Best Home Loan

Buying a house is probably the most important purchase you'll ever make. Your home loan is likely to be not only your biggest household expense, but the largest financial commitment of your lifetime. For this reason, we've compiled a list of the most frequently asked questions to explain how a home loan works and what you need to know before you apply for a mortgage.

• What is a home loan, and how does it work?

  A home loan (or housing loan) is financing provided by a bank to help you buy, build, or refinance a residential property. The bank pays the property seller upfront, and you repay the bank in monthly instalments over an agreed tenure (usually up to 35 years).

  Your monthly payment covers:

  • Principal (the amount borrowed)
  • Interest or profit rate
  • Any applicable fees or charges

  Refer to our article How Does a Home Loan Really Work for more information.

• What is a housing loan calculator, and how do you use it?

  The iMoney Housing Loan calculator estimates your monthly instalment and shows suitable home loans for you, based on your loan amount, interest rate, and tenure.

  How to use the iMoney Home Loan Calculator:

  1. Scroll up to the top of this page and enter your property price or loan amount
  2. Choose your loan tenure
  3. Select your preferred loan criteria, such as interest rate type, lock-in period, and other options.

  It will do all the calculations and will present you with the best mortgage deals for you. This can help you:

  • Check affordability
  • Compare different loan tenures
  • Understand total interest paid over time

• What are the different types of home loan schemes in Malaysia?

  Conventional Home Loans

  Standard loans where interest is charged on the outstanding principal.

  Islamic Home Loans

  Shariah-compliant financing based on concepts like Tawarruq or Murabahah. Instead of interest, banks charge a profit rate.

  Flexi / Semi-Flexi / Term Loans

  • Flexi loan: Allows extra payments and withdrawals anytime (most flexible).
  • Semi-flexi: Extra payments allowed, withdrawals may require notice/fee.
  • Term loan: Fixed repayment structure, less flexibility.

  Fixed vs Variable Interest Rate

  • Fixed rate: Interest remains constant for a set period.
  • Variable rate: Linked to the bank’s Base Rate (BR) and may change over time.

  Government Housing Loan (LPPSA)

  Provided under Lembaga Pembiayaan Perumahan Sektor Awam for eligible civil servants with preferential terms.

  Key Eligibility Criteria:

  • Permanent civil servants, including police and military personnel.
  • Minimum of 1 year of service.
  • Not under disciplinary action or bankruptcy.

  Key Preferential Terms of LPPSA Financing:

  • 100% Financing: Covers purchase price, building costs, or renovations with no down payment.
  • Fixed Interest Rate: 4% per annum throughout the loan, unaffected by market changes.
  • Longer Tenure & Age Limit: Loans last up to 35 years or until age 90; applicants aged 30 and below can get up to 40 years as of April 2025.
  • Financing Incidental Costs: Includes MRTT/MLTT, legal fees, and valuation fees.
  • High Eligibility Threshold: Monthly installments can be up to 60% of basic salary; eligibility based on net income allows higher borrowing than commercial banks.
  • Salary Deduction: Repayments are deducted directly from salary with no prepayment penalty.

  These benefits are designed to assist public sector employees, particularly younger ones, in owning homes with lower, manageable monthly repayments.

• What is the difference between Islamic and conventional home loans?

  The banks presented in the comparison table offer both Islamic and conventional loans. Islamic loans are Shariah compliant. Instead of borrowing and lending, Islamic finance relies on sharing the ownership of the assets. Check out our page dedicated to Islamic Home Loans.

  The main difference is structure:

  • Conventional loans charge interest on the outstanding balance.
  • Islamic loans are based on Shariah principles and use profit-based contracts instead of interest.

  Both may have similar repayment amounts, but documentation and legal structures differ.

• What should first-time home buyers look for when getting a home loan?

  First-time buyers should focus on:

  • Affordable monthly instalment (within safe Debt Service Ratio [DSR] range)
  • Low entry costs
  • Flexible repayment options
  • Reasonable lock-in period
  • Transparent fees

  Don’t just look at the lowest interest rate, compare total cost and flexibility.

• What are the housing loan interest rates in Malaysia?

  Home loan interest rates in Malaysia are typically floating (variable) and range around 3%–5%+ depending on:

  • Bank’s Base Rate (BR)
  • OPR set by Bank Negara Malaysia
  • Your credit profile and income
  • Loan margin and tenure

  Rates vary by bank and borrower profile, so it’s best to compare offers before applying.

• What are the factors to consider when comparing home loans in Malaysia?

  Key comparison factors:

  • Effective interest/profit rate
  • Lock-in period
  • Early settlement penalty
  • Flexibility (flexi vs term)
  • Legal and valuation fees
  • Loan tenure

  Use a structured comparison to avoid choosing based on rate alone.

• What are the eligibility requirements when applying for a housing loan?

  To qualify for a home loan in Malaysia, banks typically require you to:

  • Be at least 18–21 years old (depending on the bank)
  • Have stable income (salaried or self-employed)
  • Meet the bank’s Debt Service Ratio (DSR) threshold
  • Maintain a good credit record
  • Fit within the maximum tenure limit (usually up to age 70)

  Final approval depends on your income level, existing financial commitments, credit profile, and the property value.

• What is DSR, and how does it affect my home loan eligibility?

  Debt Service Ratio (DSR) is an important metric that banks use to assess home loan eligibility. It calculates the proportion of a borrower’s total monthly debt obligations relative to their net income. Most banks look for a DSR below 30%–40%, while the maximum allowable limits usually range from 60% to 70%, depending on the applicant’s income level. Banks use DSR to assess affordability. A lower DSR improves approval chances. This helps lenders evaluate an individual’s ability to manage additional loan repayments responsibly.

  How DSR is Calculated:

  The formula for DSR is: DSR = (Total Monthly Debt Obligation / Total Monthly Net Income) x 100

• How to apply for a home loan in Malaysia?

  You can apply for a home loan in 4 simple steps with iMoney:

  1. Compare home loans – Review interest rates, features, and eligibility from multiple banks in one place.
  2. Check your eligibility – Estimate your borrowing amount and monthly instalment using the iMoney Home Loan Calculator.
  3. Submit your application – Instead of visiting multiple banks, you can conveniently provide your details and upload the required documents online in just one step.
  4. Wait for a call – Our friendly Customer Care Associates will contact you and assist you every step of the way by recommending banks with the best rates and improving your chances of approval based on your current financial situation.
  5. Get bank approval – The bank assesses your profile and issues conditional approval, typically within a few working days.

  Applying through iMoney helps you compare offers efficiently and improve your chances of finding a suitable loan.

• What documents are needed to apply for a home loan in Malaysia?

  For salaried employees:

  • IC copy
  • Latest 3 months’ payslips
  • EPF statement
  • Bank statements

  For self-employed:

  • Business registration documents
  • 6–12 months bank statements
  • Tax filings (Form B)

  Banks may request additional documents.

• What is the minimum salary required for a home loan in Malaysia?

  There is no fixed minimum salary. Approval depends on:

  • Property price
  • Existing debts
  • DSR ratio

  Some banks may require income starting around RM2,000–RM3,000, but approval is case-by-case.

• What is the maximum tenure for home loans in Malaysia?

  The maximum tenure is generally:

  • Up to 35 years, or
  • Until the borrower reaches age 70 (whichever comes first)

  Longer tenure lowers monthly instalments but increases total interest paid.

• How do you calculate the home loan monthly payment?

  Monthly instalment depends on:

  • Loan amount
  • Interest rate
  • Loan tenure

  You can estimate it by using the iMoney home loan calculator, which applies an amortisation formula to compute principal + interest repayment.

• What is the total cost of buying a house in Malaysia?

  Beyond the property price, buyers must budget for:

  • Downpayment (usually 10%)
  • Legal fees
  • Stamp duty
  • Valuation fees
  • Insurance (MRTA/MLTA)

  Fees & Charges: There are a number of related costs (such as professional fees and government charges) that you would have to pay when you take out a mortgage.

  Some common fees and charges you would expect to incur include:

  1. Stamp duties: Sale & Purchase Agreement (0.5% to 1.0%), Loan Agreement (0.5%) and Transfer of Title (1.0% to 2.0%)
  2. Disbursement Fees: varies by state, land office and type of property
  3. Processing Fees: one time charge by the lenders (up to a few hundred ringgit).

  These costs can add several percent to the purchase price.

• How long does it take to get home loan approval in Malaysia?

  Approval typically takes:

  • 3–7 working days for conditional approval
  • 2–4 weeks for full approval and documentation

  Processing time depends on the bank and the completeness of documents.

• How can I increase my chances of getting a home loan?

  • Maintain good credit history
  • Reduce existing debt
  • Avoid frequent loan applications
  • Prepare complete documentation
  • Keep DSR within safe range

  A strong financial profile improves approval odds.

• How does my credit score affect my home loan application?

  Banks review your credit report to assess:

  • Repayment history
  • Existing debt
  • Outstanding loans

  A good credit score increases your chances of approval and may secure better rates.

• What happens if I miss my home loan payment?

  You may face:

  • Late payment charges
  • Negative credit record
  • Legal action if prolonged

  If you miss payments, banks typically begin formal legal action for missed home loan payments after 3 to 5 months of default. They will first send reminders, followed by a Letter of Demand (LOD). If you ignore these, the bank serves a Form 16D (Notice of Default), giving you one month to settle your arrears before foreclosure.

  Contact your bank immediately if you anticipate payment difficulty.

• What is home loan refinancing, and how does it work?

  Refinancing means replacing your existing home loan with a new one, usually to:

  • Get a lower interest rate
  • Reduce the monthly instalment
  • Access extra cash (cash-out refinance)

  The new bank settles your old loan, and you start repaying the new bank under new terms.

  Check out our page dedicated to Housing Loan Refinancing.

• Can I make an early settlement of my home loan?

  Yes, but:

  • Some loans have lock-in periods
  • Early settlement penalties may apply

  Check your loan agreement before making lump sum repayments.

• What are low-interest home loans?

  “Low-interest” home loans usually mean competitive floating rates with minimal spreads above the Base Rate.

  However, the lowest advertised rate may include:

  • Longer lock-in periods
  • Higher penalties
  • Limited flexibility

  Always compare the total repayment cost, not just the headline rate.

• Can I apply for a home loan if I'm self-employed in Malaysia?

  Yes. Self-employed applicants can qualify if they show:

  • Stable income records
  • Consistent bank statements
  • Tax filings

  Banks may apply stricter assessment compared to salaried employees.

• Can foreigners apply for a home loan in Malaysia?

  Yes, but:

  • Minimum property value requirements may apply
  • Lower margin of financing (e.g., 60–70%)
  • Stricter eligibility criteria

  Policies vary by bank.

• What is the best home loan in Malaysia?

  The “best” home loan depends on:

  • Your income and DSR
  • Property type
  • Preferred flexibility
  • Long-term repayment strategy

  There is no one-size-fits-all option, comparison is key.

• What is the best bank for a home loan in Malaysia?

  Different banks offer competitive packages at different times. The best bank depends on:

  • Your eligibility profile
  • Rate offered
  • Lock-in terms
  • Approval flexibility

  Comparing multiple banks increases your chances of getting a suitable offer.

• Other Housing Loan Terms

  Base Rate (BR):

  BR in Malaysia is a reference interest rate used by banks to decide how much to charge for various products they offer. In Malaysia, home loans are normally quoted as a percentage above or below the BR. This means, if the BR increases or decreases by a certain amount, the interest rates charged on floating rate loans also increase or decrease by the same amount.

  Down payment:

  An upfront payment made by the buyer of a house or car (or other highly priced goods/services). Down payments are typically expressed as a percentage of the full purchase price. For example, a 10% down payment of a RM500,000 home is RM50,000.

  Margin of Financing:

  The margin of financing is also known as the loan-to-value ratio. It is the amount of your loan expressed as a percentage of the property's value. The lower the margin of financing, the more 'equity' there is in the property. The margin of financing could go as high as 95% (of the value of the house), and is assessed on factors such as:

  • Type of property
  • Location of property
  • Age of the borrower
  • Income of the borrower

  Foreclosure:

  A foreclosure happens when the bank repossesses your property and attempts to sell it in order to settle the outstanding amount on your loan. This usually happens when you consistently fail to pay your loan instalments.

  Mortgage:

  This is an agreement with the bank to use your property as security in exchange for providing you with a loan to purchase the property.

  Loan Tenure:

  This means "period" or "number of years". If a mortgage has a "tenure" of 30 years, it usually means it would take 30 years to fully pay off the loan.

  Mortgage Reducing Term Assurance (MRTA):

  This is a type of mortgage insurance. An MRTA provides protection for an outstanding loan amount (usually a home loan), in the event of death or total permanent disability of the person insured. The amount of protection reduces over time, and normally matches the outstanding loan amount.

  Prepayment (of house loan):

  Fully or partially paying off your (home) loan before it is due.

  Early Settlement Penalty:

  Some mortgage lenders may apply an early termination penalty if the loan is paid off in part or in full within a specified time period, including if you refinance the loan with another lender. This specified time period, during which you are liable to pay an early termination penalty, is called the 'lock-in period'. Depending on the term and size of your loan, this charge can be quite significant.