Guide to Home Loan Calculations in Malaysia

Home loans in Malaysia typically use a reducing balance (amortising) formula. Interest is calculated on the outstanding principal, so your interest portion decreases over time.

Reducing Balance Formula

• Monthly rate = Annual rate / 12
• Number of payments = Years x 12
• Monthly payment = Principal x Monthly rate x (1 + Monthly rate)^N / ((1 + Monthly rate)^N - 1)

Example

Loan amount RM450,000, annual interest 4.2%, 35 years. Monthly payment is approximately RM2,047.