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A Complete Guide to Home Loans in Malaysia

A Home Loan helps individuals buy, build, or renovate a house. The borrower repays the loan in monthly installments that include principal and interest. It offers flexible repayment options, competitive rates, and tax benefits.

What is a Home Loan Repayment?

Buying a home is one of the biggest financial commitments in life. When you take out a home loan, you agree to repay the borrowed amount — plus interest — over a fixed period. This process is known as home loan repayment.

Home loan repayments are usually made monthly and consist of two parts:

1

Principal

The portion that goes toward reducing the original loan amount.

2

Interest

The cost charged by the bank for lending you the money.

How Home Loan Repayments Work

Every month, your repayment covers both interest and principal. In the early years of your loan, a larger portion goes toward interest. Over time, as the principal decreases, more of your payment goes toward repaying the actual loan amount.


Most banks offer flexible repayment plans — for example, you can choose between fixed-rate (same payment amount every month) or variable-rate (payment changes based on market interest rates) loans. Some lenders also allow early repayments, helping you save on total interest costs.


Every month, your repayment covers both interest and principal. In the early years of your loan, a larger portion goes toward interest. Over time, as the principal decreases, more of your payment goes toward repaying the actual loan amount. Most banks offer flexible repayment plans — for example, you can choose between fixed-rate (same payment amount every month) or variable-rate (payment changes based on market interest rates) loans. Some lenders also allow early repayments, helping you save on total interest costs.


Malaysia Housing Loan Interest Rates

Base Lending Rate (BLR)
= 6.6%
Maximum Loan Amount
= 90% of property price.

Top 8 Bank Home Loan Interest Rates

Bank Name Product Name Interest Rate Type
Bank Islam Baiti Home Financing-i 3.55% Fixed/Islamic
Bank of China BOCM Housing Loan 3.88% Fixed/Variable
Al Rajhi Bank Home Financing-i 3.90% Fixed (Islamic)
Standard Chartered Saadiq My HomeOne-i 3.90% Variable (SBR+1.15%)
Public Bank MORE Plan / 5 Home Plan 4.22% Variable (SBR+1.47%)
Maybank Maxi Home / HouzKEY 4.35% Variable (SBR+1.60%)
CIMB Bank Eco-Property Financing 4.35% Variable (SBR+1.60%)
HSBC HomeSmart 4.50% Variable (SBR+1.75%)
Last updated on February 2025

FAQs

This depends on your income, credit score, existing debts, and the property’s value. Most Malaysian banks offer up to 90% of the property price for a first or second home.

A home loan is a sum of money borrowed from a financial institution (such as a bank) to purchase a residential property. In exchange for the funds, you agree to repay the loan amount plus interest over a specific period, typically up to 35 years or until you reach the age of 70. The property you purchase usually serves as collateral for the loan, meaning the bank has the right to take possession if you fail to make repayments.

In Malaysia, home loans generally fall into three main categories based on repayment flexibility:

  • Term Loan: This is the most basic structure with a fixed repayment schedule. If you pay extra money into the loan account, it does not reduce your loan interest, and you cannot withdraw the extra funds later.

  • Semi-Flexi Loan: This allows you to pay extra to lower your loan principal and reduce interest charges. However, if you need to withdraw that extra cash later for an emergency, you usually need to make a formal request to the bank and pay a processing fee.

  • Full-Flexi Loan: This links your loan account to a current account. Any extra money you keep in the current account automatically offsets your loan principal, reducing interest. You can withdraw the funds anytime without notice or fees.

  • Islamic Financing: Unlike conventional loans that charge interest, Islamic financing uses a profit rate based on Shariah concepts (such as Murabahah or Tawarruq).

Yes, most banks allow you to make a full settlement to pay off your home loan early. Doing so can save you a significant amount on interest.

However, you must check if your loan agreement has a “Lock-in Period” (usually the first 3 to 5 years of the loan).

  • During Lock-in Period: If you settle the loan within this time, the bank will charge an “early settlement penalty,” typically 2% to 3% of the original loan amount.

  • After Lock-in Period: You can usually settle the loan fully without any penalty fees.

Always check your specific letter of offer to confirm the terms before making a full settlement.

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