When you are shopping around for the best home loan package to finance your house purchase, you will encounter so many different interest offer. Basically, mortgage offers can be categorized into three:

1. Fixed Interest

A fixed interest rate home loan allows customers seeking a guaranteed fixed interest lending rate to protect against potential interest rate increases that may occur during their settlement period.

1st 5 years – 5.8%
Thereafter at 6.0%

This kind of offer is suitable for more risk averse people.

2. Variable Interest

Varibale interest rate home loan calculate the interest charges that moves up and down based on the changes of an underlying interest rate index which is Base Lending Rate (BLR).


1st 5 years – BLR – 1.4%
Thereafter at BLR – 1.55%

It all depends on the BLR. When BLR increases in the future, you will have to pay more interest charges.

This kind of offer is suitable for borrower who can tolerate certain risk in interest rate fluctuation.

3. Overdraft with credit facility

These kind of home loan package is very popular a few years ago around 2005-2006. Your home loan account is linked to a current account which allow you to withdraw your money as easy as writing a check. Basically you pledge your home to the bank in order to get a liquid cash account to withdraw the amount you need.

These kind of account is suitable for business owner who need to move fund quickly and demand higher cash flow for his business.

There are also some hybrid accounts which combine home loan with current account. This works just like the overdraft facility but you still need to pay the regular installment. Only the extra amount you put into the account can be withdrawn. Sometimes this is known as flexi-homeloan which is marketed by some banks here in Malaysia.

Image: Sign home loan offer letter

Are you looking for information about home loan? Read my other related article:
Refinancing Home Loan: Save Mortgage Interest
Beware of the Lock-in Period of your Home Loan Offer Letter
How to Settle Your Loans Earlier
Mortgage: the cheapest debt
Save interest on homeloan


Personal finance author and trainer

    3 replies to "Choose the Interest Rate Package that Suits Your Risk Appetite"

    • hawa


      If I’m a first time home buyer, which package of loan do you suggest me to take. Is Flexi a good package? Would I be really benifiting from the OD facility? Or should I just stick to variable interest for a few years and refinance when the BLR is higher?

    • […] story. Mr.Tan (of course not his real name) took up a home loan from Alliance Bank. Nowadays, the home loan package offer is irresistible. I met Mr. Tan and we discussed about this matter whether should he refinance his […]

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