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Exploring New Housing Loans / Refinancing: Key Considerations (Part 1)

Updated: Apr 9

Buying a house or property is one of the most "big purchase" you will ever make. Beyond being an agreement, your home loan represents not just your largest household expense, but also the largest financial commitment you will make in your lifetime. With such serious consequences, it's critical to be thoroughly informed before acting.


To help you make this important decision, we've created a thorough explanation that explains how a house loan works. Our goal is to provide you with the knowledge you have to navigate this financial "nature" wisely and ethically.


1. What is Refinancing?

If you already have an existing housing loan in Malaysia and want to change to another product or bank without moving home, it is known as a 'refinancing'.


2. How Can I Pay Off My Home Faster?

Refinancing property with a shorter mortgage is a good way to pay off the housing loan faster and lower interest rates. Did you know that housing loan with shorter maturities (10 years, 15 years, 20 years or 25 years) have a much lower interest rate than traditional 30-year mortgages? These lower interest rates can save you tens of thousands of ringgit interest during the loan period, and in many cases, you will find that this fee is paid off. You can even cash out some of your assets to pay off your credit card, save your pension or start an emergency cash reserve.


3. What Can Refinancing Do For Me?

Refinancing can lower your monthly payments and allow you to obtain cash from your equity to do things like pay off credit cards, make home improvements or save for retirement. In addition, refinancing enables you to own your house faster and lower the interest rate your paying on your housing loan, among other things. Refinancing your house / property can permit you to do one or all of these things, making your life a whole lot easier in the process.


4. How does housing loan work in Malaysia?

The interest rate for Malaysian housing loan is usually quoted as a percentage below the Base Rate (BR). For example, if the current BR interest rate is 3.00%, "BR + 0.80%" loan interest rate is 3.80%.


In a typical Malaysian mortgage, you need to make monthly payments within the agreed period (ie the loan term) until you have fully repaid the principal and interest of the loan. At the beginning of the loan, most of your monthly repayments are used to repay interest, but, over time, most of your repayments will be used to repay the principal.


5. What is 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.


6. What is the Different of the Islamic Financing and the Conventional Financing?

The banks presented in the comparison table offer both Islamic and conventional loans.


a. Islamic Financing Principles

Islamic Financing avoids interest-based transactions (riba), and instead introduces the concept of buying something on the borrower’s behalf, and selling it back to the borrower at profit. In place of interest, a profit rate is defined in the contract. Like Conventional Financing, profit rates can be a fixed rate, or based on a floating rate (e.g. BFR).

The majority of Islamic home financing options in Malaysia today are based on the Bai Bithamin Ajil (BBA) concept. A small number of alternatives are based on the Musyarakah Mutanaqisah (MM) concept (which will not be covered in this article).


b. Conventional Financing Principles

In Conventional Financing, the banks lend to borrowers to make a profit from the interest charged on the principal amount. For property loans, borrowers pay an interest on the outstanding principal amount. Interest rates can be a fixed rate or based on a floating rate (e.g. BR, BLR).


Payment is made over a set tenure by installments. A portion of each instalment paid goes towards servicing the interest, while the remainder goes towards paying down the principal.

Since the contract is not based on an absolute value (e.g. A sale price), the sooner the borrower can pay down the principal, the cheaper the amount of interest paid.


The loan contract for Conventional Financing is known as a Loan Facility Agreement.


For more information about new Housing Loan / Refinancing request a free quotation for loan legal fees from us today.

Please feel free to click this link : or contact us as below:-



Messrs. Donny Wong & Co.

📌: D2-U1-3 & 3A Solaris Dutamas (Publika), No. 1, Jalan Dutamas 1 50480 Kuala Lumpur

📞: (Conveyancing & Banking) +6011 1628 1943| +603 6420 1294

   (General) +6018 288 6525


Legal Disclaimer

We trust that you have gained some information from this article. If you have any specific questions related to this article, please contact us at

The article posted is for general information purposes only and should not be construed as legal advice. Facts and circumstances differ from case-to-case. Please consult your lawyer for specific legal advice and action to be taken.


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