Tuesday, June 8, 2010

GLOSSARY

Acceptance Letter

A letter from the applicant indicating his willingness to accept the loan after the loan is approved by the banking institution.



Application Form

A form used to apply for loan.



Appraisal/valuation report

A written analysis of the estimated value of real estate prepared by a licensed Valuer/Appraiser.



Base Lending Rate (BLR)

A minimum interest rate calculated by financial institutions based on a formula which takes into

account the institutions’ cost of funds and other administrative costs.



Commitment Fee

A fee charged by the financial institution for setting aside funding that are not utilised by

the borrower. Usually only applicable to overdraft facility.



Default

Failure to pay the monthly instalment/interest payments to financial institutions when due.



Disbursement Fees

Various type of fees such as registration of charge fee, land search fee, bankruptcy search

fee incurred by financial institutions and solicitors attending to the loan documentation

in relation to the loan which are payable by the borrower.



Documentation

A set of agreements, forms, and other documents to be signed in connection with a

loan. The documentation will form a full set of records for the loan.



Downpayment

An initial payment made by the buyer to the seller of the house.



Financial Institutions

All commercial banks and finance companies licensed under BAFIA 1989 and Islamic banks

licensed under the Islamic Banking Act 1983.


Flat Rate

A term used to describe interest that is charged

as a fixed percentage of the loan amount

throughout the tenure of the loan. The flat

repayment amount is usually determined before

the commencement of the repayment programme.

For example, interest charged on a RM10,000

loan at a flat rate of 10% per annum is RM1,000

annually until the loan is fully settled.



Floating Rate Loan

A term used to describe a loan, where the

interest charged fluctuates due to the rise and

fall of a certain indicator such as the Base

Lending Rate.







Foreclosure

Legal action available to the financial institution

for recovering outstanding sums owed by a

borrower who has defaulted on his/her loan.

The property pledged by the borrower to secure

the loan is sold and the proceeds of the sale used

to settle the outstanding loan amount.



Graduated Payment

A scheme that allows the borrower the

flexibility to pay a lower instalment sum at the

beginning of the loan tenure before progressing

onto a higher instalment sum as the borrower’s

purchasing power improves.



Gross Monthly Household Income

The sum of gross monthly pay of all working

family members before deducting income tax,

Sosco, EPF, loan instalment or other deductions

plus any additional income from overtime,

commissions and other sources.



Guarantor

Person or entity who is legally bound to pay a

debt incurred by the borrower if that borrower

fails to pay.



Homeowners Insurance

An insurance policy that combines liability

coverage for a homeowner together with

protection from damages caused by wind,

fire, vandalism and other risks.


Interest Rate

The amount charged by the lender to the

borrower for borrowing a sum of money

expressed as percentage of sum borrowed.



Late Charge

A penalty charged by financial institution for

not paying instalment due on time.



Letter of Administration

A Grant of representation issued by the High

Court to a person to allow him to administer the

estate of the deceased who died without a will.



Loan Tenure

Number of years taken to fully repay the loan

principal and interest as agreed under a specific

repayment programme.



Margin of Financing

The loan amount granted by the financial

institution, expressed as a percentage of the

value of property pledged to secure the loan.



Mortgage Reducing Term Assurance (MRTA)

A term insurance which reduces over the

tenure of the loan. This form of insurance is

used to provide cover for the outstanding

loan amount, in the event of death or total

permanent disability of the insured. MRTA is

normally calculated to meet the outstanding

loan amount.



Outstanding Loan

Remaining loan not yet paid, including interest

and other charges.



Overdraft

A type of credit facility granted to the eligible

current account holder. The borrower is allowed

to issue cheques exceeding the credit balance

in the current account but subject to a certain

pre-approved limit granted by the financial

institution.



Power of Attorney

A formal legal document giving authority to one

person to act on behalf of another person.


Prepayment

Payment of all or part of a loan before maturity.



Prepayment Penalty

A fee charged by financial institutions for

early payment of loan in full. The fee charged

is usually based on a percentage of the loan

amount or “X” months of interest.



Principal

The amount borrowed from financial institutions,

excluding interest and other charges.



Property

Refers to landed properties (like house, apartment,

condominium) and land (like bungalow lots).



Refinancing

The process of paying off a portion or the

entire amount of the existing loan with the

intention of obtaining another loan from the

same or another financial institution.



Sale and Purchase Agreement

A written contract signed between the buyer

and seller stating amongst others, the terms and

conditions under which a property will be sold.



Security

Real or personal property that guarantees the

repayment of a loan. The borrower risks losing

the property if the loan is not repaid.



Term Loan

A loan which is repaid through regular periodic

payments, usually over a period of time, for

example 10 years.



Title

A legal document establishing the right of

ownership on a property.

Frequent Ask Questions

How much can I afford?

This depends on your income and other financial obligations. As a rule of thumb, most house buyers buy houses that cost 1.5 and 2.5 times their annual income. For example a house buyer earning RM40,000 a year would buy a house between RM60,000 and RM100,000. Furthermore, the monthly loan repayment should not exceed about 1/3 of your gross monthly income. In assessing your repayment capability, the financial institution would also take into account your other debt repayments such as car loan, personal loan and credit cards.

How much can I borrow?

This will depend on the value of your property, your income and your repayment capability. Margin of financing can go as high as 95% (inclusive of MRTA). The higher the margin, the higher you will have to pay per instalment. Also, at a given rate, a shorter tenure will require you to pay higher instalment.

How long does it take to process a loan?

It usually takes about one to two weeks for your loan application to be approved from the time you supply full documentation. You should ask the financial institution for the checklist of documents required for the application to avoid any delay.

What is the difference between conventional financing and Islamic financing?

Under conventional financing, your outstanding loan consists of principal plus the interest charged on you. The interest is actually the financial institution's cost in obtaining the funds. Islamic financing works on the concept of buying and selling where the financial institution purchases the property and subsequently sells it to you above the purchase price.

Why do I need a valuation?

A valuation is required if you are buying a completed property. The financial institution requires a valuation to ascertain whether the property provides sufficient security for the loan given. It also provides an indication that the property is worth what you are paying for.

Do I need to appoint a lawyer? Can I choose my own lawyer?

Yes. You need to appoint a lawyer to draw up your loan documentation. Normally, the financial institution will provide a panel of lawyers who are familiar with their documentation requirements for you to choose from. If you prefer to engage your own lawyer, you should discuss this with your financial institution.

Who pays for the legal fees?

Generally, legal fees are borne by the buyer. However, certain developers and financial institutions may offer to pay the legal fees on the legal documentation as part of their marketing package. In addition, some financial institutions also extend financing for the loan documentation fees.

What if I run into financial difficulties and cannot meet my loan repayments?

If this happens, you should contact your financial institution to discuss a reasonable repayment program, which could include extending the tenure of the loan.

Can I pay off my loan in full earlier than the agreed loan tenure?

Normally there will be penalty charges for early loan settlement. Depending on the financial institution, penalty charges will range between 2-5% of the outstanding amount. The charges that are made will depend on the type of product you have chosen and when you decide to redeem your loan. Note that in some loan packages, there are certain minimum periods you need to observe before full settlement is allowed.

Is there any waiver of penalty fees for early loan settlement?

Any waiver of penalty fee is strictly at the discretion of the financial institution.

Why does my outstanding loan remain high at the initial stage despite the repayments made?

During the early years of the loan, a significant amount of your repayments will go towards the payment of interest. So if you make partial repayments to repay the principal sum outstanding, you make substantial savings in your interest payments and thus shorten your loan tenure.

Can I make extra payments other than the monthly contractual repayments?

This depends on the terms and conditions stated in your loan agreement. By paying in extra money each month or making an extra payment at the end of the year, you can speed up the process of paying off the loan. When you pay extra money, be sure to indicate that the excess payment is to be applied to the principal. However, if you make a lump sum payment or partial repayments to your principal loan, you must give notice to your financial institution. The notice period ranges from 1 to 3 months.

Do I need a guarantor for a loan facility?

This is at the financial institution's discretion and depends on the credit standing of the borrower.

Does the financial institution have the right to charge my loan account for any miscellaneous charges incurred by them such as late payment charges, legal costs, insurance, etc?

The financial institution's power to impose charges on your account is normally indicated in the Terms and Conditions of the loan.

How long is the grace period for payment of my monthly instalment/interest?

Generally, the financial institution gives a grace period of 7-14 days for you to repay your instalment payment. Any payment received after the grace period will be subjected to late payment charges.

When does the financial institution release the loan to the seller/developer?

For houses under construction, the financial institution will release the progressive payment to the developer based on the claim made upon completion of each construction stage as certified by the Architect's Certificate. For completed properties, the loan will be released upon completion of legal documentation or when all relevant approvals, such as the approval of the state government have been obtained.

Can I purchase a house under joint names and apply for the housing loan only under my name?

The financial institution will consider such applications on the merits of each case, under the following circumstances:

• The co-owners are related as husband and wife, and one party is not working and the other party is solely responsible for the loan

• The co-owners are related as father/mother and children, the parents are old and not working and the children will be responsible for the loan

However, the above is at the financial institution's discretion and they may also consider other circumstances.



If the developer abandons the project, am I still required to service my interest/instalment payments?

Yes. You are still obliged to service your loan based on the loan agreement signed between you and the financial institution. However, since the financial institution has vested interest in the property, you could discuss a repayment plan with your financial institution. You should also report the matter to the Ministry of Housing & Local Government.

What happens when the loan is fully repaid?

When the loan is fully settled, the financial institution through its solicitors, will release its charge on the property. The financial institution (chargor) will uplift his claim on the property and the title to the property will be transferred to you.

What happens in the event of death of a borrower who has not bought insurance?

The deceased's survivor/next of kin can claim through the court the rights of the deceased's property. The person will have an option to either proceed to service the loan or redeem it. However, most financial institutions make it compulsory to insure (MRTA) against such an event.

What can the financial institution do if I do not make repayments?

If you fail to make three consecutive payments, the financial institution will take the necessary actions to recall the loan. In the worst case scenario, the financial institution will foreclose the property and sell it to settle the loan. The borrower would still be liable to pay the difference between the auction price and the loan amount outstanding.

What is the most convenient way to repay my loan?

Financial institutions offer a wide range of services to make banking easier for you. Some of the alternative ways of servicing a loan include:

• Open a savings/current account and arrange for standing instructions with minimal charges (if you maintain deposit and loan accounts with the same bank, the charges may be waived)

• Through an ATM transfer

• Internet Banking

• Telephone banking service

• Deposit your cheque at the deposit machine or send your cheques direct to your financial institution

Should I consider refinancing my loan if I am offered a lower interest rate?

The main consideration in refinancing would be the costs involved. As you are clearly aware, you have incurred a substantial amount to pay for the necessary fees to obtain your first loan. For example, processing fees, legal fees, stamping and transfer fees. Refinancing means you would have to incur the same charges again. Before you decide to refinance, you should ensure that the savings from the lower interest rate is enough to compensate all the costs incurred associated with refinancing, including penalty charges, if any.



Sources by : Bank Negara Malaysia

FIXED RATES OR FLOATING RATES ?

For many, a mortgage – which is simply paid every month and then forgotten about – is their largest financial commitment. Consumers have the option to choose either the fixed or floating rate mortgage.
In the constantly-evolving finance market, it is always important to understand the potential future consequences of decisions made today. This way, educated decisions can be made in response to the economic climate as and when it changes.
Most home loans will normally fall into one of two broad categories: the fixed rate or floating rate mortgage. There may be countless different packages with many differing features, but they still fall under these two categories.


Fixed rate loans
Fixed rate mortgages do exactly what they suggest; the interest rate is fixed, which means that monthly payments are fixed as well.
In Malaysia, insurance institutions offer these loans. For most of them, the interest rate is fixed for the entire mortgage term. Therefore, a borrower is not only protected from any interest rate fluctuations in the open market, but he also knows exactly what his monthly installment is for the entire lifetime of the loan.
However, most lenders will tie the borrower to the product for a set period (usually around 5 years) by way of a penalty. Hence, if the decision is made to redeem the mortgage within the first 5 years, a penalty is imposed. It is generally calculated with a formula that takes into account the remaining term of the loan and the amount repaid.
The downside is that if interest rates in the open market fall, there is no benefit since the rate is locked.
Floating rate loans
Floating rate mortgages are a variable loan that typically tracks the BLR (base lending rate). It can either track higher or lower than the base rate. Most, if not all floating rate loans are currently tracking below the BLR, roughly in the region of BLR -1.8%.
In most cases, the loan will continue to track at the same margin for the entire loan term (although some banks may attract new business by offering an extremely low floating rate, which increases after the first few years).
Floating rate mortgages can also be pegged against the 3 month KLIBOR (the Kuala Lumpur Inter-Bank Offered Rate), which is the interest rate banks use when lending each other. However, this method is relatively unusual.
Floating rate mortgages can be influenced by changes in the economy: roughly speaking, if demand increases resulting in an upward inflationary pressure, monetary policy dictates that the BLR increases. This may mean the borrower’s monthly payments will significantly increase. On a positive note, interest rates could fall too and the borrower will pay lower monthly installments.
At present, the fixed rate interests are just under 5% while floating rates are around the 3.8% mark. So the golden question is whether to fix or float?
To fix or to float?
There are numerous factors to take into account when deciding which type of mortgage to go for. At first glance, the floating rate package seems much better because a difference of more than 1% will certainly have a large impact on monthly payments. There is obviously a significant difference in price, but it is worth remembering that the BLR is at an all time low.
Market watchers believe that the BLR rates could increase and this means that opting for a floating rate could be more of a gamble instead.
Secondly, the risk-to-reward ratio should be taken into consideration. Irrespective of economic conditions, it is obvious that a 3.8% floating rate can only fall by a maximum of 3.8%, while there is no limit to its increase. If however, the BLR is at 9%, then the potential reward for taking a floating rate is much greater as it could fall much further. However at present, it is at the all time low of 5.55%.
Also, a mortgage commitment is not just for a few months. On average, it is around 3-5 years. So, while floating rates are especially cheap at the moment, it is difficult foresee that the fixed interest rate will fall below 5%.
Even if the BLR stays low for the next 5 years, and therefore (with future hindsight) the fixed rates of today are undesirable in comparison to current floating rates, the peace of mind one gets from a fixed rate should be enough to prevent the average risk-averse borrower from worrying about what they could have “gained” if they settled for a floating rate mortgage.
Source: The star -  26th Nov, 2009.

Why Use MORTGAGE CONSULTANT services?

q  Mortgage consultant specialize in home loans and are commission based, so it’s in their best interest to get you the best deal possible, or they don’t get paid.

q  They have an exceptionally large network of panel banks and financial institutions that they work with to get you the most favorable home loan interest rates and terms. Put it this way, the more banks or financial institutions you have competing for your payment plan, the more money you save.

q  Mortgage consultant are able to work one-on-one with each individual client, evaluate your specific need and tailor a home loan package specially to suit you. Next, the mortgage consultant submits the request to one or more banks / financial institutions and when the request is accepted the consultant works closely with the bank / financial institution until the home loan is approved.

q  Often, they can find a financial institution who will accept a home loan application which some of the banks choose to forgo. Because mortgage consultant have volume they are sometimes able to arrange for lower interest rates from the financial institution.

q  All-in-all mortgage consultant save you all the groundwork of finding the best home loan interest rates and terms to suit your specific needs

q  Banks on the other hand deal with many types of loans and may not have the specialization in home loans that a mortgage broker has.
q  Bank loan officers are only able to process mortgage loans originated from their bank.
q  Loan officers at a bank are often limited in certain home loan products, guiding principles together with the criteria they must follow. This can at times limit the types of home loans available to you
q  Regardless if you choose to have your home loan with a particular loan officer or not, they are still getting paid a salary. With this in mind they may not be looking out for your best interests
q  Banks normally change their home loan packages from time to time depending on Base Lending Rate (BLR) regulated by BNM (Bank Negara Malaysia). Mortgage consultant are able to update you on the latest and best BLR based home loan packages from the various banks and financial institutions.

I need verbal valuation on my property!!

Dear All,

We provide free verbal valuation for your current property and new purchase property. Only for completed property.

Please fill up the following information & email to mortgageconsultant@live.com.my:

NAME

MOBILE NO.

EMAIL ADDRESS

SUBSALE/REFINANCING

PURCHASE PRICE

PROPERTY ADDRESS

(FULL ADDRESS)

PROPERTY TYPE

LAND AREA

BUILT UP AREA

LAND STATUS

OTHERS

RENOVATION COST

RENOVATION FEATURES

ADDITIONAL FEATURES

Document Required For Mortgage Loan Application

For Malaysian


Employment :


  1. NRIC copy
  2. Property Booking Receipt
  3. Sales and Purchase Agreement / Title copy
  4. Latest 6 months Housing Loan Statement. ( only applicable for refinancing)
  5. Letter Offer from previous .( Only applicable for refinancing)
  6. Deposit Statement e.g. Fixed Deposit, ASB or Bonds
  7. Latest 3 months pay slip
  8. Latest 3 months personal bank statement ( to show salary credited as per pay slip)
  9. Employment Letter/Latest KWSP statement/Latest EA form
  10. Latest From B/BE with payment receipt acknowledgement

Self –Employment:


  1. NRIC copy
  2. Property Booking Receipt
  3. Sales and Purchase Agreement / Title copy
  4. Latest 6 months Housing Loan Statement. (only applicable for refinancing)
  5. Letter Offer from previous .( Only applicable for refinancing)
  6. Deposit Statement e.g. Fixed Deposit, ASB or Bonds
  7. Latest Form B/ BE with payment receipt acknowledgement.
  8. Latest 6 months Company bank Statement.
  9. Latest 6 months Personal bank statement.
  10. Business Registration :

Sdn Bhd company


  • Form 24 & 49
  • Latest Profit and Loss Statement
  • Memorandum of Article
  • Company Profile

OR


  1. Sole Proprietor or Partnership

Form A & Form D



For Malaysian working oversea


Employment:


  1. NRIC copy or Passport
  2. Working Permit (if any)
  3. Property Booking Receipt
  4. Sales and Purchase Agreement / Title copy
  5. Latest 6 months Housing Loan Statement.( Only applicable for refinancing)
  6. Letter Offer from previous .( Only applicable for refinancing)
  7. Deposit Statement e.g. Fixed Deposit, ASB or Bonds
  8. Latest 3 months pay slip
  9. Latest 3 months personal bank statement ( to show salary credited as per pay slip)
  10. Employment Letter/Latest KWSP statement/Latest CPF statement
  11. Latest income tax declaration form with payment receipt acknowledgement. (preferable 2 years)

Self Employed:



  1. NRIC copy or Passport
  2. Working Permit (if any)
  3. Property Booking Receipt
  4. Sales and Purchase Agreement / Title copy
  5. Latest 6 months Housing Loan Statement.(only applicable for refinancing)
  6. Letter Offer from previous .( Only applicable for refinancing)
  7. Latest 6 months Company bank Statement.
  8. Latest 6 months personal bank statement.
  9. Deposit Statement e.g. Fixed Deposit, ASB or Bonds
  10. Latest income tax declaration form with payment receipt acknowledgement. (Preferably 2 years)
  11. Business Registration to show ownership of the company
  12. Latest Profit and Loss Statement.

For Foreigner


Employment:


1. NRIC Copy or Passport

2. Working Permit (if any)

3. Property Booking Receipt

4. Sales and Purchase Agreement / Title copy

5. Latest 6 months Housing Loan Statement.( Only applicable for refinancing)

6. Letter Offer from previous .( Only applicable for refinancing)

7. Deposit Statement e.g. Fixed Deposit, ASB or Bonds

8. Latest 3 months pay slip

9. Latest 3 months personal bank statement ( to show salary credited as per pay slip)

10. Employment Letter/Latest KWSP statement/Latest CPF statement

11. Latest income tax form with payment receipt acknowledgement (Preferable 2 years)

Self Employed:

  1. NRIC copy or Passport
  2. Working Permit (if any)
  3. Property Booking Receipt
  4. Sales and Purchase Agreement / Title copy
  5. Latest 6 months Housing Loan Statement.(only applicable for refinancing)
  6. Letter Offer from previous .( Only applicable for refinancing)
  7. Deposit Statement e.g. Fixed Deposit, ASB or Bonds
  8. Latest 6 months Company bank Statement.
  9. Latest 6 months personal bank statement.
  10. Latest income tax declaration form with payment receipt acknowledgement. (Preferably 2 years)
  11. Business Registration to show ownership of the company
  12. Latest Profit and Loss Statement
  13. Memorandum of Article & Company Profile


Refinancing Your Home Loan now!!!

REFINANCE EXISTING LOAN TO OTHER BANK



Want to lower your home loan interest? Seek an overseas education for the kids? Wife wants a holiday? Seek greater liquidity?



Refinancing is a simple method of not only lowering your monthly repayments but also a great way of unlocking cash trapped within your home equity ( value of your house less the loan amount still owing) for investments, renovations or even to pay off a high interest debt.



When you refinance your loan, it means taking up a new loan either from your existing lender or a new lender, in substitution of your existing loan. Refinancing allows you to change your loan to suit your new circumstances and needs



Refinancing can be tedious and making sure you get the best deal is even harder work.

At mortgageconsultant.com.my, we can help make your life simpler by helping you get the best refinancing deal without most of the hard work.



Call our mortgage consultant now to get a simple quotation and free verbal valuation on your property.


Contact our mortgage consultant at +6016-2056205/+6012-6946746 or email to mortgageconsultant@live.com.my .