Mortgage brokers are independent and qualified home loan professionals with vast
experience in both the banking and financial industry (lenders) prior to becoming
a mortgage (home loan) consultant to provide mortgage options to ensure property
buyers get the right home loan to suit their individual requirements.
They will gather, understand and verify
your needs and basic requirements, examine the available home loan packages and
options provided by the various banks and financial institutions.
A mortgage broker will explain in easy to understand (layman) terms the benefits
as well as the shortcomings of the many different types of home loan packages which
best meet your needs.
A mortgage broker will eliminate the time consuming process of your search for the
best home loan package. They will do all the running around and present the most
suitable home loan packages to you at your convenient time and location.
Most of us find ourselves confused with the various loan packages available and
are too often swayed by the hype of numerous lender’s aggressively advertised
interest-rates. Worse still, many of us fail to read the fine print and or comprehend
the shortcomings of such home loan packages.
In our experience, many borrowers have found themselves with a home loan which is
simply “not” right for them, leaving them to put up with it and or pay
huge penalties to get out and take a better deal elsewhere. Mortgage brokers will
simplify the process and explain both the pros and cons of the various home loan
packages and recommend which is most suitable for you.
A mortgage broker has a broad knowledge of the wide range of home loan packages
and options available on the market. A bank officer by contrast, will normally only
be familiar with the home loan packages offered by their bank (employer) and therefore
are not able to offer you the best
comparison as well as impartial and
unbiased advice.
Mortgage brokers are paid on commission basis from the bank or financial institution,
and in general its market practice that they are paid within the same commission
structure basis, no matter which loan package you (the borrower) chooses. With that,
mortgage brokers are able to give you both impartial and unbiased advice about the
pros and cons of each home loan package that best suit both your needs and requirements.
Most mortgage brokers work within a specialised organisation; their credit department
will help you with your home loan application (s) to ensure you meet the correct
lending criteria (guidelines) as well as verify all your documents submitted are
both complete and accurate. This will ensure a faster turnaround time and decision
for your home loan application.
A tip to remember, the mortgage broker chosen by you should do all the work without
costing you any money as mortgage brokers are paid on a commission basis by the
bank or financial institution only upon the approval of the home loan.
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 banking institution would also take into account your other debt payments such as car financing, personal financing and credit cards.
How much can I borrow?
This will depend on the value of your property, your income and your payment capability. Margin of financing can go as high as 95% (inclusive of Mortgage Takaful). The higher the margin and the shorter the tenure, the higher you will have to pay per instalment. Also, at a given rate, a shorter tenure will require you to pay higher instalment.
How long does it take to process a loan?
It usually takes about one to two weeks for your financing application to be approved from the time you supply complete documentation. You should ask the banking institution for the checklist of documents 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 banking institution's cost in obtaining the funds. Islamic financing works on the concept of buying and selling where the banking 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 banking 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 banking 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 banking institution.
Who pays for the legal fees?
Generally, legal fees are borne by the buyer. However, certain developers and banking institution's may offer to pay the legal fees on the legal documentation as part of their marketing package. In addition, some banking institutions also extend financing for the loan documentation fees.
What if I run into banking difficulties and cannot meet my loan repayments?
If this happens, you should contact your banking 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 banking 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 banking 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 banking institution. The notice period ranges from 1 to 3 months.
Do I need a guarantor for a loan facility?
This is at the banking institution's discretion and depends on the credit standing of the borrower.
Does the banking 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 banking institution's power to impose charges on your account is normally indicated in the Terms and Conditions of the loan.
When does the banking institution release the loan to the seller/developer?
For houses under construction, the banking 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 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 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 banking institution's discretion and they may also consider other circumstances.
If the developer abandons the project, am I still required to service my interest/instalment 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 banking institution has vested interest in the property, you could discuss a repayment plan with your banking 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 banking institution through its solicitors, will release its charge on the property. The banking 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 banking institutions make it compulsory to insure (MRTA) against such an event.
What can the banking institution do if I do not make repayments?
If you fail to make three consecutive payments, the banking institution will take the necessary actions to recall the loan. In the worst case scenario, the banking 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?
Banking 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 banking 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: Bank Negara Malaysia Banking Info web site
For more information on housing loans, download Bank Negara Malaysia (BNM) bankinginfo booklet or visit the Housing Loan page to help you with any queries.
Compare rates from different banks with BNM bankinginfo comparative table to help you narrow down your options and determine what suits you before making your decision.
