Tuesday, June 8, 2010
GLOSSARY
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
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 ?
Fixed rate mortgages do exactly what they suggest; the interest rate is fixed, which means that monthly payments are fixed as well.
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%.
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.
Why Use MORTGAGE CONSULTANT services?
I need verbal valuation on my property!!
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 :
- NRIC copy
- Property Booking Receipt
- Sales and Purchase Agreement / Title copy
- Latest 6 months Housing Loan Statement. ( only applicable for refinancing)
- Letter Offer from previous .( Only applicable for refinancing)
- Deposit Statement e.g. Fixed Deposit, ASB or Bonds
- Latest 3 months pay slip
- Latest 3 months personal bank statement ( to show salary credited as per pay slip)
- Employment Letter/Latest KWSP statement/Latest EA form
- Latest From B/BE with payment receipt acknowledgement
Self –Employment:
- NRIC copy
- Property Booking Receipt
- Sales and Purchase Agreement / Title copy
- Latest 6 months Housing Loan Statement. (only applicable for refinancing)
- Letter Offer from previous .( Only applicable for refinancing)
- Deposit Statement e.g. Fixed Deposit, ASB or Bonds
- Latest Form B/ BE with payment receipt acknowledgement.
- Latest 6 months Company bank Statement.
- Latest 6 months Personal bank statement.
- Business Registration :
Sdn Bhd company
- Form 24 & 49
- Latest Profit and Loss Statement
- Memorandum of Article
- Company Profile
OR
- Sole Proprietor or Partnership
Form A & Form D
For Malaysian working oversea
Employment:
- NRIC copy or Passport
- Working Permit (if any)
- Property Booking Receipt
- Sales and Purchase Agreement / Title copy
- Latest 6 months Housing Loan Statement.( Only applicable for refinancing)
- Letter Offer from previous .( Only applicable for refinancing)
- Deposit Statement e.g. Fixed Deposit, ASB or Bonds
- Latest 3 months pay slip
- Latest 3 months personal bank statement ( to show salary credited as per pay slip)
- Employment Letter/Latest KWSP statement/Latest CPF statement
- Latest income tax declaration form with payment receipt acknowledgement. (preferable 2 years)
Self Employed:
- NRIC copy or Passport
- Working Permit (if any)
- Property Booking Receipt
- Sales and Purchase Agreement / Title copy
- Latest 6 months Housing Loan Statement.(only applicable for refinancing)
- Letter Offer from previous .( Only applicable for refinancing)
- Latest 6 months Company bank Statement.
- Latest 6 months personal bank statement.
- Deposit Statement e.g. Fixed Deposit, ASB or Bonds
- Latest income tax declaration form with payment receipt acknowledgement. (Preferably 2 years)
- Business Registration to show ownership of the company
- 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:
- NRIC copy or Passport
- Working Permit (if any)
- Property Booking Receipt
- Sales and Purchase Agreement / Title copy
- Latest 6 months Housing Loan Statement.(only applicable for refinancing)
- Letter Offer from previous .( Only applicable for refinancing)
- Deposit Statement e.g. Fixed Deposit, ASB or Bonds
- Latest 6 months Company bank Statement.
- Latest 6 months personal bank statement.
- Latest income tax declaration form with payment receipt acknowledgement. (Preferably 2 years)
- Business Registration to show ownership of the company
- Latest Profit and Loss Statement
- 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 .