Yes, it is a very sound financial planning to do this. This is why some flexi accounts are charged RM5 to 20 a month, because this facility actually has some value to those who use it.

Say, you keep RM20k as your emergency funding all the time for a year in your flexi-savings account, based on 4.5% annual interest rate, you are saving RM900 from paying interests to the bank this way! Of course, your installment stays the same, but this means your tenure is shortened!

Even if you are not keeping a large sum of money in the flexi account all year, but only in the account for a few days between getting your salary and paying off your commitments, due to the daily rest of most, if not all flexi loan accounts, you are saying quite a bit of interests!
Yes, please clarify with the bank just to be sure. It would be best if you could clarify before signing the loan, but different people have different circumstances!  Good to know you are being proactive against paying unnecessary interests to the banks

Thank you!

But one thing is the 20k is earning the same 4.5% RM900 if i put in 10 years, whereas if I put in FD maybe 4.0% but the interest in the 2nd year is based on compounded value already i.e. 20.8k. Long term wise got good and bad need to calculate.

Ok, good question but if you are compounding the 4.0% FD year on year, you need to compound the 4.5% (RM900) savings year on year too. So since you have saved RM900, please put it back into the loan account and make the emergency fund grow to RM20,900.

Your mileage will vary since there will be cash-flow issues to think about. Why? Because your monthly installment still maintain at a the amount agree and changes only as the BLR/BR changes, as such, the RM900 will come out of your pocket. But doing as I said above (compounding the savings) will shorten your loan tenure even further, and most importantly the savings exist and can be calculated.

Then would it be better if I transfer all my salary into the current account for flexi, and withdraw it every now and then for other commitment as per usual.
Since my money is seating there offset the potential interest of 4.45 instead of normal deposit account.

Ahha... sounds legit. even i've read a writing from an islamic financial planner regarding this. Although I don't really understand the mechanism, but I think it is worth trying.

Will it be prudent to place a large lump sum into the loan account if I intend to sell the house a few years down the road?

It depends, since your installment would not change, all you are doing is to offset the interest payable based on the amount that you dumped in.

Since your interest charge is only about 4.3-4.8% for a mortgage, if you can get better returns elsewhere, you should just invest the money there.


There are 2 types of capital repayment:

a. Capital repayment to reduce the loan outstanding; usually this can be withdrawn at a later date, but you are still required to service the loan.

b. Advance payment to reduce the loan outstanding; usually this cannot be withdrawn at a later date, but you can use this "advance payment" to service the loan i.e you don't have to pay the monthly installment as it will be automatically withdrawn from this pool of money. However, as it is withdrawn each month, the loan outstanding reduction is also reduced, until there is no more money and you would have to pay your installment as normal.

Yes, it is a very sound financial planning to do this. This is why some flexi accounts are charged RM5 to 20 a month, because this facility actually has some value to those who use it.

Say, you keep RM20k as your emergency funding all the time for a year in your flexi-savings account, based on 4.5% annual interest rate, you are saving RM900 from paying interests to the bank this way! Of course, your installment stays the same, but this means your tenure is shortened!

Even if you are not keeping a large sum of money in the flexi account all year, but only in the account for a few days between getting your salary and paying off your commitments, due to the daily rest of most, if not all flexi loan accounts, you are saying quite a bit of interests!
Yes, please clarify with the bank just to be sure. It would be best if you could clarify before signing the loan, but different people have different circumstances!  Good to know you are being proactive against paying unnecessary interests to the banks

Thanks. The loan agreement was signed few yrs back before the new prop SNP is signed. Few months ago I asked the banker whether it's worth to convert this daily rest loan a/c to flexi loan, the answer is to convert I need to pay extra few k to redo the loan agreement. He said it's more worthwhile to just write in to deposit the one lump sum amount to my daily rest loan a/c in future to offset the interest instead of converting the loan type.

Thanks for the the detailed and prompt explanation. Really learned a lot from reading all your posts     

My opinion on this would be that it is a valid strategy as long as:

1. Your salary is credited into that particular account to maximize the savings that take place each day that you do not withdraw your money for payments.

2. If you were a Bumiputra, that you don't put too much of your emergency funds in there anyway, since you are offsetting only 4.5% or whatever your mortgage rates are, compared to ASB's 8.5++%. So for medium to long term emergency-cum-investment, things like ASB or bond funds may still be better .

Ref to 1. Meaning to say I change my salary account to my loan account and every month salary in, will also somehow or rather reduce my interest? But once I used to pay my bills and withdrawal, the interest will increase back a bit?

Sure, I'll explain! But I am on mobile now so a little difficult to explain without drawing any illustrations. If you are not clear feel free ask.

1. Like I said, nowadays most mortgage (please verify with your banks just in case) interest is calculated based on daily rest and not monthly rest. That means each day, interest is calculated based on the OUTSTANDING BALANCE of the day, add added into the interest to be repaid by the end of the month as part of the installment.

2. Keep note that when you pay off the installment, you are paying both the INTEREST and OUTSTANDING BALANCE

3. You want to quickly pay off the OUTSTANDING BALANCE to finish paying your loans.

4. We will follow your example of RM1500 monthly installment: As such, when you pay RM750 on the 15th of the month, and another RM750 on the 30th of the month:

a) From the 16th onwards, you have RM750 less of the OUTSTANDING BALANCE.

b)  The reduced OUTSTANDING BALANCE means that the interest incurred from the 16th to the 30th is now reduced by a small amount.

5. On the 30th, when you pay another RM750, the interest savings you had earlier would translate to a higher portion of the RM750 installment used to pay off the OUTSTANDING BALANCE.

6. The cycle continues and eventually you would end up paying more of your OUTSTANDING BALANCE and reducing the tenure.

If seeing that laying biweekly can save interest. How about paying every week? If my installment is 2000 per month. Does paying 500 per week make a difference?

Yes, definitely. But you can only do this if you get your salary 4 times a month right? Since if you already have the money upfront, why not just do advance payment that reduces the capital? and if you are already going to do this so oftern, it would be the utmost best if you just get a full-flexi account!

I would've have my salary before the installment cycle ma? But speaking of which, since I have it before the installment cycle, might as well I dump the installment in even faster? As in using this month salary oay next month installment.

Should be faster then paying 4x or 2x a month right?

Exactly, you got it all right. If you get your money or salary earlier in the month, then just pump it into the loan account now, if you want to save the 4.4%++on mortgage interest.

Btw, plese ask the bank first ya about your loan's advance payment p0olicies..

Currently applying uob (semi flexi) and rhb (full flexi). I did ask them if its possible to pump in more money and they say its possible. But it is a current account I don't think company can bank in salary to current account kut.

Public bank told me that it can offer me 60% OD and 40% term loan for housing loan facility. But the problem is, PBB will still charge me 1% commitment fee if I cover up my OD facility in full though my OD limit is below RM250k.
Previously, bank don't charge 1% commitment fee for unutilised OD facility below RM250k. Is there any bank still practice that ?