What to look for in a flexible home loan?

Several years ago, flexible home loan was a new concept contrary to the conventional home loan, offered by limited number of bank only. By today, many banks provide their so-called flexible home loan facility to the market. There was a saying that the interest rate of flexible home loans is slightly higher than their conventional counterparts, but this is no longer true nowadays, with both having the same competitive rate.

If you are considering a flexible home loan, what should you look for to distinguish the genuine flexible home loan from the rest?

Here are the basic features that any flexible home loan should mandate:

• Your loan account should linked to a deposit account, such as a current account. You get consolidated statement report for both accounts in one.
• You deposit money into the deposit account, and your monthly installment is automatically transferred from there to your loan account.
• The interest is calculated from outstanding loan amount minus any excess money in the deposit account. In other words, any extra money you deposit can really helps to reduce interest payments, thus saving you the money.
• You are flexible to deposit more than your monthly installment in any amount, anytime, and as often as you wish.
• No notice required or fees charged for the extra payment.
• You have the flexibility to withdraw your excess payments whenever you need it in any amount, anytime you wish.
• No notice required or fees charged for withdrawal of excess payments.
• Withdrawal of excess payments can be done anytime by ATM or cheque facility.
• You can start your principal repayments immediately even if your home is still under construction, rather than merely servicing the progressive interest.
• You can request for an increase in loan amount, giving you a ready avenue for extra money.

Any home loan that does not have ALL the features above, should not be considered as flexible home loan. If the loan imposes constraint or limit to the amount of payment and frequency to the deposit and/or withdrawal of excess money, then it is not flexible enough.

Other than the above basic features, you should also look for the loan with:

• Low interest rate, of course.
• No monthly, quarterly or annually maintenance fee.
• No processing fee for application.
• Subsidised lawyer fee.
• Subsidised valuation fee.
• Low lock-in period.
• Low termination fee.
• Daily rest interest calculation where interest is reduced as soon as payment is made.
• EPF withdrawal to reduce loan outstanding.
• Loyalty bonus in the form of lower interest rates or money rebates for customers who keep the account for years.
• No compulsory to MRTA/MLTA offered by the bank.
• Convenient to make payment easily.

Although you could hardly find a flexible home loan with all the features above, you can always look for the one that offers the most.

Reduce your home loan interest rate

For most people like me, home loan is our biggest borrowing in our lifetime that span for many years to settle off. The interest rate of our mortgage loan is a crucial factor that determine the amount of money and the repayment time we need to pay back to the bank.

Over the past few years, the interest rate offered by banks has been gradually dropping to historical low level, and is currently around 5%. Therefore, if your home loan interest rate is far higher than 5%, you should consider lowering it to tremendously save the cost and time for you to repay the bank. If you signed up your current home loan package by more than 3 years ago, there is a great possibility that your loan is bearing an interest rate of more than 6% (or higher than BLR-0.75% in other words) with the current Base Lending Rate of most banks in Malaysia standing at 6.75% now.

How to lower your interest rate? This is my advice.

The 1st attempt is to write a letter to the mortgage business manager of your bank, requesting for a reduction to your home loan interest rate with the bank. This is exactly what I did recently, and I received the reply from my bank 2 weeks after I sent out the letter to them, offering to reduce the interest rate 2% lower from the existing. Immediately, I saved a huge amount of money at the cost of just sending out a letter to the bank (cost of paper, ink, envelop and postal stamp, which is close to zero).

If your 1st attempt failed, either denied or ignored by the bank, the 2nd attempt is to refinance your home loan to another bank. I'm sure you can easily get an interest rate of below 5% with zero moving cost offered by another bank nowadays. There are plenty of such packages around.

Take out your home loan offer letter and check your interest rate now. You could save an amount of at least 5 figures RM of your hard earned money by this interest rate reduction attempt.

Insurance to the cards and cash in your wallet

I've been always afraid of loss, snatch, theft and fraud to those plastic cards and bank notes in my wallet. I'm sure you would be the same too.

I was introduced to the CPP card protection plan by a flyer that come together with my Citibank credit card statement about a year ago, and this plan have relieved me from such worry at the cost of only RM98 per year, with the protection extends to my family members too.

The CPP plan enables me to have a single point of contact to cancel all my lost or stolen cards with just one phone call to their call center. Beside credit cards, its protection also covers bank ATM cards, MyKad, driving license, passport, Touch'n Go card, cash, and the wallet itself.

It provides protection to credit card fraud case even before notification to bank, and of course also after notification. It will also provide reimburstment for the replacement cost of the cards and valuable documents.

Click here to view the list of features and benefits of CPP.

Besides Citibank, CPP's protection policy is currently available locally for credit card holders from Alliance Bank, CIMB Bank, Standard Chartered Bank and Hong Leong Bank too. The plan and annual fees might varies a bit from each of the banks.

You can probably find out more about this protection plan from your bank.