Interest calculations: Banks normally adopt one of two methods for calculating interest:-
1. Monthly Rest:
Interest is computed based on the loan balance on a specific date each month. So there is no advantage to be gained if a borrower repays an instalment before the prescribed date.
2. Daily Rest:
Interest is calculated based on daily loan balances. This means that if payment is made earlier, the outstanding balance in the account is reduced which in turn results in less interest charged.
How do I find the best deal? When shopping for the right housing loan, you
may wish to keep the following in mind:
1. Match duration:
Find out what is the maximum loan period that you can secure. Generally maximum loan period differs among banks and ranges between 30 to 35 years, or dependant on when the borrower turns 65 years of age. In the case of leasehold properties, it is important that you also check the remaining lease on the property.
2. Monthly payment projections:
Compare the monthly repayment patterns of different interest rate from various providers to decide which of these better match your requirements.
3. Interest rate comparison:
Find out if the mortgage is on fixed or floating rate loans and in the case of fixed rates how long these rates are fixed for.
Find out if the bank charges a fee for processing such loans. These typically include fees for legal, valuation or insurance. Sometimes bank offers free fire insurance and free valuation on the property. Some banks even provide legal subsidies.
Find out if there are any penalty fees for partial or full redemption of the loan.The daily rest option is the best, though all banks do not offer this.
What this means is that the moment you pay, it is accounted for and interest is only calculated for the balance amount of your loan.