Hi, I was wondering if someone can answer my question on how interest calculation works for semi/full flexi loans.

Say I take a loan of 1M for 35years at 3.85%. Based on https://www.calculator.com.my/home-loan-calculator, the monthly installment is RM4,338.23. If I were to pump 100k into the flexi loan for 1year:
1. I believe I will still pay the same monthly installment of RM4,338.23. So does this mean a higher portion of the monthly installment is being used to reduce the capital? If yes, how much is this portion?
2. How do we calculate the effective savings per year (capital reduction of 100k + higher capital reduction from monthly installment)? Basically how does it compare if I were to put that 100k into FD of the same rate (3.85%)?

Thank you in advance.

Installment will be same. And yes a higher portion goes to pay off principle. So example I took a 300k loan and had 300k in the account. I actually do not pay any interest on the loan. But also do not earn any interest on my account
Unfortunately I don't know how to calculate the savings if you put the money into FD instead

This post has been edited by jetblast: Oct 28 2023, 01:18 AM

1. You can use an online calculator to calculate the break down of your monthly installment.

If you were to pump 100k, you will only need to pay 3904.40 per month. So calculate the diff between your original and new installment, and you'll get the extra principal you are paying.

2. If your housing loan is 3.85%, and your FD is the same, then you are net 0.

1. Yes, your monthly repayment will maintain.
1.1 If you pump 100K, your loan tenure will be reduce. So you not need pay 35year, can settled early.
1.2 Yes higher portion from monthly repayment will go to principle part. My opinion* i assume*

1.
example. Total repayment = Total Principle + Total Interest.
1m = 4338
900K = 3904

so you keep paying 4338 = extra 434 going to principle part.

1.2. total repayment = total principle + total interest
total repayment = 1m + (1mx3.85%x35 year)*

after pump 100K

total repayment = 1m + (900K x 3.85%x35year)*

as its flexible, so the interest rate will calculate based on daily basic.

*total interest just show as simple formula idea, not the actual calculation*

so you can see pumping 100K doesn't reduce your principle amount payment, but only reduce the interest portion payment.

by paying same amount 4338, extra 434 go to the principle, so the loan tenure shorten.

2. If you both same, then your net will be 0, but very hard to get same rate. either asb loan & epf give higher interest.

2.1 flexi loan not accept 100% top up. mostly 90% or 70%. So if both same rate, you pump 100K at FD, you get 100K amount interest, but at flexi/semi flexi loan, you pump 100K, then you only save 90% or 70% of 100K interest. So based on this concept, the 1.2 calculation part total interest will be (910K x 3.85% x 35year) or (930K x 3.85%x35year).

so at this point, if both same interest rate, pump 100K at housing loan or FD, FD will get more profit.

Just my 2 cent opinion.

1m@3.85%= 38500per year
38500/365x31=3269 interest for Oct23
Instalment =4338 , means interest 3269, principal 1069

If 100k pump in,

900k@3.85%= 34650per year
34650/365x31=2942 interest forOct23
Instalment =4338 , means interest 2942, principal 1396.


Another way of calculation is RM100k@3.85% = 3850 per year,

Interest saved = 3850/365x31 = 326

Remember monthly instalment would not change no matter how much extra money you put in…. If outstanding 1m u put 990k extra in, the monthly instalment still 4338, unless OPR increase/decrease… Reason is when u signed the agreement with bank, that’s the monthly repayment commitment. It cannot simply change without supplementary agreement or refinance.

This post has been edited by Rinth: Oct 28 2023, 05:11 PM

Some bank flexi loan doesn’t have capping… throw in 100k, whole 100k can reduce interest..

And some of the comment are wrong, whatever amount u put into the flexi loan is used to reduce the principal, hence reduce the interest charged because interest calculation is based on your daily principal outstanding.

This post has been edited by Rinth: Oct 28 2023, 05:08 PM

Can I know how does the capping of interest looks like on the contract? Since I never see before in the contract and hope I dont miss up anything before I sign the loan.

exceprt from my Loan Offer

'Interest Offset Limit" means 70% of the Oustanding Principal, or such other percentage or limit imposed on the computation of interest, as may be varied by the Bank in its absolute discretion from time to time, with notice to you

Just wondering , if flexi loan , let’s say 1M loan,
I pumped in 100k to reduce the interest. But after a year I decided to withdraw it, can I do that?