What are loans and interest rates in property investment?

Applying for a home loan is entirely different from any other type of loans. Before you buy a house, it is very important to know how home loans work because you will need to service the loan for a long time. The rule of thumb here is when you are preparing to buy your property, you should not be paying more than one-third of your monthly income.
Types of loans – Home loans are offered mostly by banks while there are certain financial institutions that offer this service as well. They will come in either fixed terms or flexi loans which can be catered to different type of customers. The fixed-term loans are the most common type offered where it basically gives you a standard to pay back for the duration of the loan. On the other hand, a flexi-loan is one that let you reduce the interest when you are able to. The former would be most ideal if you have a predictable income pattern while the latter would be most ideal for those who feel that you can pay off the loan at a later time of the duration.

Interest – The interest rates vary among the banks and you should find one which offer you the lowest. You will come across terms like BLR or Base-Lending Rate which is determined by Malaysia’s central bank, Bank Negara Malaysia. in most cases, the interest rate is BLR-x%. If a bank offers BLR-2.20% and the BLR is currently at 6.8%, then it means your interest is 6.8-2.2 = 4.6%. Take note that the interest could change when Bank Negara revises the BLR while there might be other fees as well.

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