The loan application process for purchasing a property always appears to be a complicated one for the uninitiated.

The loan application process in Malaysia is however very simple, whether you are working in Malaysia or abroad.

Also covered in our property buying guides were the guides to planning your property buying budgetselecting the right property, and signing the property buying documents.

And whilst this guide will cover the legal documents needed for a residential property, there is also a guide for the legal documents needed for purchasing commercial properties.

Whether you are purchasing a developer or subsale unit, the requirements are similar.
The first step to procuring a loan is to first apply for it. Purchasers should select the bank that offers them the lowest interest rates, which will affect their overall total payment in the long run.

Upon selecting the bank that offers the best interest rates, the next step to take would be to prepare the required documents.

1) Preparing The Required Documents

While the required documents are all approximately the same, they do differ whether you are an employee, self-employed, running a business or working abroad.

Below is a complete list of documents that an individual will need to prepare when purchasing a property in Malaysia, whether they are Malaysian or a foreigner.
1.1 Malaysians Working In Malaysia – Employee
Malaysian employees will only need to prepare personal documents to show their credit-worthiness, whether they are a fixed income earner or earn on commission basis.
  • Identification Card – NRIC (copy)
  • Property Booking Receipt
  • Vendor Sales & Purchase Agreement/Title (copy)/New Sales & Purchase Agreement
  • Latest 3 months pay slip (for Basic Salary)/Latest 6 months pay slip (for Basic + Commission Earner)
  • Latest 3 months personal bank statement (for Basic Salary/Latest 6 months pay slips (for Basic + Commission Earner) which show your salary credited as per pay slip
  • Latest EA form
  • Latest KWSP statement
  • Income Tax – Latest Form B/BE with payment receipt acknowledgement
  • Deposit statement eg. Fixed Deposit, ASB or Bonds (if any) – to show how strong your emergencies fund it is
1.2 Malaysians Working In Malaysia – Self Employed
Self employed individuals are usually those who are running their own business. These individuals will also need to show their proof of credit-worthiness.
  • Identification Card – NRIC (copy)
  • Property Booking Receipt
  • Vendor Sales & Purchase Agreement/Title (copy)/New Sales & Purchase Agreement
  • Latest 6 months Company Bank statement
  • Latest 6 months Personal Bank statement
  • Deposit statement eg. Fixed Deposit, ASB or Bonds (if any) – to show how strong your emergencies fund it is
  • Business Registration
In order to view the documents needed if you are a Malaysian working abroad or a foreigner living in Malaysia and wishing to purchase a property in the country, then check out the guide we’ve provided!

2) Getting Familiar With Property Terms

Upon submitting your loan application to your desired banks, the next step would be to await the Letter of Offer.
This will typically take at least a week. Among some of the more technical terms that the purchaser will encounter which they should familiarise themselves with first, are as below:
2.1 Type Of Loan
There are a few different types of mortgage loans, depending on what your requirements are.
There’s the Standard Home Loan, Flexi Home Loan, Home/Personal Loan Package and the Islamic Home Loan.
  • Standard Home Loan
The Standard Home Loan is the most common type of loan in the market, as indicated by its name. The loan’s interest rates are calculated based on either fixed or floating interest rates.
The advantage of fixed interest rates are that the borrower will not be affected by the market’s fluctuations; however, the floating interest rates have its own advantages too.
For example if the market rate were to drop, the interest rates would also reduce.
Flexi Home Loans are a favourite of those with extra cash. These individuals can choose to put in additional cash into their mortgage loan account, which will in turn mitigate their interest rates.
The cash can however be withdrawn out at any given time, giving them the flexibility to use the funds as they wish – hence the loan’s name Flexi Home Loan.
The Islamic Home Loan is similar to the Standard Home Loan, except that it utilises the Base Finance Rate (BFR) to determine how much the bank earns from lending out the money.
2.2 Amount Of Loan
The amount of loan that is mentioned in the Letter of Offer is very important, as it will state how much loan the purchaser is entitled to from the finance institution.
The remainder of the money for the property will have to paid for by the purchaser.
2.3 Purpose Of Loan
The Letter of Offer will also state the purpose of the loan, which in this case if purchasing a property, the purpose of the loan will be for a property purchase.
2.4 Description Of Property
The Letter of Offer will also state the description of the property that the purchaser is buying, whether it is a single storey terrace house, single storey superlink or so forth.
The description of the property will be stated in detail, up to the land area and size of the property.
2.5 Duration
The longest term for a property loan is 35 years. The Letter of Offer will state how long is the bank giving the purchaser to make their repayment.
The shorter the loan period the higher the monthly repayment, and vice versa.

3) Processing/Set Up Fee

As with all legal documents, a bank loan also requires processing fees which are also known as set up fees. The Letter of Offer will state clearly how much the bank will be charging for setting up the loan.
3.1 Monthly Service Charge
The banks will also charge a small fee monthly, known as the Monthly Service Charge, and this amount is usually not high.
3.2 Prevailing Interest And Repayment
Also stated clearly in the Letter of Offer will be the repayment schedule, and the interest rates that the customer will have to pay.
3.3 Instalments
Instalments are the fixed monthly payments that the borrower will have to pay to the bank.

4) Security Documents

For residential properties with title, the security documents that need to be furnished are the Charge Annexure, Facility Agreement and Charge instrument in Form 16A.
On the other hand, properties without a title will require the security documents of Power of Attorney, Deed of Assignment and the Facility Agreement.
In lieu of a weak financial background, the banks may require additional security documents.
Such examples of additional documents include an assignment of rental proceeds, guarantors or a charge over the fixed deposit.

5) Prepayments

This occurs when the borrower makes an excess payment. The Letter of Offer will state what the additional payment is entitled to.
Typically in a Flexi Home Loan, the interest rate of the property will decrease accordingly.
For a Standard Home Loan, the borrower will need to check if they are entitled to any benefits if they were to partially or fully settle their outstanding loan early.

6) MRTA/MLTA

These two are among the most common housing insurance. Borrowers can opt to make them part of their mortgage loan if they wish.
If applied for through the bank, the Letter of Offer will state the amount and entitlement.
The above terms are among some of the most commonly used terms in a Letter of Offer, and are also the ones that a property buyer should pay attention to when going through the terms and conditions of their Letter of Offer.

There is a separate guide for commercial property buyers. The next guide will walk buyers through the signing of the legal documents.

For more guides on property buying, you can visit the following pages:
To learn about property titles, payment schedules and loan documents, visit our other guides:
Relevant Guides:
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Source: Property Guru