Difference between Semi Flexi and Full Flexi in Malaysia

You have discovered your dream house and decided to start buying it. The next step to take is to apply for a home loan. Buying your first home is a significant financial commitment, so choosing the right home loan is crucial. There are three basic types of home loans in Malaysia: basic or term loans, flexible loans (including semi-flexi versus full flexi options) and Islamic home loans. In this article, we will explain the differences between semi-flexi and full-flexi options.

Which is Right for You: Flexible Home Loan – Semi-Flexible vs. Fully Flexible?

A flexible home loan, also known as a flexi loan, is a type of loan that allows adjustments to the monthly repayment amount. The repayment amount is not fixed, but has a minimum value that is agreed upon. In Malaysia, flexible loans are categorized into two types – semi-flex and full flex.

Both semi-flexi and full-flexi loans allow borrowers to overpay, which in turn reduces their loan principal. The loan principal represents the amount of money borrowed from the bank for the purchase of a house. A lower loan principal not only reduces the interest rate, but also shortens the term of the loan.

On the other hand, a term loan is the basic form of housing loan in Malaysia where the monthly installment amount is fixed and remains unchanged during the lease period. For example, if a buyer borrows RM400,000 from a bank to buy a house, that RM400,000 represents the loan principal.

The borrower then agrees to pay RM2,000 as a monthly installment and settle the debt over 35 years. With a loan with a basic term, the customer must pay an agreed installment of RM2,000 every month for exactly 35 years. This means that the principal of the loan, the monthly installment and the duration of the loan are fixed and unchanging during the period.

Any attempt to pay the additional amount and settle the debt two to three years earlier will be penalized. In contrast, with a flexible loan, borrowers have the flexibility to pay more than the agreed minimum installment and enjoy the benefits listed below. So let’s take a look at what semi-flexible versus fully flexible loans have to offer and what their drawbacks may be.

Semi-flexible housing loan: advantages and disadvantages

As the name suggests, semi-flexi covers half the flexibility to repay the loan. You can still enjoy the flexibility of paying an additional amount to your monthly loan payment, which is unlikely for the base term of the loan. However, certain banks may impose additional fees and procedures for withdrawing excess money from your home loan account.

Today, this type of loan is set as a standard loan offered by most banks in Malaysia.

Advantages of a semi-flexible home loan

These are the advantages of semi-flex for your home loan:

1. Borrowers can enjoy lower interest rates when they pay an additional amount of their monthly installment. For semi and full-flexi interest is calculated daily;
2. Borrowers can also enjoy a shorter loan term or can settle their loan years in advance. For example, a 35-year loan can be reduced to 30 years if they put an extra RM5,000 towards the loan repayments per year. This can vary between different lenders;
3. Borrowers can also withdraw the excess money deposited in their account, subject to terms and conditions.

Disadvantages of a semi-flexible housing loan

The only downside to a semi-flexi loan is that some lenders will have to go through a specific procedure to withdraw money from your home loan account. In short, you can always put more money in, but it’s not very convenient to take it out.

Complete Flexi Home Loan: Pros and Cons

Full flexi, also commonly called flexi loan, can be described as an upgraded version of semi flexi. Borrowers benefit from complete flexibility in loan payments. Borrowers will usually use a checking account linked to a home loan, so it will be easier to pay the excess money at any time. Similar to a semi-flexible loan, additional repayment amounts will lower the interest rate and shorten the term of the loan.

In addition, borrowers will also have the privilege of withdrawing the excess amount from their current account without complicated procedures or additional charges at their convenience.

Advantages of Full Flexi Home Loan

Here are the advantages of a full flexi loan:

1. Borrowers can use their checking account linked to their mortgage loan. Therefore, the monthly installment is automatically deducted from the current account. The additional amount paid monthly will reduce the principal amount of the loan as long as the agreed minimum repayment amount is met;
2. Additional money in the current account will automatically be used to recalculate interest based on the remaining principal amount. For example, the loan amount borrowed is RM500,000 (principal amount). The borrower then deposits RM100,000 into the checking account. The bank will then calculate the interest rate based on the last loan principal which is RM400,000;
3. It is simple because there will be no complicated procedures or additional costs for withdrawing additional money since it is in a current account. Simply put, you can deposit and withdraw money whenever you want.

Disadvantages of Full Flexi Home Loan

In addition to its super convenient features, a full flexible loan can have some disadvantages such as:

1. An additional monthly fee of RM10 administration fee including eight percent SST will be imposed whether you use the account or not;
2. Not all financial institutions have a full flexible loan as an option, making it a limited product that banks offer for home loans;
3. Higher interest rate compared to basic term loans.

Choose the right home loan for your needs

Keep in mind that a home loan is a long-term commitment. Choosing the right home loan is crucial, but it’s equally important to plan your finances to ensure timely loan repayments. Now that you know the difference between semi-flexi and full flexi home loans, you can use these points of view to make the right decision in choosing the most suitable home loan for you.

• If you have a variable income, receive commission with a monthly salary or collect bonuses at the end of each year, you can opt for semi flexi as it allows overpayment with lots of benefits in return without any maintenance fee;
• Full flexi are suitable for individuals with variable income such as bonuses, business distributions and cash rich people;
• Check your Debt Service Ratio or also known as DSR with your bankers to see your salary eligibility to buy a home as well as home loan eligibility to choose the best loan that suits you.

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