First-Home Loan Interest Relief: RM7,000 a Year, Three Years Only

What you can claim, and the two price bands

The amount depends on the purchase price stated in your Sale and Purchase Agreement — not on the size of your loan, and not on what the property is worth later:

Reading those bands correctly

• The figure is a ceiling on interest actually paid in that assessment year — you claim the lower of your interest paid and the cap.
• It is a relief, not a rebate: it reduces chargeable income, so what it saves you depends on your marginal band, not on the RM7,000 headline.
• The price bands are cliffs, not slopes. A RM505,000 house drops you from RM7,000 to RM5,000 a year; a RM755,000 house drops you to nothing at all.
• Only interest qualifies. The principal portion of your instalment, your MRTA or MLTA premium, legal fees, valuation fees and stamp duty are all outside this relief.

The SPA date is the gate — not your loan date, not your keys

The single condition that disqualifies the most people is the agreement window: the Sale and Purchase Agreement must be executed between 1 January 2025 and 31 December 2027. Nothing else in the timeline substitutes for it. If you signed your SPA in late 2024 and only drew down the loan in 2025, you are outside the relief even though every ringgit of interest was paid inside the window. If you sign in 2027 and take vacant possession in 2030, you are inside it.

For a property still under construction this matters a second time. Progressive-release interest on an under-construction unit is still housing loan interest, and it is usually the first interest you pay — so for a new launch your three-year clock is likely to start during the construction period rather than when you move in.

Three consecutive years, and the clock starts without asking you

The relief is allowed for three consecutive years of assessment, beginning with the first year in which you pay housing loan interest. It is consecutive, not cumulative: you cannot skip a low-income year and claim it later, and you cannot save the allowance up for the years your salary is highest.

That makes the first year the one worth thinking about. If your loan is disbursed in November, you may only pay two or three months of interest in that first assessment year — perhaps RM3,000 against a RM7,000 ceiling — and that partial year still consumes one of your three. The unused RM4,000 is simply gone. Where drawdown timing is genuinely within your control (a completed property with a flexible completion date, say), a January disbursement claims far more of the relief than a November one.

The three-year window also sits entirely at the start of a loan that will run for decades, so there is no scenario in which the relief follows you through a refinancing years later. Refinance in year five and there is nothing left to lose. Refinance in year two and you should confirm with LHDN whether the replacement facility still counts as the loan for the first residential home — it is the one edge case the published conditions do not spell out.

For almost everyone the cap binds, so treat it as a flat amount

Malaysian housing loans amortise on a reducing balance, which front-loads interest: in the early years most of your instalment is interest rather than principal. Combine that with a 30- to 35-year tenure and the RM7,000 ceiling is passed by a surprisingly small loan. Here is the interest actually charged in each of the first three years, at 4.00% over 30 years:

What that table means in practice

• At around 4%, any loan above roughly RM175,000 already pays more than RM7,000 of interest in its first full year — so the ceiling, not your interest bill, is what you end up claiming.
• The relief is therefore effectively a flat RM7,000 (or RM5,000) a year for the vast majority of first-time buyers, and negotiating a lower interest rate does not reduce what you can claim.
• The exception is a small loan or a short tenure. A RM150,000 loan over 30 years pays about RM5,950 in year one, so the claim is RM5,950, not RM7,000.
• It is also the exception in a partial first year, which is why the drawdown month matters more than the loan size.
• Your bank's annual loan statement shows the interest charged for that calendar year, and that is the figure to enter — not your total instalments, which include principal.

What 'first residential home' actually requires

Every condition below has to hold, and the first is stricter than most buyers assume — it is about having never owned residential property, not about not currently owning one.

• You must not have previously owned a residential property. An inherited share in a family home, or a unit you bought and sold years ago, can take you outside the relief.
• The relief is limited to one residential unit. Buying two properties inside the same window does not give you two claims.
• The home must be occupied as your own residence and must not be used to generate income. Rent it out, even partially, and the relief is not available for that year.
• The loan must come from a legitimate financial institution in Malaysia. An employer loan, a family arrangement or a personal loan used to fund the purchase does not qualify.
• The claimant must be a resident individual for that assessment year, and the relief is framed as one for Malaysian citizens — confirm your own status against the LHDN relief page before claiming.

Two or more buyers on the same house

Co-purchase is the norm for first homes, and the Ministry of Finance confirmed that two or more individuals can claim on the same residential house, apportioned on the basis of how the interest payment is shared. In practice the split follows who actually pays the interest rather than the percentages on the title.

The important part is that this apportions the relief rather than duplicating it — a couple should not assume RM7,000 each on the same house. If you file separately, agree the split before you file so the two returns are consistent, and keep the bank statements that support it. Under a joint assessment the question disappears because there is only one return; see the joint-versus-separate guide if you are still deciding which way to file.

What it is actually worth in tax

Because it reduces chargeable income rather than tax, the same RM7,000 is worth very different amounts depending on where the top of your income sits:

Stacking it with the rest of your reliefs

• On the RM5,000 band the same four rows come to RM300, RM550, RM950 and RM1,250 a year.
• The relief stacks on top of everything else — self relief, EPF, insurance, lifestyle — so for most buyers it simply removes RM7,000 from the very top of their income at their highest marginal rate.
• Pair it with the first-home stamp duty exemption, which shares the same RM500,000 ceiling and the same 31 December 2027 end date. A first-time buyer at exactly RM500,000 can land both, and the stamp duty saving is by far the larger of the two.
• It does not interact with the RM4,000 EPF relief or the RM3,000 life insurance relief in any way — different lines, separate caps.

Claiming it, and what to keep

• Claim it in the relief section of Form BE or Form B at e-Filing, under the first residential home loan interest line. There is no separate application and no pre-approval.
• The supporting figure is the interest charged for that calendar year, taken from the bank's annual loan statement.
• Keep the SPA (it proves both the execution date and the purchase price), the loan offer letter and facility agreement, and the annual interest statement for each year claimed.
• Employees can have it reflected in monthly PCB through Form TP1 rather than waiting for a refund, if payroll accepts mid-year relief declarations.
• Keep the records for seven years — the standard LHDN retention period.

Caveats

The amounts and conditions above reflect the relief as announced in Budget 2025 and applied from Assessment Year 2025. Reliefs are amended at almost every Budget, and the detailed qualifying conditions — particularly around refinancing, under-construction interest and co-purchaser apportionment — are the kind of thing LHDN clarifies through its own guidance rather than the Budget speech. Confirm the current wording on the LHDN relief page for your assessment year before you file.

This is general information, not tax advice. Use the loan calculator below to build your own amortisation schedule and see the interest you will pay in each of the first three years — that tells you immediately whether the cap binds for you, and whether your drawdown month is costing you part of year one.