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Financing Your First House

Photos by Alexander Andrews on Unsplash

Just like everyone else, your bucket list is not tied down to that one desirable toy or device,   and will eventually extend to that dream house of yours. In comparison to everything you had owned, nothing quite tops the milestone of buying your first home. However, the road to get there forces a financial challenge, of which most would find comfort in a home loan. The flow of things may be overwhelming at first, but they get easier after some explanations, and this article serves to give you a clearer view of the process.

In financing your first house, the first most important thing to understand is interest rates. There are 2 types of interest rates: fixed and variable. As their names suggest, the former refers to a percentage that remains the same throughout your loan, and the latter refers to a percentage that banks follow, as formulated by Bank Negara Malaysia. By comparison, the fixed interest rate guarantees certainty, while the variable benefits you if it drops in the future. That being said, there is no better of the 2, as they each have their pros and cons. Regardless of your choice, keep in mind that the lower the interest rate, the more you will get to save.

There are 2 main types of home loans offered in Malaysia: Standard and Flexi home loan. While both serve to provide you with financial assistance, they differ in their installment plans and interest charges. Standard home loans are calculated on the interest rate of your choice, by which determines your monthly instalments. Flexi loans, on the other hand, give you the option of prepayments to help you save on interest charges, and additionally, lets you withdraw any excesses.  Like interest rates, neither of the loans is better than the other and only boils down to your cash flow and preference.

Photo by Kyle Mills on Unsplash

Now that you’re familiar with the basics, it is important to know what qualifies you for a loan. Creditworthiness is determined by 3 things: credit history, credit report, and credit score. Credit history is your record of debt payment, and credit report is a summary of the information mentioned earlier. Credit history from different financial institutions. The credit score is the numerical reflection of your credit report as ranged in figures from 300 at low to 850 at max. Essentially, you want to keep it as high as possible by being quick with your payments. Needless to say, having the perfect score would not secure you of loans beyond your means, but it will help banks identify the eligibility at your income.

There you have it, the simplest property guide to exist. All things broken down, financing a house no longer seems so scary, does it? Before you jump the bucket list though, know that this article is not complete on its own, and it is subject to further considerations in whatever situations you’re in. Nevertheless, these are the main things that apply, and perhaps it’s already preparing you for that dream house in the future.

By: Thomas Koh


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