Bank charges on quick excess payments, too

What banking institutions make money off your coffers are the little things you don’t realize you’re paying for. Us, being smart Malaysian consumers, have to be wary of these little things so that we don’t burn our pocket holes too quickly.

Housing loans or home loans are one of the biggest mortgage you’re going to take in your life, as property purchase is. Since buying houses isn’t like walking around the mall and grabbing them off the shelf, there is a particular science to it that you need to at least take the time to understand; consequence if you don’t: Face a big hole in your pocket. As for any of us, burning money for nothing isn’t worth it – And the middle to low income group of people in Malaysia, it’s not fun at all.

Prepayment charges are fees made by banking institutions to home loan applicants when they need to pay off their loan amount in excess (considering you struck the lottery 2 months ago and want to make a full payment on your housing loan). Another good term to consider is the early loan settlement. Depending on where you want to pay your loan to – Whether it’s going to be the principal loan reduction or advance payment, the borrower (home loan applicant) has to specify it to the bank.

At most cases, prepayment charges are charged when a housing loan is paid off 3-6 years off its current loan tenure. For example, instead of paying for 20 years, an individual can pay for 15 years with a penalty imposed on him. Keep in mind that this facility varies from different banking institutions. Don’t expect charges to be the same for all banks. That’s why ML has came out with a list of what you should look for in a home loan. At the bottom section under the category of ‘Others’, there’s a line saying prepayment charges.

In general, there are two types of prepayment charges:

     

  1. Partial Prepayment

    Payments made are not complete – It does not fully settle the mortgage and outstanding loan applied by the borrower.

     

  2.  

  3. Full Prepayment

    Payments made are complete – The outstanding loan amount is paid at full.

     

General rules of prepayment facility charges:

  1. Partial Prepayment

  • Some banks have the facility of not imposing any charges on prepayment penalty fees or any restrictions to help make their product more attractive.
    1. Stated in the letter of offer, loan agreement or home loan product brochure.
    2. Requires pre-notification.
    3. Certain banks may impose some restrictions.
    4. Certain banks may impose a penalty fee.
  1. Full Prepayment
  • Known as ‘early settlement penalty’. Ask for the minimum required tenure of loan repayment before making full prepayment, so that you might not need to be charged the prepayment penalty fees.
  1. Subject to penalty charges if the prepayment of loan tenure does not meet the required amount of period (years and months).
  2. Requires pre-notification (for certain banks).

Banking institutions are NOT OBLIGATED under any law or contract (usually) to provide waivers of penalty fees to borrowers. But under certain circumstances, banking officials might just make the decision to do so.

     

  1. The borrower’s party is selling off the property to the buying party, which the loan transfer will be made under the same bank.
  2. Under certain conditions to where properties are sold at a loss (borrower’s side).
  3. The transfer of loan is taken up by another party with the same or larger amount.
  4. Compassionate financial reasons – Natural disasters, personal economical problems, accidents, etc.
  5.  

The mortgage and financial consulting services are offered to you FREE of charge without any obligations. Kindly contact us or email to consultant@malaysialoan.com.my if you need any enquiry. Thank You.

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