The Complete Guide To Obtaining A Mortgage Loan For Property in Malaysia - Buy Property Guide - PropertyGuru Malaysia

3/16/2018 The Complete Guide to Obtaining a Mortgage Loan for Property in Malaysia | Buy Property Guide | PropertyGuru Malaysia
Buy Property Guide
The Complete Guide to Obtaining a

Mortgage Loan for Property in
Malaysia
Posted on Nov 7, 2017
19 6
Buying a property is every youth’s dream in Malaysia. Times are however hard, and aside from searching for
the right property within their budget and learning how to buy a property there will also be the various
questions that need to be answered - from the most basic of how to apply for a housing loan to what is
adjudication in property transaction.
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This guide will teach our readers all the basics of property buying. It will teach you the basics of how to apply
for a housing loan, the documents that you will require to apply for one and the waiting periods.
There will also be an explanation of the many di erent types of property loans in the market, from the most
common such as the Term Loans, Islamic Loans and Flexi Loans, to the less common ones such as the
Overdraft. Re nancing will also be part of this guide, as well as government loans and third party housing
loans.
Finally in order to ensure complete understanding of the entire loan process, all the technical terms to getting
a property loan will also be explained within this guide. Base lending rates (BLR), balance purchase price,
progress payment, margin, free moving cost and charge will all be explained below.
How to Apply for A Housing Loan
If you are reading this guide, you should already have decided on the property you wish to buy. If you have
not, you will need the Complete Guide to Purchasing a Property in the Subsale Market or the Complete Guide
to Purchasing a New Development/Property. Once you decide on a property to purchase, you will next need to
know the how of applying for a housing loan.
Applying for a housing loan
Obtaining a property loan is literally as easy as walking into a bank and asking for a property loan. The bank
will however ask for the type of property loan you are looking for, and also request the necessary documents
from you.
Purchasing a property from the Developer
If you are purchasing a property from the developer, among the documents that you will need from them is
the booking fee receipt. Only then will you be able to approach the bank to request a property loan. You will
also need to provide a number of personal documentation such as proof of income and salary slips.
Purchasing a Subsale Property
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While buyers of a new developments will require a booking form receipt, buyers of subsale properties will
need a deposit receipt from the seller’s lawyer. The booking amount is usually set at 3%, but the seller can
negotiate on a higher amount if they so wish. Aside from the receipt acknowledging both party’s agreement
on the amount to be exchanged, personal documentation on the buyer’s personal income is also required.
Bank Loan Approval Waiting Period
In the days past the waiting period for a bank loan approval could take up to months. But with modernisation,
the waiting period has be shortened tremendously. Buyers can now get verbal approval from the bank within
2 or 3 days, and the o cial approval within two weeks.
The bank will rst run a basic check on the buyer’s CCRIS, and run a rough check on the amount of the
property being bought and whether the buyer’s income is su cient to support the loan. Once he has done
this basic con rmation, the banker will then submit all the documents and get the o cial O er Letter within
approximately 2 weeks.
The only reason for there to be a delay is if the supporting income documents are insu cient or if the
borrower’s come is insu cient to cover the loan. In these cases, the banker will advise the borrower on the
next best way to obtain the loan such as getting a Guarantor.
The Consequences of Failing to Pay Your Mortgage Loan
The consequences of failing to make payment on your mortgage loan depends on the Loan Agreement signed
- which the terms di er from bank to bank. But what is consistent across all banks is that the rst warning you
will get are reminders via snail mail to make your payment. After a period of approximately 2 months, if any
payment has yet to be made, the warnings will start coming via phone call. After defaulting for between 3 and
6 months, the bank will highly likely produce a summons on the borrower to appear in court.
In these cases, the borrowers may be encouraged to approach the National Credit Counselling and Debt
Management Agency (APKP) to restructure their loan in order for the to be able to continue making their
payment.
The Required Documents in Undertakings and Statutory Declarations

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Everyone is allowed to purchase a property in Malaysia, whether you are a local or foreigner - as long as you
ful l all the requirements. For a complete list of documents that need to be provided when buying a property
even as a foreigner, visit PropertyGuru. However, on top of the providing all the required documents,
borrowers will also need to provide a Letter of Undertaking and a Statutory Declaration.
A Letter of Declaration is a letter that protects the rights of the seller and will encompass terms such as the
completion of the property, Certi cate of Compliance and Completion and so forth.
The Statutory Declaration also protects the seller, which signing it allows the acting bank to carry out the
necessary checks on the purchaser. This document will need to be signed in front of the Commissioner of
Oath or the Notary Public.
The Di erent Types of Property Loans in the Market
Once you have decided on a property to buy and know what documents you need to prepare, you will next
need to know what are your property loan options. There are many choices in the market, and making the
best choice may help you save more money in the long run.
Term Loan
The term loan is once of the most common loans in the market. It has the typical maximum tenure of 35
years, and the interest rates are budged together wth the principal payment in the monthly instalments. There
are no bene ts to completing payments early or making extra payments. Opting out of the loan within the rst
3 to 5 years will also result in a penalty.
Fixed Rate Loans
Similar to the Term Loan, Fixed Rate Loans also have a xed monthly payment. For those who worry that the
occasional changes in Base Lending Rate (BLR) may a ect them, this is the safest plan for them.
Overdraft
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Of all the loans in the market, the overdraft is the rarest and is rarely issued by any banks anymore. The
Overdraft is unique in the sense that a borrower only needs to pay the interest of the loan. There is no tenure
for this loan, and when making the monthly payment on the interest rates, the buyer can choose to pay extra
to reduce the principal loan. The disadvantage to this loan is that its interest rates are higher than the norm.
Flexi Loan
The Flexi Loan is popular among those who have spare cash in the bank. It is a combination of the Term Loan
and Overdraft Loan. Attached to their Current Account, those who get this loan will have lower interest rates
when they put more money into their Current Account, and still be able to withdraw money of their Current
Account at any time. Withdrawing money from the Current Account will however cause the interest rates to
increase again, until the borrower puts more money back into the Current Account.
Islamic Loan
Islamic loans are a whole di erent ballgame altogether, which everyone can apply for. Compliant with the
Syariah law, this loan is popular with short term property investors as there are usually no penalty charges if
the loan is terminated early. Di erent banks however have di erent terms, so the terms and conditions have
to be checked properly before signing the document. There is the Al-Bai’ Bithaman Ajil loan, Al-Ijarah / Ijarah
Muntahiyah Bittamlik, Musharakah Mutanaqisah and Murabahah among the more popular Islamic Loans in
the market.
Re nancing
Re nancing is not exactly a loan; it is more of getting a loan on a property which already has a loan for it. This
kind of loan is usually utilised by those who cannot a ord their monthly instalment on their property anymore
and need to re nance it with another bank that can give them better rates, or by property investors who want
to cash out on their property’s increase in value over the years. Re nancing their property which has increased
in price will give the borrowers a “cash back” which can be used to nance a new business or put into
investment in other areas. Here is the complete guide to re nancing from property experts. Feedback
Government housing loan
This loan is quite self-explanatory - it is a loan for government servants. There are stringent rules attached to
this property loan, such as being able to apply for a government loan from only one o ce even if the hold
positions in two di erent o ces, and being able to take a government housing loan only twice in their lives.
They are also allowed to nance certain items only with the government housing loan, such as the purchase of
land, house, renovation of the house and settlement of other debts to purchase any of the aforementioned
items. There are 7 types of government housing loans, which out of the 7, two of them follow the Al-Bai
Bithamin ‘Ajil concept - Treasury’s Housing Land Scheme and Islamic Housing Loan Scheme.
A third party housing loan is a loan that is suitable for those who cannot a ord to purchase a property by
themselves due to insu cient income or bad credit records. In these cases, the borrower can look for
somebody who has higher income or clean credit records to become part of the loan agreement. This party is
usually a parent, sibling or spouse. The usual agreement is that the co-borrower will have no claim on the
property upon completion of the payment, and that the primary borrower must ful l their monthly
repayments on time without a ecting the co-borrower. But then again all these terms are negotiable and
depends on the agreement between both parties.
Understanding All the Di erent Property and Loan Terms
Upon deciding on the property you wish to purchase and the property loan you wish to acquire, you will next
need to know about all the di erent property and loan terms in the market. Below is a comprehensive list of
property and loan terms that you will need to familiarise yourself with.
Valuation
There are two types of valuations - the rst by estimating the worth of the property based on the transaction
prices of the properties surrounding it, and the second is by getting a professional and licensed valuer to go in
and calculate the value. Before quoting you on your loan, the bank will rst valuate your property to know how
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much loan to provide you. They usually rely on the gures provided by the professional valuer.
Monthly Installments
This is the most basic of the terms. Monthly instalments is the amount that you have to pay the bank every
month based on on your mortgage Loan Agreement signed between the both of you.
Early Settlement
Early settlement is when you complete your mortgage loan earlier than the agreed upon time. While this is
good for the borrower, it is not so favourable for the bank as they earn money from the interest charged.
Hence if a borrower settles his loan early, the bank will lose out on their pro t.
As a result, some banks charge a penalty for early settlements. Aside from that, the bank will also require the
borrower to bear the charge of discharging the property from the bank. Re nancing is also treated as Early
Settlement. However if re nancing to another bank, the borrower can negotiate with the acting bank to bear
the costs of Early Settlement.
Lock in Period
A lock in period is highly related to early settlements. the banking industry is a competitive one, and many
banks o er very good re nancing packages. Hence in order to prevent their borrower from transferring their
loan to another bank, the acting bank usually makes the lock in period part of the agreement. This means that
the borrower cannot terminate their loan within the lock in period. The lock in period is usually xed at
between 5 and 7 years at a rate of 3.5%.
Read more…
Interest rates
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Interest rates is the banks’ way of earning money. It is the extra amount on top of the loan provided that is
charged to their loanees monthly.
Base Lending Rates (BLR)
Base Lending Rates (BLR) are the rates that are set by Bank Negara Malaysia (BNM). The banks can then adjust
the rates accordingly to their own calculation of their administrative costs and fund structures. So for example
BNM can set the rates at 6.7%, but the bank can charge only 5.7%. The highest BLR in Malaysia history as of
2017 is 12.27% in 1998, and 5.55% in 2009.
Balance purchase price
Balance purchase price literally means the rest of the amount that you need to pay for your property. When
you decide to purchase a property, you will have to put down an agreed upon booking fee. The balance
purchase price is the balance of the money that has yet to be paid for the property. In the event that the
transaction cannot go through, the downpayment will need to be returned to the purchaser.
Progress payment
Progress payment is usually only applicable on properties that have yet to be completed. The monthly
repayment amount will depend on the completion of the property, hence the term progress payment - also
known as progress billing. The payment progression is stated under the Payment Schedule for an Under
Construction Property in Malaysia. The amount will also be stated in the Sales and Purchase (SNP) agreement
under Schedule 3, or Schedule G or Schedule H under the Housing Development (Control and Licensing)
Regulations 1989.
Free moving cost

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This term is usually only applicable to Re nancing. It is the cost of moving your loan from one bank to another
to enjoy better bene ts. The original bank will usually charge a fee for terminating the loan early. But when
the other bank bears full responsibility for the cost, this is called Free Moving Cost.
Meaning of Margin in housing loan
The term Margin in housing loan refers to the di erence in what the bank loans to you and the price of the
property. So for example if the property is priced at RM100,000, and the bank only loans you only RM90,000,
the Margin is RM10,000.
What is Charge?
The term Charge is usually applicable to a secured loan such as a Mortgage Loan. In order to secure their
position, the bank will take the property as collateral in case the loanee is unable to make their payment. In
this case, as the property does not actually belong to the bank, the bank is knows as the “charge” and the
property owner as the “chargee”.
What is Deed of Assignment?
A Deed of Assignment is applicable only to properties without a title. It is a document that shows that the
property belongs to the buyer and is the only proof of transaction that the buyer has with the bank. The bank
will hold the original copy and give the loanee a duplicate copy. If payment for the property is completed
before it gets its title, the property owner will get a document called the Deed of Receipt and Reassignment
when the bank discharges the property to the borrower. Only when the property gets a title will the owner be
able to get a Form 16A for it.
Consent to Charge

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Consent to Charge is the governing body’s law on transferring a property to another party. Every state has
their own laws on transferring a property to another party. But required across the board are the qualifying
documents such as the identity cards of both parties - and if the property is still under a banking loan, a letter
of consent from the bank allowing the properties to be transferred is also required.
Adjudication in Property Transaction
Adjudication is a formal judgement on a matter of dispute. When this term is used in property, it actually
means a disagreement on the Stamp Duty charged. This usually happens when the Stamp Duty paid appears
to be lower than the stamp duty’s o ce estimation. When this happens, the lawyer will le a Form 14A from
the National Land Code 1965 - the document for transferring a property from one party to another. This can
also happen in the event of a parent to child transfer.
MRTA / Takaful
Both MRTA and Takaful are property insurances. The bank usually requires their loanee to acquire a property
loan so in case of their death of total permanent disablement, the bank loan for the property will still be paid
for. Both the MRTA and Takaful insurance works the same way, with the only di erence being that the Takaful
insurance follows the Islamic nance guidelines issued by Bank Negara Malaysia (BNM). In case of a joint loan
and the co-borrower dies or is permanently disabled, the insurance will also cover their half of their loan.
Co-borrower, Guarantor and Third Party Loans in housing loan
All these terms refer to somebody who assists the home buyer in obtaining a mortgage loan. A co-borrower is
one who enters into a joint loan with the property buyer to enable him or her to get the loan. A co-borrower
will share all the liabilities with the main borrower.
A Guarantor on the other hand is one who vouches for the reliability of the loan applicant to make their
payment. Unlike a co-borrower, a guarantor does not share liabilities with the loan applicant. They can also
opt out from being a guarantor at any time. The bank can however choose to go after the guarantor if the
loanee defaults on their repayment.
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A third party loan is similar to a co-borrower. The property can be purchased under more than one name with
only 1 name appearing in the loan or vice versa. The name on the loan and SNP can also be entirely di erent.
These cases ae rare and usually only occur between family members and spouses.
Memorandum of Deposit
The Memorandum of Deposit is a safety measure for the bank. When signing up for a mortgage loan, the bank
may require the loanee to open an account in the bank and put a deposit in it where the bank is allowed to
deduct the monthly repayment from the account if the loanee does not make their repayment on time.
Disbursement of housing loan
This is the nal stage of the loan. It is when everything has been approved and the bank makes their rst
payout either to the loanee or the developer.
This concludes the guide to home loans in Malaysia. For more details on purchasing a new, subsale or
commercial property in Malaysia, please visit our other guides.
i. The Complete Guide to Buying a Commercial Property

ii. The Complete Guide to Purchasing a Property in the Subsale Market
iii. The Complete Guide to Purchasing a New Development/Property
Below are the other useful information you will need when purchasing a new home:
i. Freehold, leasehold or Bumi Lot? Know the di erences and restrictions

ii. Preparing Mortgage Loan Documents
iii. The Payment Schedule for an Under Construction Property in Malaysia
For the latest property news, trends, resources and expert opinions, visit our Property News section. Home
buyers, sellers or property renters looking for Malaysian Properties, may like to visit the New
Launches or Project Reviews page.
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3/16/2018 The Complete Guide to Obtaining a Mortgage Loan for Property in Malaysia | Buy Property Guide | PropertyGuru Malaysia

Buy Property Guide

The Complete Guide to Obtaining a

How to Apply for A Housing Loan

Applying for a housing loan

Purchasing a property from the Developer

Purchasing a Subsale Property

Bank Loan Approval Waiting Period

The Consequences of Failing to Pay Your Mortgage Loan

The Required Documents in Undertakings and Statutory Declarations

The Di erent Types of Property Loans in the Market

Fixed Rate Loans

Government housing loan

Understanding All the Di erent Property and Loan Terms

Base Lending Rates (BLR)

Balance purchase price

Free moving cost

Meaning of Margin in housing loan

What is Deed of Assignment?

Adjudication in Property Transaction

Co-borrower, Guarantor and Third Party Loans in housing loan

Disbursement of housing loan

i. The Complete Guide to Buying a Commercial Property

i. Freehold, leasehold or Bumi Lot? Know the di erences and restrictions

Related Buy Property Guide

Loan Terms You Need to Know A Comprehensive Guide to the Di erent

The Complete Guide to the Basics of Top 100 Low-Density Condominiums in

Asked on Mar 15, 2018 | 1 Answer

Asked on Mar 14, 2018 | 2 Answers

Asked on Mar 13, 2018 | 2 Answers

Asked on Mar 13, 2018 | 12 Answers

Asked on Mar 13, 2018 | 2 Answers

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