Pasir Gudang offers a variety of appealing houses for sale that can attract many property buyers. However, purchasing a new home often involves costs too high for most buyers to pay upfront. As a result, many turn to home loans to secure the needed funds.
While home loans provide financial assistance, the accompanying interest rates can become a significant long-term expense. To help reduce this burden, it’s essential to understand how home loan interest works before exploring effective strategies to lower it.
Buying a house is an exciting milestone, but it’s crucial to carefully consider the home loan you take. A home loan is a financing option provided by banks to help homebuyers purchase a property.
In Malaysia, home loan interest rates are determined based on the Base Rate (BR), which sets the minimum interest rate banks can offer. For most buyers, unless you have sufficient savings to pay for a Pasir Gudang house in full, a home loan becomes essential.
The interest charged on your loan is calculated on the remaining balance after each instalment. With every repayment, a portion covers the interest, while the rest reduces the principal amount owed.
If you’re planning to buy a house and want to lower the interest on your home loan, one effective strategy is to pay more than your monthly installment amount. Since the interest is calculated based on the outstanding principal, reducing this principal can significantly lower the interest paid over time.
Here’s the key idea: the smaller your remaining loan balance, the lesser interest you’ll owe. This is because the interest after each instalment is calculated as:
Interest = Outstanding principal loan x Interest rate
By making additional payments or paying a larger amount than required, you can directly reduce the principal loan amount. This not only decreases the interest owed but can also help you pay off your loan faster.
While reducing the interest on your Pasir Gudang house loan is possible, this strategy applies only to certain types of loans. Paying more than your monthly instalment reduces the principal loan amount, but this benefit is available only for semi-flexi and flexi loans.
If you plan to make extra payments, ensure your loan terms allow flexibility to withdraw the additional funds if needed. Also, check whether the extra payments automatically offset future installments. Below is a summary of the key loan types:
Term loans have fixed repayment schedules with consistent installments. Additional payments typically don’t reduce loan interest but are treated as pre-payments for future installments. While you can request special arrangements to reduce your principal, approval is at the bank’s discretion.
With semi-flexi loans, extra payments directly reduce the principal loan amount, lowering the interest charged. Borrowers can withdraw additional payments, but this may require prior approval and a processing fee.
Flexi loans link your housing loan to a current account. Extra funds deposited into this account reduce the principal and, in turn, the interest charged. Borrowers can withdraw these extra funds anytime, providing greater financial flexibility.
With strategies to reduce your home loan interest in mind, you can now focus on comparing available options to find a house in Pasir Gudang that best suits your needs and budget. Choosing wisely ensures your investment is worthwhile.
A standout house for sale option in Pasir Gudang is Meridin East, offering double-storey terrace houses designed for multi-generational living. The property types include Jasmine (22’ x 70’) and Allamanda (18’ x 65’).
Meridin East offers a well-rounded community lifestyle, ideal for families and individuals seeking both comfort and convenience. It features a 16.6-kilometre jogging and cycling track for active living, along with essential amenities such as playgrounds and gazebos for relaxation.
The development fosters a strong sense of community, with opportunities for regular interactions among neighbors. In addition, the spacious living areas provide enhanced privacy compared to high-rise residences.
Interested in exploring these houses for sale further? Contact us today to learn more!