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Home Loan - AIA - American International Assurance Company, Limited

Congratulations! You have already proven that you have what it takes to succeed in life. With hard work and sheer dedication, you now have the resources to buy a property and build your very own home. At AIA, we recognize your efforts and offer the chance to secure your property to our low, long-term fixed rate home loan. Help make your future financial commitments safer and secure by signing up for our BLR-free loan.

AIA Fixed Rate Home Loan offers:

Home Loan : Terms and Conditions

1. Who can apply?

• Individual Malaysian citizens. Married couples to submit joint applications.
• Aged 18 & above.

2. Types of properties financed

a) Completed residential properties with permanent Certificate of Fitness

• Landed - Klang Valley , Penang / Seberang Prai, Sg. Petani, Kulim, Seremban, Johor Bahru, Batu Pahat, Ipoh, Kuantan, Malacca Town, Kota Kinabalu and Kuching Town.
• Non-landed e.g. apartments, condominiums & townhouses - Penang Island & Klang Valley only.

Note:
(i) For leasehold land, the unexpired land lease must exceed 30 years upon maturity of the loan tenure.

(ii) Exclude financing of service apartments and residential properties with restriction in interest, Bumi Lot (with restriction to sell / transfer to non-bumi), located at landslip / flood prone area and T-junction as well as auctioned properties.

b) Under construction residential properties developed by :

3. Maximum / Minimum Loan Financed

• Minimum Loan : RM75,000.
• Maximum Loan : RM1,000,000 (Higher amount is subject to AIA's discretion).

4. Interest Rate

A unique housing loan package that offers the following options:-

Packages	Interest Rates
Fixed Rate - Package	6.15% p.a. for entire loan tenure - For all end financing projects under AIA Home Loan list of panel developer - For new and existing life policyholders, MRTA policyholders (Applicable for completed landed & non- landed residential property. Min loan required is RM75,000)

Benefits

• Flexible prepayment - No prepayment fee will be levied if prepayment is from own savings, Employees Provident Fund or if existing loan is replaced simultaneously by another loan from AIA for the purchase of another residential property for own occupation.
  
• Guaranteed fixed interest rate for the entire loan period or up to 30 years. Absolutely no fluctuations in interest rate. The one opportunity to lock in at these fantastic low fixed rates for up to 30 years.
  
• Assured financial planning and peace of mind. Fixed monthly repayment helps to plan and chart a clearer financial planning for the family as housing loan instalment is one of the highest loan commitments in the family.
  
• $ Daily Interest - Loan calculation based on daily interest.

5. Margin of Financing (MOF)

• MOF is based on Open Market Value (OMV) or purchase price whichever is lower for new purchase.
• OMV shall be based on valuation report prepared by AIA panel of valuers.
• MOF is up to 90% for owner occupied landed residential properties only.
• Cashout is available to finance Group Mortgage Reducing Term Assurance (GMRTA), legal fee, renovation and children’s education.

6. Loan Tenure

• Up to 30 years or age 60 whichever is earlier.
  

7. Loan Eligibility

• For employed category

(i) Monthly instalment and other loan repayments must be within 38% for single applicant's monthly income.

(ii) Monthly income for employees is defined as basic salary with fixed allowances and does not include part-time income, sales commission or non-contractual bonus or rental income.

• For self-employed category

(i) Monthly instalment and other loan repayments must be within 33% of the applicant(s)' monthly income based on average three (3) years declared income Form J(1).

(ii) The business established for at least five (5) years and operating profitability for the past three (3) years.

(iii) Income substantiated with income tax form J(1) and financial statements.

(iv) Average monthly income will be based on three (3) years declared income in the income tax Form J(1).

8. Prepayment Fee

• There will be a pre-payment fee levied should the loan be refinanced within the first five (5) years from the date of first drawdown.
  

The prepayment fee is chargeable at a rate of 0.35% times the number of remaining years of loan (not exceeding 4% but subject to a minimum rate of 2%) times the amount prepaid.

9. Other Terms and Conditions

• Houseowner Insurance.
• All loans must be adequately protected by AIA Group Mortgage Reducing Term Assurance or AIA life policies (Life, Term or combination) on the total loan amount.
• Valuation reports and loan documentation are to be handled by AIA’s panel valuers and solicitors.

Home Loan FAQs
Guide to chosing a Home Loan
Home Loan Contact Information

Important: This is purely a product summary and shall under no circumstances be used or deemed as an offer to sell nor shall it be taken as a form of professional advice of any manner. Please contact us at 1-300-88 1899 for more information.

Home Loan : Guide to Choosing A Home Loan

To many, being able to afford a new home is indeed exciting but can be stressful. After months of reviewing potential homes, you finally have the financial means to choose the best of the lot. But now comes the mind-boggling task of selecting a suitable home loan.

1. Choosing a suitable home loan
Choosing a home loan for most of us is the beginning of a long-term commitment, one that can stretch up to thirty (30) years! Selecting the right package is important. If this is not planned carefully, you may find your finances strained. So, shop around and know your options before selecting the best package that suits your needs.

2. What are your needs?
Identify and list down your needs and match the benefits offered by each housing loan package. You may want to consider some key points such as: What margin of financing do you need? Any pre-payment fee for early or partial settlement? Does the package subsidize moving costs? Any risks in fluctuations in interest rates? If interest rates fluctuate, will I be in the financial position to take this risk? Any insurance protection required? It is always prudent for the customers to ensure that they know the features of the mortgage when securing the housing loan and ideally the package must be able to meet their needs.

3. Types of housing loan packages
There are basically two types of interest computation for home loan packages in the market:

1. Floating Rate Mortgages whereby interest rates are pegged to the Base Lending Rate (BLR).
2. Fixed Rate Mortgages where interest rates are fixed for the entire loan period.

Floating Rate Mortgages
If the customers opt for the floating rate mortgages, interest rates will fluctuate according to the BLR determined by the Bank from time to time. As such, customers must be prepared for such eventualities if interest rates were to increase during their tenure of the loan. This is because a rise in interest rates could potentially hurt household income, as borrowers will face higher financial obligations if they are not prepared for such risks.

Fixed Rate Mortgages
Nowadays, homeowners have the option of obtaining fixed rate mortgages whereby interest rates are fixed for the entire loan period. AIA offers such a mortgage under its AIA HOME LOAN package. Borrowers under this scheme will be assured that the interest rates and instalments for the loan is fixed for the entire loan regardless of the volatility of market conditions. AIA HOME LOAN offers three choices of fixed rates for its customers:

Packages	Interest Rates
Fixed Rate - Package	6.15% p.a. for entire loan tenure - For all end financing projects under AIA Home Loan list of panel developer - For new and existing life policyholders, MRTA policyholders (Applicable for completed landed & non- landed residential property. Min loan required is RM75,000)

The mortgage package protects borrowers from fluctuations in interest rates. This gives peace of mind in ensuring that their finances are intact despite a volatile interest rate environment.

4. Is the interest rate going up or down?
No one can actually predict what the interest rate will be in the next twenty (20) to thirty (30) years. Historically, interest rates for home loans have certainly seen their share of ups and downs over the past twenty (20) years.

Analysis of the lending rate over the past twenty three (23) years can only give us a historical guide of the interest rate cycle. Based on figures provided by Bank Negara (for the period between 1980 to 2003), the average Base Lending Rate (BLR) for commercial banks is 8.38% a year with an average lending rate of 9.80% This means that for a loan taken for the past twenty three (23) years, the average interest rates were charged at 9.78% whereby lending rates have peaked as high as 12% and as low as the current BLR of 6%.

Table 1:

Table 1: depicts the analysis of lending rate over the past twenty (20) years. Source BNM statistics.

1. Average BLR for twenty four (24) years : 8.38%
2. Average Lending Rate for twenty four (24) years : 9.80%

5. What would be the potential impact if BLR increases?

Currently most banks are offering low rates for the first two (2) years and from the third year onwards, it would be based on BLR added to a certain margin. Both BLR and margin is subject to revision at the discretion of the banks.

In Table 2 we have a comparison of the potential impact on total interest payable when BLR increases. For this example, let’s look at Package A – a floating rate mortgage at an interest rate of 1st year: 2.88%, 2nd year: BLR+0.00%, thereafter: BLR+0.25% for a tenure of thirty (30) years.

Table 2:

In this table, for a loan amount of RM300,000, if BLR were to increase by 1.00% and 2.00%, additional interest to be paid by borrowers would increase by RM67,141 and RM136,912 respectively and loan would be lengthen by approximately four (4) years and seven (7) years respectively (if the instalment remains the same). Of course interest rate fluctuations could also decline but it is important that borrowers must be prepared for any eventualities if interest rates do increase. Unlike the fixed rate mortgages, interest rate is fixed whereby customers need not worry about fluctuations of interest rate for the entire tenure of the loan.

6. Other Features of Mortgages

Is there flexibility in pre-payment?
Pre-payment or putting additional payments to reduce the loan amount, is important to provide more interest savings. For example, if your instalment is RM1,321 for a loan of RM200,000 for twenty five (25) years, by paying an additional RM250 every month, it will shorten the loan tenure by seven and a half (7 1/2) years or save you RM66,408 in interest payments. In AIA HOME LOAN the flexibility of pre-payment includes allowing customers to start paying monthly instalments during the period of progressive release for properties under construction. Customers can start paying instalments instead of just servicing progressive interests for the period of two to three (2-3) years which actually lengthens the loan period by the same period.

Why not unlock the value of your property?
Most of the homeowners can actually unlock the enhanced value of their property for additional cashout. For example if the property purchased five (5) years ago is RM200,000 and the current market value is RM400,000, homeowners can refinance or request for an additional loan to unlock this value by getting additional loan for purposes of children’s education, investment into unit trusts such as Amanah Saham Bumiputera, renovations or other personal commitments and investments.

Insurance coverage for housing loans
As home loans are a big commitment, repaying a home loan can be a major burden if calamity strikes. Fortunately, there are insurance options to protect borrowers against death, permanent disability or even critical illness, where the insurance company will settle the loan and family members need not face the burden of repayment.

There are two (2) different types of policies to choose from – Group Mortgage Reducing Term Assurance (GMRTA) or life policies. GMRTA basically provides coverage on a reducing basis, which will match the outstanding loan. Premiums are paid in one lump sum. Alternatively, borrowers can opt for various types of life policies to secure the loan.

In addition, all properties will also need to be insured with fire / houseowner insurance on the property to ensure that your property is insured against any risks such as fire, air craft disaster, etc.

Can insurance companies provide housing loans to the public?
Under the Insurance Act, all licensed insurance companies are empowered to provide housing loans to the public. The funds from insurance companies are internally generated giving them an additional edge to provide attractive long-term fixed rate housing loans for the benefit of the public.

Concluding pointers
Take your time in choosing a loan package that will best meet your needs. It is important to know, not just the rates, but the features of each package as well. Be aware of the final points of the terms and conditions, as well as the quality of service and time taken for the loan to be disbursed. Always make a comparison of the cost and benefits before making a decision to purchase or refinance. The effort is worthwhile as home loans are a long-term commitment and a wise decision will prove to be profitable in the long run.

What AIA HOME LOAN offers
AIA HOME LOAN is a unique mortgage package to meet customers’ needs as it protects customers from the volatility of interest rates so that borrowers would enjoy peace of mind and easy financial planning due to the fixed instalment amount. It is flexible as the more you pay, the more you will save and you can sell off or pay off at anytime without incurring any penalty.

Home Loan FAQs
Home Loan Contact Information

Important: This is purely a product summary and shall under no circumstances be used or deemed as an offer to sell nor shall it be taken as a form of professional advice of any manner. Please contact us at 1-300-88 1899 for more information.

Home Loan FAQs

Common Questions About Interest Rate

1. What is your interest rate?
For AIA Fixed Rate Loan, the interest rate is fixed at 6.15% p.a. – all with daily interest calculation. Please refer to our Terms & Conditions section for more specific details. All packages are for a limited time period only.

2. What are the benefits of the Fixed Rate Loan?
Fixed Rate Loan offers peace of mind by locking in at a fixed rate so your monthly instalments are constant throughout the duration of the loan. Otherwise, fluctuating interest rates may exhaust your financial resources as an increase in monthly instalments can be a burden especially when other costs of living are on the rise too. Although some financial institutions do not increase your installments, when the interest rate rises, the duration of the loan is extended as your installments are insufficient to cover the increased monthly interest which will eventually increase your principal loan outstanding. In AIA HOME LOAN you are in absolute control of the interest rate and installment. So, personal financial planning can be charted for a clearer financial future for you and your family.

Common Questions About Prepayment Fee

1. Does AIA charge prepayment fee?
There will be a prepayment fee levied should the loan be refinanced within the first five years from the date of the first drawdown. The prepayment is chargeable at the rate of 0.35% times the number of remaining years of Loan (not exceeding 4% subject to a minimum rate of 2%) times the amount prepaid. However, there is no prepayment charged when the loan is repaid with own savings, EPF or sale of property which makes it more cost-effective for customers who would like to settle their loan faster if they have additional cash.

Common Questions About The Type And Margin Of Properties Financed

1. What types of properties do you finance?
Completed landed residential properties e.g. single, double-storey link, semi-detached, bungalow, etc. We also financed properties under construction. This applies only for selected developers and projects. For further information, please refer to our terms and conditions.

2. Do you finance condominiums and townhouses?
Only selected condominiums and townhouses with or without strata title issued in Penang Island and Klang Valley.

3. Do you finance shop lots or industrial lots?
Our loan is currently open for residential properties only.

4. Can you finance a property located out of Klang Valley e.g. property in Melaka?
Yes, our program is tailored for properties within the Klang Valley, Penang / Seberang Perai, Johor Bahru, Batu Pahat, Seremban, Sg. Petani, Kulim, Ipoh, Kuantan, Malacca Town, Kota Kinabalu and Kuching Town.

Common Questions About Refinancing

1. Do you refinance properties?
Yes, we refinance properties that are encumbered or currently charged to another financial institution. Our margin of finance is between 70% - 80% of OMV (Open Market Value). The purpose for refinancing is to redeem the outstanding balance of your existing financier. Additional cashout for other purposes such as renovations, education and any other commitments are considered with the exception of business investments.

2. My property is currently encumbered, can I refinance the property for personal requirements?
Yes.

3. Do you finance construction of a house if my land has already been paid off?
Not at this present moment. Currently, our program finances completed landed residential properties and selected properties under construction by selected developers only.

Common Questions About Loan Application & Insurance

1. If I am not an AIA policy holder, can I apply the loan?
Yes, as long as you are a Malaysian Citizen. However, you will need to purchase an AIA Group Mortgage Reducing Term Assurance or AIA Life Policy to secure the loan. The insurance policy is to provide protection and peace of mind to your family when calamity befalls such as death or permanent disability. In some instances, the savings from our low interest rate compared to other financial institutions helps to subsidize this repayment.

2. If I have existing Life policies with other insurance companies, can I assign them to AIA?
Since this is a unique HOME LOAN package from AIA, the policy must be from AIA.

3. I am married, can I apply as a single applicant?
It is one of our terms that your spouse be a joint applicant. Both husband and wife are to be joint borrowers. Exceptions can be considered.

4. Is a valuation report required?
Yes, a valuation report is required by our panel of valuers once the loan is approved.

Valuation is only waived for properties under construction or recently completed properties purchased from selected developers.

5. Can we have our own solicitor’s firm to prepare the loan documentation?
You are required to use the solicitors on our panel.

6. I am healthy and I do not wish to buy insurance.
Health is fragile. Our well-being cannot be guaranteed in the next five or 10 years time. Life insurance, either a Mortgage Reducing Term, Life or combination of both provides the necessary funds for your family to settle the mortgage in times of need. As such, the unique AIA HOME LOAN protects you from fluctuating interest rates, fire, life and permanent disability.

7. Can I assign my existing AIA policy instead?
Yes. However, the coverage of the policy must not be less than the mortgage loan amount.

8. You can always sell my house if anything happens to me. After all, is the house not sufficient security?
AIA would rather not recall the loan and the property. A home is needed as a means of shelter. We are in the business of helping homeowners to protect themselves and this is the reason the unique AIA HOME LOAN helps you to achieve this objective.

9. Is Life Insurance or Group Mortgage Reducing Term assurance expensive?
We have a variety of life policies to suit your needs and our agent will assist in planning according to your requirements.

You can even opt for Group Mortgage Reducing Term assurance which involves only one lump sum payment and this insurance will cover you for the entire loan period. It is the most affordable form of insurance. Depending on your age and loan amount, it can be as little as RM18 a month.

10. If this is a joint loan application, how must we insure ourselves?
Required insurance will be based on the income of both applicants. For example, if the husband is paying for the loan, then insurance on the loan amount is to be taken by the husband. However, the proportion on insurance will depend on the income earned.

Eg. Loan RM200,000 Insurance

Source: http://www.aia.com.my - 30/12/2006