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.
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 installment. Also, at a given rate, a shorter tenure will
require you to pay higher installment.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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:
- 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
- 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.
If the developer abandons the project, am I still required to
service my interest/installment 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.
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.
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.
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.
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:
- 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)
- Through an ATM transfer
- Internet Banking
- Telephone banking service
- Deposit your cheque at the deposit machine or send your cheques
direct to your financial institution
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.
Source by:
www.bankinginfo.com.my
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