Your Malaysian mortgage uses the reducing balance method โ meaning each monthly payment is split between interest and principal. In the early years, most of your payment is interest. Understanding this helps you make smarter overpayment decisions.
How Amortisation Works
Each month, your payment is split: first pay the interest on the current outstanding balance, then the remainder reduces the principal. As the principal falls, so does the interest component โ meaning more of each later payment goes to principal.
On a RM400,000 loan at 4.35% over 30 years, your monthly payment is RM1,985:
| Month | Payment | Interest | Principal | Balance |
|---|---|---|---|---|
| Month 1 | RM1,985 | RM1,450 | RM535 | RM399,465 |
| Month 12 | RM1,985 | RM1,428 | RM557 | RM393,300 |
| Year 10 | RM1,985 | RM1,204 | RM781 | RM332,200 |
| Year 20 | RM1,985 | RM843 | RM1,142 | RM232,600 |
| Year 25 | RM1,985 | RM565 | RM1,420 | RM155,900 |
Generate the full month-by-month amortisation table for your loan using our ๐ Mortgage Calculator.
Why Overpaying Early Is So Powerful
In the first 5 years, about 70%โ73% of each payment is interest. An extra RM500 paid in month 1 saves you that RM500 from the principal โ preventing approximately RM820 in future interest (at 4.35% over 30 years). The earlier you overpay, the greater the multiplier effect.
Reading Your Bank Statement
Malaysian banks typically send an annual statement showing: opening balance, total payments made, interest charged, principal reduced and closing balance. Cross-reference this with the amortisation table to verify accuracy.
Our editorial team specialises in Malaysian personal finance โ covering loans, taxation, insurance, EPF, and Islamic finance. Every article is fact-checked against Bank Negara Malaysia (BNM), LHDN, and major Malaysian bank publications. We reference our calculators (which use industry-standard formulas) to ensure consistency between our written content and tools. Learn more about our methodology โ