Hey guys.

I'm thinking of reducing my Maybank mortgage payment (personal use property). Right now I'm paying via ESI (standing instruction) that will deduct a pre-determined amount from my account every 1st day of the month.

I can also pay more by using the 'Online Bill Payment > Maybank Loan / Hire Purchase'.

Now, I'm assuming that if I transferred money through this method, it will end up at the 'Payment In Advance' balance in my loan account. How do I pay so that it will reduce the principal amount of the loan instead of waiting to be deducted at the end of the month? I'm planning to pay more these days to reduce the interest amount.

If Maybank doesnt allow me to reduce principal balance automatically (e.g I have to write formal letter etc.. zzzzZZzz), am planning to refinance the property with another bank after my locked-in period in 2 year's time. What should I look for when shopping for my next home loan? Maybe I should consider a flexi-loan? Whats the average % of interest difference between flexi-loan an a non-flexi one?

Thanks

Syd G,

A) Do not be PENNY WISE and POUND FOOLISH. Unless, you are paying A few extra K per month, it does not make sense for you to do ESI every month. Sending letter to Maybank and pay the principal once or twice a year is good enough. If you went through the calculation, you will find that the difference is only a few RM. It is NOT worth the trouble.

B) As for refinancing, unless you can get a significantly less interest rate, you are NOT going to save much money either. But, you may still do it because you want the flexibility.

Dreamer

dreamer,

I'm currently paying via ESI to serve the loan (principal + interest), not to reduce principal

I'm 25, the tenure is 30 years and current rate is BLR - 0.75%. Not attractive at all since we were not so educated back then and took ZEC

Here's the answer to your most common questions :

1) I save 40% of salary (10% emergency fund, 30% invest, excluding epf), my fiancee is saving 10% even with this mortgage and its misc expenses

2) We have around 3 months emergency fund

3) Mortgage is fairly affordable since it's a teeny tiny unit - renting would cost approx the same.

A few more questions :

Based on your posts, I have the idea of just closing one eye, pay the amount that's due according to its schedule and invest my extra money elsewhere (ASB maybe?). Do you think it's the right move?

Syd G,

1) If you are BUMI and you can invest on ASB, I would not pay EXTRA to the loan to begin with. The FIRST 200K that I invest will be in ASB. No Unit Trust of ANYTHING else. You are BORROWING at BLR - 0.75% ~ 6%. ASB is paying 7%. So, you gain (7% - 6%) = 1%. Why pay off the loan earlier??

2) How DO YOU KNOW that the extra amount that you pay every month go towards PRINCIPAL?? Do not assume. Ask and check your statement. Some bank do not credit your extra payment to principal. You are just giving them free money at 0% interest.

Dreamer

u do not have to refinance , within lock in period, if u found any better loan package in the market, write a letter to MBB and tell them how new loan will save ur interest $$ even if u break ur lock in period n pay penalty. ask for revision of ur loan package , they may not offer as good as wat u find in the market but definitely better than ur current loan package. I did tht to my hong leong loan, at least u save some time n effort + $ on getting new loan.

for maybank conventional house loan, you can dump an amount to the account and it will use to pay ur installment at the same time it also reduce your interest rate.

That sounds really good . I'll shop around for a better deal on my homeloan to strengthen my case. Thx

Yeah I think I cant do it on monthly basis But it's ok. Based on dreamer's advice. I'll just be paying the scheduled amount and put the extra money on other investments.

Offtopic a bit, here's another decision that I have to make.. I have to pay my study loan at 0%, within 7 years, totalling 63042.13.

I'm planning to pay progressively as we're preparing to get married, settle down and all.. so how much should I allocate a month into paying this loan without losing too much opportunity cost? I'm allowed to propose my own payment plan so here's what I've come up with :

Year 1 - 500/mo
Year 2 - 500/mo
Year 3 - 650/mo
Year 4 - 750/mo
Year 5 - 850/mo
Year 6 - 950/mo
Year 7 - 1050/mo
+42.13

I better earn much more passive income in case I lose my job

Hi there,

I too got a home loan from Maybank. Regarding the extra payment, you definitely can do that and it definitely reduces the interest. I checked the T&C.

I am also repaying via Standing Instruction. However, in order to pay extra, it is "a little more difficult". They only accept the additional payments through their counter. If you pay in via other means, your standing instruction would actually stop deducting for the extra amount that you paid in, which defeats your purpose obviously.

Cheers

I just got my maybank home loan offer letter

Couldnt find the clauses for paying extra repayment to reduce the total of principal loan
Only mentioned that the extra money put in can be withdrawn

Some bank, when u pay extra thru the ATM etc, it won't reduce your principal. Instead it is treat as advance payment (hmm..some bank or was it all bank? Not really sure on this)

has the interest rate increased already?

not yet increased, but strong rumours that BLR will be increased after 25 July

i am also paying via standing instruction. Want to ask, will the extra funds paid via maybank2u to the loan account knock off the principal loan amount ? if not that means it will be sitting there without collecting any interest at all for me ?

UP this.

Will the extra funds paid clear off the Principal Loan Amount (and reduce the interest charges), or it is just merely serving as advance payment for the next installment?

I pay advanced payment via mb2u

It goes to principal loan amount ✌️

A lot of people are confused with the term Principal Offset and Advance Payment. If you made additional payments through M2U online, this is actually advance payment which will also help to reduce the interest rate.
Principal offset is something which you need to personally write in to inform bank that the additional payment made is to reduce Principal.
Note: Any extra money paid to offset principal can no longer be withdrawn in the future should you need the money

damn, ASB paying 7%. wadafish, here non bumi all finding for best rate FD+-4% baru and ASB is right in front of bumi to placed in. lols

Dear Fortezan,
Good afternoon. Thank you for your advice mate. 
With that mentioned, I need more clarity on the reason why that many people say that the Advanced Payment can actually reduce the Principal Loan Amount, and why it is not considered Principal Off-Set?
Please pardon my ignorance on this.

That's because both terms have been used loosely without any regards for it's accuracy.
I too was confused initially until I had a long discussion with a bank manager who heads the home loan department.
For most people who are on semi-flexi and full-flexi home loan, what we want when we have extra money is to park the money in the bank to reduce our monthly interest. This is actually term as advance payment, although it looks like our Principal was also reduced during interest calculation.
The advantage of this is that we can still withdraw the money in case of emergency. However, note that when you perform advance payment online, your ESI (standing instruction) automatically stops, so you need to manually top up every month to maintain the status quo.

Principal off set is something you need to be careful, coz if you tell the bank you want to do principal off set, they will take your money and permanently deduct it from your Principal, and you can no longer withdraw this money.

Dear Fortezan,
Thank you for your kindness and patience in sharing those information with me.
1. I am surprised to know that the ESI (Standing Instruction) stops automatically once I perform the Advance Payment Online. Does this apply for Maybank M2U payment too? How can I re-set back my Standing Instruction, or do I need to notify any Maybank Personnel/Branch Personnel for the resetting back of the ESI?
2. The Advanced Payment that I have made will be 100% used to reduce the Principal Amount, not partial-interest-partial-principal right?