covers loan repayment in case of death or disability but reduces over time.

• Mortgage Level Term Assurance (MLTA): Provides full payout benefits, making it a more comprehensive coverage option.

5. Loan Tenure & Repayment Commitment

Most housing loans in Malaysia have a maximum tenure of 35 years or until age 70. A longer tenure reduces monthly repayments but increases total interest paid. Ensure your loan repayment does not exceed 40% of your monthly income to maintain financial stability.

6. Early Repayment & Lock-In Period

Some banks impose a lock-in period (typically 3–5 years) where early loan settlement may incur a penalty fee (usually 2–3% of the outstanding loan amount). Always check the terms before deciding to settle your loan early.

7. Refinancing Options

If interest rates drop or if your financial situation changes, refinancing your home loan to a better package can help reduce interest costs. However, check for potential refinancing costs and penalties before making a switch.

A housing loan is a long-term commitment that requires careful planning and understanding. Always compare different banks, review your financial situation, and consult with legal professionals to ensure a smooth process. At Choo & Lee Advocates & Solicitors, we provide expert legal services for property transactions, ensuring that your loan agreements, SPA, and legal documents are in order.

📞 Need legal assistance for your housing loan? Contact us today to ensure a smooth and hassle-free home-buying process!

Disclaimer: This article is for general informational purposes only and does not constitute legal, financial, or real estate advice. While we strive for accuracy, laws and regulations may change, and information may not be applicable to your specific situation. Always consult a qualified professional before making any legal or financial decisions.