Benefits of taking a home loan

A home loan, or a mortgage loan, as it may be called, is a financing product that enables you to buy a property or piece of real estate, usually a house, a condominium or an apartment. Here, we will explore some of the benefits of taking a home loan:

Property ownership – Buying a property can be one of the biggest financial commitments that you may make during your lifetime. That is because buying a home is not an easy task. And, a home loan allows you to become the proud owner of a home.

Home loan product innovations – Home loan products have evolved from plain vanilla home loans that used to exist before to semi-flexi and fully-flexible home loans and Islamic home loans. Although the core benefit of these products is giving you home ownership they have other benefits too.

Semi- and fully-flexible home loans allow you to make extra payments towards your home loan principal; your interest payments diminish and you can get to own your home faster. You can also make payments into your home loan account and withdraw from the account whenever you have a need. You can even write cheques or use an ATM card for withdrawals.

The RHB Equity Home Financing-i and the HSBC HomeSmart are examples of such products.

Property renovation – You may already own a home; but that home may be in need of renovation or repairs. Or, you may want to make changes to your home, including structural changes. You can use a home loan or more appropriately a mortgage on your home to finance the necessary repairs or changes.

Tax Benefits – If you had signed the sales and purchase agreement for your home between 10th March 2009 and 31st December 2010, you could get to enjoy a tax relief of up to RM 10,000 (for one unit) for every year for the first three years on the interest of your housing loan.

Benefits of Islamic home loans – Islamic agreements carry a 20% stamp duty discount. In case of refinancing from a conventional to an Islamic package there will be a 100% stamp duty waiver on the existing refinance loan balance (not applicable to amounts over the loan balance).

For floating profit rates, profit rates are capped at a maximum. Conventional floating interest rates have no such cap.

Late settlement of loans can incur lower charges than Conventional loans as there is no concept of compounding interest calculation. However, in practice, other fees and charges may apply that could offset this benefit

Benefits of refinancing – Refinancing means the process of ending your home loan package with your current lender and shifting your home loan repayments to another lender. You can go in for refinancing for the following reasons:

• To take advantage of lower interest rates. This could result in savings and also in you repaying your home loan in a shorter amount of time. 

• Cashing out: Here you can takes an additional loan amount from your new financier. This is useful when you urgently need some cash and have no other avenue to raise cash. You can also use this cash in an investment that can give higher returns than the interest that you are currently paying on your property.

If you want to extend or reduce the tenor of your loan.