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FAQs on House Financing-i
    How much can I afford?
      This depends on your income and other financial obligations. As a rule of thumb, most buyers purchase properties that cost between 1.5 to 2.5 times their annual income. For example, a buyer earning RM40,000 a year would purchase a property between RM60,000 and RM100,000. Furthermore, the monthly payment should not exceed 1/3 of your gross monthly income. In assessing your payment capability, the Islamic banking institution would also take into account your other debt payments such as car financing, personal financing and credit cards.
    How much financing can I obtain?
      This will depend on the value of your property, your income and your payment capability. Margin of financing can go up to 95% (inclusive of Mortgage Takaful). The higher the margin and the shorter the tenure, the higher you will have to pay per instalment.
    How long does it take to process an application for financing?
      It usually takes about one to two weeks for your financing application to be approved from the time you supply complete documentation. Ask the Islamic banking institution for the checklist of required documents to be submitted to avoid unnecessary delays.
    What is the difference between conventional loan and Islamic financing?
      A conventional loan is given on a debtor/creditor relationship. Interest will be charged on the amount of loan. This represents the financial institution's cost in obtaining the funds. Islamic financing works on the concept of purchasing and selling whereby the Islamic banking institution purchases the property and subsequently sells it to you at a selling price inclusive of its profits, on a deferred payment basis.
    What are the advantages of house financing-i?
      The selling price of the property is fixed at the time of contract.

      There is no additional or hidden costs that will change the selling price of the property.
      The repayment amount is not subject to fluctuations in interest rates.

      There is no compounding of arrears and it allows for better financial planning.
    Can a non-Muslim apply for house financing-i?
      Yes, house financing-i facility is available to non-Muslims.
    Why do I need a valuation?
      A valuation is needed if you are purchasing a completed property. The Islamic banking institution requires a valuation to ascertain whether the property provides sufficient security for the financing 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 financing documentation. Normally, the Islamic banking institution will provide a panel of lawyers who are familiar with their documentation requirements for you to choose. If you prefer to engage your own lawyer, you should discuss this with your Islamic banking institution.
    Who pays for the legal fees?
      Generally, the legal fees are borne by the purchaser. However, certain developers and Islamic banking institutions may offer to pay the legal fees on the legal documentation as part of their marketing package. In addition, some Islamic banking institutions also extend financing for the documentation fees.

    What if I run into financial difficulties and cannot meet the payments for my financing?
      If this happens, you should contact your Islamic banking institution to discuss a reasonable payment programme, which could include extending the tenure of the financing or reducing the instalment amount, provided the amount outstanding is still within the selling price.

    Why does my outstanding financing remain high at the initial stage despite payments made?
      During the early years of the financing, a significant amount of your payments will go towards the payment of the Islamic banking institution's profits. So, if you make partial pre-payments to pay the principal sum outstanding, you will be able to save on payments on Islamic banking institution's profits.
    Can I make extra payments other than the monthly contractual payments?
      This depends on the terms and conditions stated in your financing agreement. By paying in extra money each month or making extra payments at the end of the year, you can speed up the process of paying off the financing. When you pay extra money, be sure to notify your Islamic banking institution that the excess payments are to pay for the principal sum outstanding. However, if you make a lump sum payment or partial payments to your principal financing, you must give notice to your Islamic banking institution. The notice period ranges from 1 to 3 months.
    Do I need a guarantor for house financing-i?
      This is at the Islamic banking institution's discretion and depends on the credit standing of the customer.

    Does the Islamic banking institution have the right to charge my financing account for any miscellaneous charges incurred by them, i.e. late payment charges, legal costs, takaful, etc?
      The Islamic banking institution's power to impose charges on your account is normally indicated in the Terms and Conditions of the financing.
    How long is the grace period for payment of my monthly instalments/profits?
      Generally, the Islamic banking institution gives a grace period of 7 - 14 days for you to pay your instalment payment. Any payment received after the grace period will be subjected to compensation charges.

    When does the Islamic banking institution release the financing to the seller or developer?
      For properties under construction, the progressive payment will be released to the developer according to the completed stage of construction as per the Architect's Certificate. For completed properties, the financing 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 property under joint names and apply for the house financing-i only under my name?
      The Islamic banking 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 financing.

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

    If the developer abandons the project, am I still required to service my profits/ instalment payments?
      Yes. You are still obliged to service your financing based on the agreement signed between you and the Islamic banking institution. However, since the Islamic banking institution has vested interest in the property, you could discuss a payment plan with them. You should also report the matter to the Ministry of Housing & Local Government and House Buyer's Association.
    What happens when the financing is fully paid?
      When the financing is fully settled, the Islamic banking institution will uplift its claim on the property.
    What happens in the event of my death if I have not taken up takaful?
      Your survivor/next of kin will have an option to either proceed to service the financing or redeem it. However, most Islamic banking institutions make it compulsory for you to take mortgage takaful (MRTA) at the time of the contract to provide financial security against such an event.
    What can the Islamic banking institution do if I do not make payments?
      If you fail to make 3 consecutive payments, the Islamic banking institution will take the necessary actions to recall the financing. In the worst-case scenario, the Islamic banking institution will foreclose the property and sell it to settle the financing. You would still be liable to pay the difference between the auction price and the financing amount outstanding.
    What is the most convenient way to pay for my financing?
      There is a wide range of services offered to make payments easier for you. Some of the alternative ways of servicing a financing include:

      Open a savings/current account and arrange for standing instructions with minimal charges (if you maintain deposit and financing 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 it directly to your Islamic banking institution

    Should I consider refinancing my existing financing if I am offered a lower profit 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 financing. For example, processing fees, legal fees, stamping fees 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 rate is enough to compensate for all the costs incurred associated with refinancing, including penalty charges, if any.
    Can the existing conventional housing loan be converted to house financing-i?
      Yes, with the preparation of fresh legal documents for house financing-i.
    Am I entitled for rebate for early settlement?
      The Islamic banking institution, at its discretion, may give a rebate (ibra') for the unearned profits. The rebate is in the form of a reduction in the balance outstanding of the selling price.