What you should know about getting a home loan in Malaysia

What you should know about getting a home loan in Malaysia

Are you planning to buy a house in Malaysia? But the thought of getting a house loan approved is stopping you from taking another step further because you have heard a lot of stories on the housing loan gets rejected by the banks or how lengthy it could be. You certainly do not want to prepare so much and finally found the right house for sale in Malaysia only to get your bank loan rejected. All the hard work that you have done in researching, planning and preparing have all gone to waste. Fret not, there are articles on the complete guide to obtaining a mortgage loan for property in Malaysia.  This article will guide you through what you should know about getting a home loan in Malaysia. 

1.      Types of loans

There are different types of home loans offered by the banks, such as the flexi loan or the non flexi loan. A flexi loan is a loan that allows you to place additional money that is withdrawable in the loan account. It is a flexible loan service that allows you to draw out money without any charges. As for semi flexi loan, there is a charge if you withdraw money from the account.

It is recommended to go with a full flexi loan if you have the extra money that you could use to make advance payment and reduce the outstanding balance. In addition, your cash balance in your account is excluded from outstanding balance for the interest calculation. This will then give you more flexibility and you will be saving on your interest payable as you will be paying for lesser interest when you opt for a full flexi loan.

Although there are benefits that come with a full flexi home loan, it is perfectly fine to opt for a non flexi loan if you are tight on your cash or you do not have any intention of putting your money into the loan to reduce interest payable. Furthermore, you might also be able to get better interest rate if you opt for a non flexi loan.

2.      Interest

Next, you will need to check for interest rates offered by different banks. The interest rates offered by the bank is determined by Base Lending Rate (BLR) that is set by the Bank Negara Malaysia (BNM). However, different banks will have different interest rates as well. Do your research on the interest rates offered by different banks.

3.      Margin of financing

The amount that you are eligible to loan is dependent on the purchase price of the property. Different banks also have different requirements and process when it comes to bank loan application. Banks will also look into the property that you pln to buy, the age of borrower, the location of the property, income of applicant and so on.

4.      Loan tenure

The period for loan repayment is commonly up to 35 years, starting from the day your loan gets approved, or until the age of 65 years old, whichever that comes first. As for personal loans, it is capped at 10 years. This is an effort made by BNM to restrain household debt levels.

5.      Insurance

you can consider protecting your property with the the Mortgage Reducing Term Assurance (MRTA) or Mortgage Level Term Assurance (MLTA), These policies will cover the property or homeowner in case of any uneventful situations such as total permanent disability or death. These policies will also mitigate financial burden from your family so you do not have to worry about the mortgage payment.

Other than the MLTA or MRTA, you can also purchase a fire insurance policy that provides coverage for your house against disasters, such as fire, flood, riot or strike. Properties such as condominiums or apartments will not need to buy this insurance as it will be covered by the management company for the building.

6.      Loan disbursement

Bank or finantial institution will pay out the loan once the lawyer provides advice regarding the completion of legal processes with complete loan documents. At the same time, you will also get notice from the bank on the date and the amount of first installment that you will have to make.

7.      Fees and charges

(a)    Lock in period

Lock in period is the period where penalty fees will be imposed if you plan to clear the loan earlier. In any event of breach of contract, there will be penalty fees applied to the applicant along with the conversion and cancellation of loan agreement. Typically, the penalty fees are approximately 2% to 5% of your outstanding loan balance.

(b)   Legal fees and stamp duty

Property buyer will also need to pay for Legal fees. These fees are charged depending on the time and expertise of the engaged lawyer, and also the price of your property.

(c)    Delays and penalties

Be aware or the dealines for all the payments that need to be done. There will be a panalty fee if there is any delay in completion of paperwork.

(d)   Quit rent and assessment fees

Quit rent is the annual fees that cover the tax of your land for your property. As for the assessment fee, it is a fee that you will need to pay twice a yer to the local council.

In conclusion, getting your home loan approved is not as daunting as it seems to be, as long as you start preparing and planning earlier. Be sure to read through the conditions on the bank agreement before you sign the loan agreement.