{"id":5750,"date":"2025-02-17T15:45:17","date_gmt":"2025-02-17T07:45:17","guid":{"rendered":"http:\/\/www.imoney.my\/articles\/?p=5750"},"modified":"2025-02-17T23:02:42","modified_gmt":"2025-02-17T15:02:42","slug":"home-loan-overdraft-facility-explained","status":"publish","type":"post","link":"https:\/\/www.imoney.my\/articles\/home-loan-overdraft-facility-explained","title":{"rendered":"Do You Need A Home Loan Overdraft Facility?"},"content":{"rendered":"

One of the biggest financial commitments you can make is to take a home loan. Getting one means you are likely tied to repayments for many years, even decades.<\/p>\n

If you have considered taking a home loan, you will have come across a home loan overdraft facility. Here’s a quick explainer on this type of facility.<\/p>\n

<\/span>What is a home loan overdraft?<\/strong><\/span><\/h2>\n

An overdraft is an extension of credit from a lending institution when an account reaches zero. In layman\u2019s term, it is when a bank allows you to withdraw money from an account, even though you have no funds in the said account. Basically, it is just like borrowing from a bank.<\/p>\n

Nowadays, many financial institutions offer accounts with such facilities. The amount that has been \u201coverdrawn\u201d is, of course, subject to interest and repayment terms previously agreed upon between the bank and the account holder. Usually, there is a fixed amount as to how much the account holder can access using overdraft, known as \u201cAuthorized Overdraft Limit\u201d.<\/p>\n

<\/span>How does a home loan overdraft facility work?<\/strong><\/span><\/h2>\n

When you understand how overdraft works, then a similar feature in a home loan becomes easier to understand.<\/p>\n

Working pretty much in the same principle, a housing loan with an overdraft facility enables you to withdraw money you don\u2019t have from an account that is linked to your housing loan.<\/p>\n

This is despite the fact that you effectively still owe money to the bank (in the form of your home loan).\u00a0Of course, all this takes place under a predetermined interest rate as well as repayment terms and conditions which have been set by the bank.<\/p>\n

<\/span>Why would the banks allow you access money you don\u2019t have?<\/strong><\/span><\/h2>\n

When you utilise the facility in a home loan, you are essentially borrowing against the equity of your property (i.e. kind of like pledging your property to the bank in order to gain access to cash).<\/p>\n

From the financial institutions\u2019 point of view, it is a relatively safe deal because your property is technically acting as collateral, and what\u2019s more, they also get to earn interest from the amount you\u2019ve overdrawn.<\/p>\n

<\/span>Why do people utilise it in their home loans?<\/strong><\/span><\/h2>\n

There are many reasons, and here are a few common ones:<\/p>\n