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Debt is something we would like to avoid. But sometimes, taking up a loan is the most practical way to finance certain events in our lives. Here is our guide to help you understand loans better and hopefully aid you in making the savvy financial decision that will benefit you.
 
 
     
   
  There are many ways for you to get information on housing loans. You can get them directly from the banking institutions or from other sources such as newspapers, magazines and the Internet. If there is any information that is not clear to you, ask the banking institution to explain it to you. Compare the different types of loans from different banking institutions to ensure that you will be able to choose the loan that suits your financial needs.

You should look out for the following information:
 
     
  Rates  
     
  You should find out about rates offered and the period of the offer. Look at the overall deal that a banking institution is offering, rather than just the initial interest rate. In some instances, you may pay more interest in the future although the initial interest was low.

Check whether the rate is a fixed rate or floating rate. If it is a floating rate, the interest rate charged on your loan will move in tandem with changes in the base lending rate. As such, ask how your loan repayment will vary when the rates change, that is whether your loan repayment can be reduced when rates go down or increased when the rates go up. Also check whether you can opt to leave the loan repayment amount unchanged. However, if you choose this, the tenure of your loan can either be shortened or lenghtened depending on the movement of the interest rate.
 
     
     
     
   
  Ensure that you have the following documents ready before applying for a housing loan.  
     
 
A copy of your identity card or passport
Your latest 3 months' salary slip
Your latest income tax return form (form J) or EA form
Sale and Purchase Agreement deposit or booking receipt/letter of offer from the housing developer
A copy of the land title (if any)
Latest bank statements (compulsory in the absence of salary slips and/or Form J/EA Form) dating back six month/savings passbook/fixed deposits
Valuation report for completed houses
 
     
  If you are self-employed, you will need to provide in addition to the above your:  
     
 
Business registration documents
Latest financial statements
Other supporting documents required by the banking institution
 
     
   
  Upon acceptance of the letter of offer, the banking institution will usually let you appoint a lawyer from its panel to prepare the loan documentation. Some of the documents you've provided will then need to be submitted to the relevant government authorities for registration and official stamping.

Once that has been done, these documents will then be submitted to the banking institution and you will receive a copy of the Loan Agreement.
 
     
     
     
     
  Processing your loan application may incur related costs such as professional fees and government charges which you have to bear. Please note that these fees and charges are subject to change in the future. Therefore, you should always seek advice from your loan officer with regard to the fees and charges. The following are some of the common fees and charges involved:  
     
 
Type Rate
 
 
     
  Professional Legal Fees
 
  For loan agreement and Sale & Purchase Agreement *  
   
   
 
For the first RM150,000   1.0% (min RM300)
for the next RM850,000   0.7%
for the next RM2,000,000   0.6%
for the next RM2,000,000   0.5%
for the next RM2,500,000   0.4%
Exceeding RM7,500,000   negotiable on the excess (not>0.4% of such excess)
   
     
  Stamp Duties
 
  Loan Agreement  
     
  Transfer of Title (for completed properties)  
   
   
  0.5% of the loan amount
   
  1% for the first RM100,000
  2% for the next RM400,000
  3% on the excess above RM500,000
   
     
  Disbursement Fees
 
  Includes fees for registration of charge, land search and bankruptcy search  
   
 
  These fees vary by state, land office and type of property. For instance, in Selangor and Wilayah Persekutuan, the fees could range from RM300 to RM700.
   
     
  Processing Fees  
  One time fee charged by the banking institutions for loan processing  
   
Rate (RM) Range (RM)
50 Up to 30,000
   
100 30,001 – 100,000
   
200 100,000 and above
   
 
     
  * As per the First Schedule and Third Schedule of the Solicitors' Remuneration Order 2006.

Note : The type of charges and the amount charged might change in the future. You should meet with your banking institutions loan officer for further advice and discussion regarding any questions that you may have concerning the type of fees and legal services.
 
     
     
     
   
  Based on the loan packages that you choose, repayment of your monthly loan instalments will incur interest charged on either a daily basis (daily rests) or monthly basis (monthly rests). The principal sum immediately reduces every time a loan instalment is made.

However you may discuss with your banking institution about various ways of making your loan payments as flexible as possible such as:
 
     
 
Graduated payment scheme
 
This helps house buyers reduce the burden of loan repayment by allowing lower instalment payments at the beginning of the loan. However, the amount will gradually increase over time. You may find this scheme useful should you wish to allocate more funds for other purposes first.
   
Prepayment flexibility
 
Some banking institutions offer the flexibility of making prepayments or extra
payments. This helps save considerable interest charges on condition that you make prompt monthly repayments.
   
Partial prepayment of the outstanding loan
 
Some borrowers find it useful to shorten the loan tenure by making partial prepayments with surplus savings or annual bonus. This effectively reduces interest charges if prepayments are made during the early years of the loan tenure. However, you may need to check with your banking institution about making partial prepayments as there may be restrictions imposed on how much you can pay.
 
     
     
  If you make an early repayment of your loan in full before the loan tenure expires, the banking institution may impose a penalty for early termination as it would disrupt the banking institution’s cash flow planning. The penalty can either be a flat rate or “X” number of months of interest.  
     
     
  When you have surplus funds, you may want to make payments in excess of your fixed monthly instalment to reduce your loan amount. For partial prepayments, banking institutions may require pre-notification or may impose restrictions on the amount to be pre-paid or impose a penalty fee. Check whether the loan package allows you to make partial repayments and the procedures involved.  
     
     
   
 
Your rights as a borrower
   

Access to all information that would affect your borrowing
decision
To be treated professionally and without prejudice
To be consulted on changes to the conditions of your loan
To have accurate account information on a regular basis
   
Your duties as a borrower
   
Read and understand all terms and conditions of the loan
Observe the terms and conditions of the loan
Enquire and clarify all aspects of the loan to your satisfaction
Make payments on time
   
Rights of the banking institution
   
To have relevant disclosure of borrower's credit standing
To receive correct and truthful information about the borrower

To receive monthly instalments and interest repayment in a
timely manner
To enforce legal action in the event of a breach of contract
   
Duties of the banking institution
   
Discharge borrower's obligations as described in loan
Consult borrowers on any changes made to the loan
Attend to all queries made by borrower
 
     
     
 
 
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For more information on housing loans, download our booklet or visit our FAQs to help you with your queries.