Category: Article (13)

Acceptance Letter
A letter from the applicant indicating his williness 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 pledfed 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 fo 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 acount 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.
Step Action
1 As the buyer, you have to find the property. After you have made your decision, you are required to fill in an application form prepared by the broker and pay the booking fee (min 2% or more). A receipt will be given to you after you pay the booking fee. If you, as the buyer go back on your word, the seller has the right to confiscate the booking fee. Otherwise, the seller has to double pay the booking fee to you if he or she goes back on his or her word.
2 You have two choices:1: You provide the financial documents to the broker. They will assess your credit, income and assets to quickly determine what loans you qualify for.2: You provide any relevant details and financial documents to the broker.The buyer has to prepare his or her identity card and deposit. The broker will hand over seller’s detail, buyer’s detail and title to the lawyer for preparing the Sell & Purchase Agreement. The deposit will be handed to the seller only after both parties (seller and buyer) have signed the Sell & Purchase Agreement.
3 All the relevant financial documents will attach to the application form and submit to the bank for approval.
4 After 7 days, as the bank reply the approval, loan will be processed and an offer letter will be prepared. The buyer needs to sign the offer letter.
5 Before signing the Sell & Purchase Agreement, both parties can decide the date of settling the rest of the deposit. Normally, the buyer is given three months for settling the rest of the deposit. The buyer can request the seller to extend for one month. However, within this one month, the buyer has to pay the interest that is calculated per day. The amount of the deposit depends on the amount of the loan. For example, if you loan 70%, you are required to settle 30% deposit within three months.
6 The buyer will hand over the deposit to the lawyer for settling the ransom from the bank or financial company and property tax in order to redeem the property. Then the process of transfer can be carried on.
7 As the property is being redeem and the seller has settled the property tax, the lawyer will submit the transfer form to the Land Service for registration. If the transfer form is approved, the lawyer will hand over the rest of the deposit to the seller. At the same time, the seller has to pass the right of the property to the buyer as final realize.

Owning a comfortable home are top on the most wish list from the people, this largely due to the constant increased house prices for past few years. Price of most houses in the cities has been double or treble since then.

As part of the effort in reducing the speculative activities in the property market, it was proposed under Budget 2014 that the real property gains tax (RPGT) will be revised as table below:

REAL PROPERTY GAINS TAX FOR 2014 Tax Rates
  Personal (citizen & PR) Company
Disposed within 3 years 30% 30%
Disposed in 4th year 20% 20%
Disposed in 5th year 15% 15%
Disposed after 5 years 0% 5%

 

For non-citizen, disposal within 5 years is subject to a flat RPGT of 30%. Disposal after 5 years, RPGT is at 5%.

The RPGT rates increase is applicable to disposal of property taking place on or after 1 January 2014.

 


Property disposed off during the year 2013 will be subject to the RPGT rates as shown at table below:

REAL PROPERTY GAINS TAX FOR 2013 Tax Rates
  Personal (citizen, PR & non-citizen) Company
Disposed within 2 years 15% 15%
Disposed after 2 & up to 5 years 10% 10%
Disposed after 5 years 0% 0%

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