In Malaysia, the flexible housing loan, which adjusts with the Overnight Policy Rate (OPR), is a popular choice among homebuyers. While this type of loan offers the benefit of lower interest during favorable market conditions, paying off your housing loan faster can significantly reduce your financial burden. Here are some common strategies to help you achieve that, complete with examples to make things clearer.
1. Make Extra Lump-Sum Payments
When you receive a bonus or windfall, consider putting part of it toward your housing loan. For instance, if you have a loan of RM500,000 with an interest rate of 4% over 30 years, paying an extra RM10,000 upfront could reduce your loan tenure by nearly a year and save tens of thousands in interest!
2. Pay Extra Monthly
Increasing your monthly repayment amount by even a small amount can lead to significant savings. For example:
- Original Loan Terms: RM500,000 at 4% interest over 30 years
- Monthly Installment: RM2,387
- Additional Payment: RM300/month
- Outcome: You could shorten your loan by almost 5 years and save over RM60,000 in interest.
3. Increase Payments With Salary Hikes
As your income grows, commit a portion of your salary increase to your housing loan repayments.
Example:
- Starting Salary: RM5,000/month
- Loan Repayment: RM2,387/month
- Annual Salary Hike: 5%
After your first salary increment, consider increasing your repayment by RM250/month. Over time, this cumulative increase can cut your loan term by several years and save significant interest.
4. Shorten Your Loan Tenure
When refinancing, opt for a shorter loan tenure.
Example:
Suppose your current loan is RM400,000 over 30 years at 4%. If you refinance for 20 years at the same rate:
- 30-Year Loan Monthly Repayment: RM1,910
- 20-Year Loan Monthly Repayment: RM2,420
While you pay an extra RM510 per month, you save over RM90,000 in interest and finish your loan 10 years earlier.
5. Utilize EPF Account 2 (Cautiously)
In Malaysia, you can withdraw from your EPF Account 2 to reduce your housing loan principal.
Example:
If you withdraw RM30,000 to offset your loan:
- Before Withdrawal: Loan Balance = RM300,000
- After Withdrawal: Loan Balance = RM270,000
This reduces interest over time. However, be cautious—using retirement funds for this purpose could impact your long-term financial security. Consider this option only if you have a strong retirement plan in place.
Housing Loan Calculator
Try the interactive calculator below to see how additional payments or increased repayments can save you time and money. Have fun exploring scenarios to create the best repayment strategy for your needs!
Housing Loan Calculator
Housing Loan Calculator
Use this calculator to estimate your savings and loan tenure when making additional payments. Leave "Extra Payment" blank or enter 0 if not applicable.
Results
Details
Without Extra Payment
With Extra Payment
Total Loan Payment (RM)
-
-
Total Interest Paid (RM)
-
-
Total Savings (RM)
-
Loan Term (Months)
-
-
Conclusion
Paying off your housing loan early doesn’t just save money—it provides peace of mind and financial freedom. Use the calculator above to visualize your potential savings and experiment with different strategies.
Housing Loan Calculator
Use this calculator to estimate your savings and loan tenure when making additional payments. Leave "Extra Payment" blank or enter 0 if not applicable.
Results
| Details | Without Extra Payment | With Extra Payment |
|---|---|---|
| Total Loan Payment (RM) | - | - |
| Total Interest Paid (RM) | - | - |
| Total Savings (RM) | - | |
| Loan Term (Months) | - | - |
Conclusion
Paying off your housing loan early doesn’t just save money—it provides peace of mind and financial freedom. Use the calculator above to visualize your potential savings and experiment with different strategies.