Loan Tenure & Repayment Of House Loan
If you’re serious about purchasing a home in the Malaysian market, then you need an understanding of what loan tenure is as well as repayment of house loan. We’ll start with what loan tenure is.
Loan Tenure
When you take out a loan from a bank to purchase a home, then they’ll give you a certain amount of years in order to pay off the loan right? It can be 15 years, 30 years or sometimes a little longer. A lot of this is going to depend on income and risk profile, but the main factor considered is age.
Why is age so important in this case? Well the older a person is the more risky it would be for a bank to give them long loan tenure. Loan tenure is simply the number of repayment years a person will be given to settle a house loan.
The age in Malaysia is about 70 year’s old maximum with the tenure being 35-40 years maximum. A better way to understand this would be to look at it from a risk standpoint. If a person who was 60 years old was able to get a 30 year loan tenure, then what’s the probability they’d be able to live out the entire duration of the loan? Even when it came to different forms of insurance they’d have a hard time getting it for the course of the loan. The age maximum and loan tenure maximum are the best ways to protect against this.
Repayment of house loan
Repayment of house loan sounds complex, but is really simple. Repayment of house loan involves paying back money borrowed from a lending institution in the form of monthly payments. These monthly payments are going to be comprised of the total amount owed on the house as well as the interest accumulated or owed.
What this means is that the total amount of money a borrower owes to their lending institution is going to be less and less each month. Ultimately the amount owed will be less and less until the complete loan was paid in full. The process can be sped up if borrowers are able to make advanced payments as long as the bank actually lowers interest charges due to this.
As you can see there is a correlation between loan tenure and repayment of house loan. If you have a long period of years in order to pay back money you owe to a lending institution, then it means the total monthly payment amount will be less. This doesn’t always mean the interest is less, because this is determined based on several factors, namely a borrowers risk profile. In any case the total amount you’d pay monthly based on a longer number of years (loan tenure) will be less.
If you’re older and aren’t able to get a long loan tenure, then repayment of house loan is going to be tougher. The reason why is because your time is shorter to pay off the house loan in full, plus your monthly payments are going to be higher. Your margin of error is a lot lower, which means you’ll probably need to be more qualified if the goal is to get a desirable interest rate. Even when it comes to things such as the different forms of mortgage protection you can get, you’ll find with age the cost is going to be higher. In the case of having the monthly premium built into your total monthly payments to a bank it can get quite expensive the older you are.