Let's say for Flexi Housing loan I took RM 100,000 and monthly installment is RM700, tenure 20 years. At the 1st monthly installment in 1st year, I put RM 10,700 in my current account as deposit and on 2nd installment, i deposit another RM700 in the current account and so on for next month. The intention is to maintain RM 10,000 in the account to offset the interest charges until the last installment required.

My question is would it be saving more money if I straight away make lump sum payment to the loan using that RM 10,000 on the first installment or just keep it there inside the current account? Of course after making that L/S RM10K payment, the current account balance would be zero now. Im thinking there should be no difference between the two scenario in terms of total interest amount being charged for the whole tenure duration. Am I correct?

This post has been edited by TerTop: Aug 24 2008, 09:02 PM

Yeah i do agree on the liquidity point of view. But comes to think of it, the bank main purpose is to make money how come the flexi plan they offer is so good one. I think there maybe some small calculation difference in the allocation of interest/principal when comparing the two method above. Its too good to be true that's why im asking.

Good point from another perspective. Been doing some calculation, just by keeping ~ RM3000 in the current account, RM10 monthly charges would be totally canceled out by the interest gained from the current account for the whole tenure. Somemore if the BLR increase, that will make the flexi loan gives a higher return than FD!! IIRC during the BLR 10%++ previously, the FD rate does not increase in the same amount. Based on (1-2yr) BLR -2.2% and -2.0% thereafter.

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Added on August 25, 2008, 10:56 pmThanks for another confirmation. I will definitely not making any prepayment now but just deposit as much as possible into the account. The early years is quite crucial i believe.

This post has been edited by TerTop: Aug 25 2008, 10:56 PM