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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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:
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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
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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.
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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.
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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.
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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.
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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.
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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:
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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)
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Through an ATM transfer
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Internet Banking
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Telephone banking service
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Deposit your cheque at the deposit machine or send your cheques direct to your
financial institution
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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.
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