Hi ryujimitsui,

To be frank, it depends on how you think of this facility (this is full flexi loan package, available with other banks as well, like PBB, HSBC, SCB, HLB...). Certain clients might think it is a good facility to them as they have quite a large sum of idle money to keep in the CA and offset the interest incurred by the loan while some consider that it is not a good option. Basically, the latter kind of clients are more investment-oriented. Considering you make a loan of 1M and you keep 500k in the CA. In a simpler manner, assume the current rate of interest is 4%, you have save 4% interest of 500k, which is around 20k. However, the latter kind of clients have a different mindset that if they are able to invest in other option that yield more than 4% return, it won't convince them to take up such facility. Most of the time, ppl will just tend to use this facility as they seldom have any options that can provide them with a return of more than 4%, sometimes, with a structured MLTA, it will save more interest than utilizing a simple full flexi package. The full flexi might be a good hedge against high rise interest rate during bad economy outlook (provided you have plentiful of money).

It is too late to ask for suggestion now as you don't have sufficient time to go through another cycle of loan application unless you drag the signing of S&P or you appoint your own lawyer to do both S&P and loan doc for you simultaneously while pending for the next loan. For your loan size, the rate can be around BLR -1.9 ~ BLR -2.2, subjected to profile variation and property financed.

Next time, better to have the consultation first prior make any move (in regardless it is going to be professional or amateur). It might helps a lot in term of getting a good offer and cost & time savings in other aspects as well.

Normally the 4% is per annum.....

if i am not mistaken,
calculation: 4% of your remaining principle divide by 365/366 days.... that's how much you need to pay interest per day.

Dear Forumers,

If anyone of you read through your loan doc or letter of offer thoroughly, majority of our current conventional home loans are calculated on a daily rest basis while for couple years ago, home loans are mainly calculated on a monthly rest basis. The major differences between monthly rest and daily rest are as below:

MONTHLY REST BASIS

Interest of a loan for a particular month will be calculated based on the previous month’s outstanding balance (Outstanding balance will include both principal and accrued interest, if any).

Consider current BLR at 6.3%

ie. Loan Amount RM 500k at BLR -2.3% p.a. (effective interest rate will be 4%), tenure 30 yrs. Monthly installment is projected to be RM2,387.08, payable on 15th of each month.

1st Month(30days):

Outstanding balance: RM 500k
Interest Due: RM 500k X 4% X 1/12 = RM 1,666.67
Monthly principal repayment: RM 2,387.08 - RM 1,666.67 = RM 720.41
Outstanding balance of 2nd Month: RM 500k - RM 720.41 = RM 499,279.59

So, how about Daily Rest Basis?

DAILY REST BASIS
Interest of loan will be calculated based on the previous day's outstanding balance.

Using the same example:

1st Month(30days):

Outstanding balance: RM 500k
Daily interest charged until payment on 15th: RM500k X 4% X 15/365 Days = RM 821.92
Principal repayment on 15th: RM 2387.08 - RM 821.92 = RM 1565.16
Outstanding balance after 15th: RM 500k - RM 1565.16 = RM 498,434.83
Daily interest charged until end of 30th: RM 498,434.83 X 4% X 15/365 Days = RM 819.34

Thus, total interest incurred during 1st month = RM 1,641.26

Look at the interest incurred for both cases then you know what I want to point out.

The interest savings = 1666.67 - 1641.26 =25.41, it might looks insignificant in short run but make a huge difference for a tenure of 30 yrs as this amount will serve as additional principal repayment which further reduce the interest incurred in 2nd month and so on.

COMMENTS:

Basically, if a daily rest loan is utilized correctly, it should provide significant interest saving impact to your loan. The savings will be more obvious and more significant if you make a lot of prepayments other than your regular monthly installments, often attractive to those who have high cash flow and bunch of idle fund. The only problem with daily rest is when you default or miss any installment. The accrued interest will be calculated on a daily basis as well and you might end up paying more if you try to delay your payments.

For monthly rest, the advantage will be you do not have to worry about additional interest incurred (or no need to consider the interest savings impact) when you make an installment at a certain date, as long as you did not miss any of them.

Give a good rate if you think this calculation is good enough for your understanding