If you're thinking of taking a home loan to purchase a house/apartment, you should consider this useful tool called Home Loan Calculator. It's a very simple one in Microsoft Excel format. Drop me an email at totalcoveragesolutions@gmail.com with the title Home Loan and I'll send it to you.
As an illustration, I've taken a 30 year loan for RM300 000. The Base Lending Rate (BLR) is 6.3%. Most banks offer home loan packages that charge BLR - 1.8%. Needless to say this varies slightly from bank to bank. So effectively you pay about 4.5% in interest per annum.
Loan Amount: RM300 000
Interest Rate: 4.5%
Tenure of Loan: 30 years
With the Home Loan Calculator I can tell:
Monthly Payment: RM1520.06
Total Interest Paid: RM247 220.13
Total Amount Repaid: RM547 220.13
As you can see, for a loan of RM300 000 you end up paying almost RM250 000 in interest which brings the total amount of money out of your purse to about RM550 000. Thats is a huge sum of money to "donate" to the bank.
The best way to reduce interest payment is to have a bigger sum of money ready as down payment thus reducing your overall loan amount.
The other great way is to make lump sum payments over the years. You can give the bank instructions that this money is to be utilized only to pay up the Capital part of the loan and not the Interest portion.
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