Housing loan rejections have never been as high as of the year 2017 with the slow market performance.
Submission of the wrong housing loan documents was one of the reasons behind all mortgage rejections, and it could’ve been avoided if the proper documents were carefully prepared beforehand.
How To Apply For A Housing Loan?
Applying for a housing loan is the first step to purchasing a property. Even the most cash rich person will take a loan, as this is the wisest financial decision.
Purchasing a property with cash even if you have it is a bad investment decision, as it is always better to let someone else pay for your property and make your own money grow elsewhere.
Applying for a housing loan is literally as easy as walking into a bank and applying for it. But first and foremost, you will need some documentation.
If you are buying a brand new property from a developer, you will first need a booking fee receipt. This is obtained by paying the booking fee to the developer.
With the receipt, the buyer will be able to approach the bank and ask for a bank mortgage loan.
If purchasing from a private owner, aka subsale property, the buyer will also need a receipt. This receipt is obtained via the seller’s lawyer.
Otherwise, a document that acknowledges both parties’ agreed upon amount to exchange for the properties is required.
The booking amount, otherwise known as the initial deposit, is usually a charge of 3% from the property purchase price and it's non-refundable.
While a property agent is usually the one who prepares all the documents required for purchase, you may also choose to do it yourself!
Here’s a list of documents that you will need to prepare:
i. Booking form
ii. IC / passport
iii. Salary slip
iv. 12 months of bank account statements
v. Income tax receipt
vi. 6 months EPF statement
How Long Will It Takes For Banks To Process Your Loan Application?
If all required documents were prepared correctly, it’ll only take approximately one or two days for loan applicants to get a verbal answer to whether the bank has approved it.
Before your loan application is reviewed, a bank officer will have to run a check on all the documents to make sure that everything is in order.
Upon ensuring all documents are in order, the bank will move on to acquiring confirmation from the government authorities such as:
- Central Credit Reference Information System (CCRIS)
- Income Tax Department (LHDN)
- Employees Provident Fund (EPF)
Upon receiving confirmation from all three parties, the bank will only then proceed with the loan approval.
There will only be delays if the income and expenditure of the borrower cannot support the loan repayment for the property.
Only then, the bank officer may ask the borrower for sources of additional income to avoid canceling the loan request. Other sources of income may include:
- Unit Trust (UT)
- Amanah Saham Bumiputera (ASB)
- Fixed Deposit (FD)
A unit trust (UT) is an unincorporated mutual fund structure based on a trust deed that provide profits to individual investors instead of reinvesting them back into the fund.
Whereas Amanah Saham Bumiputera (ASB) was launched by Amanah Saham Nasional Berhad (ASNB) aimed to provide an alternative savings vehicle for Malaysian Bumiputeras.
If all else fails, the bank may then request the borrower to find a Guarantor, a person who guarantees to bear a borrower's debt when the borrower defaults on a loan obligation, of which additional Guarantor documents will be required.
What If You Fail To Return Your Housing Loan On Time?
When you obtain a mortgage loan from the bank, you will need to sign a Loan Agreement.
Within this agreement are the terms and conditions of what will happen if you fail to pay your housing loan on time.
While each agreement is unique to its own right, below are some of the more common consequences of failing to pay back your housing loan.
i. Reminders - These will be the first warnings that the borrower will receive to pay their loans.
ii. Phone calls - These will be the second warnings when the borrower has defaulted for two months.
Upon failing to make payment between 3 to 6 months, the banks will be on high alert for a Non-Performing Loan, meaning the amount of loan is now labeled as in default or close to being in default, where the borrower may be encouraged to approach the National Credit Counselling and Debt Management Agency (AKPK) to restructure their loan so that they can resume in making their payment.
AKPK is an agency established by the Bank Negara Malaysia (BNM) which provides financial counseling, debt management program, and financial education to help consumers regain financial control and improve in credit management skills.
Finally, if a loan payment is still not made after 6 months, the bank can proceed with summons, whereby their lawyer will file affidavits – official statements to be used in courts which will include the housing loan and its agreements.
The borrower will then be summoned to court, and should the borrower lose the case, the house will be auctioned off by the bank.
In case where the auction amount still couldn’t cover the loan, the bank can still demand for the remaining balance of the loan debt from the borrower.
Required Documents, Undertakings, And Statutory Declarations In Housing Loan Applications
Here’s a complete list of documents you need in buying a property in Malaysia that applies to both locals and foreigners.
On top of that, there are two main collateral documents that will be required from the purchaser.
1) Letter Of Undertaking
Whether you are purchasing a property from a developer or from the subsale market, and whether the property does or does not have a title, a Letter of Undertaking is required.
The Letter of Undertaking will be drawn up by the lawyer acting for the seller, and the terms will encompass:
i. Completion of the property
ii. Property is issued with a Certificate of Compliance and Completion (CCC), a certificate which provides final sign-off on the construction of a building.
iii. Consent of Transfer, which is an official statement stating a transfer of property ownership, if the property requires it.
iv. Execution of the Memorandum of Transfer (MOT), another type of legal document that declares for an official transfer of property ownership, for properties with title.
v. Money disbursed by bank for the mortgage loan to be refunded if for any reason the property cannot be transferred to the purchaser.
2) Statutory Declaration
This document has to be signed for the acting bank to carry out the necessary checks on the purchaser. This document will be signed in front of the Commissioner for Oath or the Notary Public.
A Commissioner for Oath represents lawyers or public officers that have a right to verify documents or statements as legally bound contracts.
Whereas a Notary Public is a person with authority appointed by the government as a witness when documents are being signed.
The document will be authenticated with the official rubber stamp of the name and number of the Commissioner of Oath.
Applying for a property loan and knowing what documents to provide is only the first step to purchasing a property.
To learn more about the different types of loans in the market and the different loan terms in the market, look them up below:
For the latest property news, trends, resources and expert opinions, visit our Property News section. Home buyers, sellers or property renters looking for Malaysian Properties, may like to visit the New Launches or Project Reviews page.