How Malaysian home loans really work
Unlike car loans, Malaysian housing loans use the reducing-balance method. Interest each month is charged only on the outstanding principal, so as you pay down the loan, the interest portion shrinks and the principal portion grows. Over a 30-year mortgage this difference is enormous.
The formula
where P = loan principal, i = annual rate ÷ 12, n = months
A real example
Buy a RM 500,000 property with 10% down (RM 50,000), borrow RM 450,000 at 4.20% over 30 years:
- Monthly installment ≈ RM 2,201
- Total interest over the tenure ≈ RM 342,360
- Total repayment ≈ RM 792,360 — almost double the loan amount
- If you settle after 10 years, the outstanding balance is still ~RM 355,000: only 21% of the principal is gone, but you've paid 10 years of interest.
This is why a small reduction in interest rate, or a slightly shorter tenure, has an outsized effect on total interest. The amortisation schedule above shows exactly how each ringgit is split.
Don't forget the closing costs
The cash you actually need at closing is more than the down payment. You also pay:
- MOT stamp duty on the property price (1–4% in tiers)
- Loan-agreement stamp duty at 0.5% of the loan amount
- Legal fees and disbursements (not modelled here — typically 0.5–1% on top)
First-time home buyers are fully exempted from MOT + loan-agreement duty for properties priced up to RM 500,000 — toggle the switch above to see the impact.
Compare home insurance and MRTA before signing
Banks usually bundle their own MRTA with the loan. Independently quoting MRTT/MRTA from 3+ providers can save RM 3,000–8,000 over the loan tenure on the same coverage.
Get free quotes →Frequently asked questions
What's the maximum home loan tenure in Malaysia?
How much down payment do I need?
Can I make extra repayments to save interest?
What about lock-in periods?
Reducing balance vs flat rate — which does my loan use?
Other Malaysian calculators
This calculator estimates monthly installments using the reducing-balance method standard for Malaysian housing loans. Actual loan terms, lock-in penalties, MRTA bundling, and approval criteria are determined by individual banks. Always confirm figures with your bank before making financial decisions. Not financial advice. See our methodology for the full formula.