Home Loan Glossary

Application Form

A form to be completed when applying for loans, financing, or other banking products or services from banking institutions.

Appraisal / Valuation Report

A written analysis of the estimated value of real estate prepared by a licensed Valuer / Appraiser.

Asset

Any item of economic value owned by an individual or a corporation. Examples are cash, securities, accounts receivables, stocks, office equipment, houses, cars, and other properties.

Base Rate (BR)

Bank Negara Malaysia will replace the Base Lending Rate (BLR) with the Base Rate from Jan 2, 2015 as the main reference rate for new retail floating rates. Base Rate is to be reviewed by the respective banks at least on quarterly basis & to be disclosed publicly.

Base Lending Rate (BLR)

A minimum interest rate calculated by banking institutions based on a formula which takes into account the institutions• cost of funds and other administrative costs.

Collateral

Legal property, fixed deposits or other tangible securities charged to the financial institution for loan granted.

Deposit

Initial cash payment required to be paid before entering into the hire purchase agreement.

Disbursement Fee

Various types of fees such as registration of charge fee, land search fee, bankruptcy search fee incurred by banking institutions and solicitors attending to the loan documentation, in relation to the loan, which are payable by borrowers.

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.

Down Payment

An initial payment made by the buyer to the developer or seller of the property.

Financing Charges

Charges imposed on outstanding balance after payment due date. For cash advance, finance charges are computed from the transaction date. For balance transfer programmes, the rate of interest charged on the balances transferred to the new card may differ from that imposed on purchases and cash advance for a specified period.

Financing Tenure

Number of years taken to fully pay the financing amount and profit margin as agreed under a specific payment programme.

Fixed Rate Loan

A term used to describe a loan, where interest charged is fixed throughout the tenure of the loan.

Flat Rate

A term 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 RM 10,000 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 (BLR).

Foreclosure

Legal action available to the banking institution for recovering outstanding sums owed by a borrower who has defaulted on his/her loan. The property pledged 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, Socso, 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.

Houseowner Insurance

An insurance policy that combines liability coverage for a homeowner together with protection from damages caused by wind, fire, vandalism and other risks.

Installment

Monthly payment that the borrower has to pay to the banking institution as stated in the loan or financing agreement.

Interest Rate

The amount charged by the lender to the borrower for borrowing a sum of money expressed as percentage of sum borrowed.

Late Chargers

A penalty charged by banking institutions for not paying instalment due on time.

Late Payment Chargers

Interest charged on the overdue instalment payment, calculated on a daily basis.

Legal fee on Loan Agreement

Legal fees incurred for loan agreement. The current rate is 1% for the first RM100,000 and 0.5% for the next RM4,900,000.

Loan Lock in Period

This is the minimum period borrowers are required to maintain their loans with banking institutions without being subjected to any penalty.

Loan Tenure

Number of years taken to fully repay the loan principal and interest as agreed under a specific repayment program.

Margin of Financing

The loan amount granted by the banking institution, expressed as a percentage of the value of property pledged to secure the loan.

Monthly Rest Interest

Interest on housing loan calculated on a monthly basis based on current outstanding balance.

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.

Net Worth Analysis

A method to determine one•s net assets by comparing total assets against total liabilities.

Non-Zero Entry / Moving Cost Loan Package

A loan package where borrowers have to pay for all charges and fees involved in obtaining / refinancing a loan, such as legal fees, stamp duty or disbursement charges.

Offer Period

The availability period for the housing loan package.

Overnight Policy Rate (OPR)

The overnight policy rate (OPR) is the interest rate at which a depository institution lends immediately available funds (balances within the central bank) to another depository institution overnight.

Outstanding Loan

Remaining loan not yet paid, including interest and other charges.

Overdraft (OD)

A type of credit facility granted to the eligible current account 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.

Property

Landed properties such as houses, apartments and condominiums, and land such as 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 banking institution.

Repayment Mode

Fixed monthly repayment - A scheme that allows borrowers to pay a fixed instalment sum every month until the end of the loan tenure.

Flexi monthly repayment - A scheme that allows borrowers to repay a higher repayment amount than its monthly instalment anytime without the need to seek banking institutions• approval.

Sale and Purchase Agreement

A written contract signed between the intended buyer of the property and the developer or seller of the property, stating among others, the terms and conditions under which the property will be sold.

Selling Price

The price agreed for the Islamic banking institution to sell the property back to the customer which consists of the Islamic banking institution•s purchase price (financing amount) plus its profit margin.

Stamp Duty on Loan Agreement

The duty payable to the Government (Stamp Office) for the stamping of an agreement, in this case, the Loan / Facility Agreement. Duty payable is based on the loan/facility amount. The current rate is 0.5% of the loan / facility amount or RM5 per RM1,000.

Title

A legal document establishing the right of ownership on a property.

Valuation Fee

A fee charged by property valuers to appraise the properties. The valuation fees start from a few hundred ringgit upwards, depending on the value of the properties.

Zero Entry / Moving Cost

A loan package where banking institutions financed certain types of fees and charges incurred by borrowers.

Examples of these fees and charges are legal fees, stamp duty or disbursement charges. These costs however, exclude stamp duty and legal fees, pertaining to Transfer of Ownership (Memorandum of Transfer) and maintenance / administration fees imposed by developers (components of the costs vary between banks).

Zero (%) Installment Plan

A facility arranged between card issuers and selected merchants where cardholders can pay for purchases made with the merchants concerned by way of instalment, e.g. 3, 6, 9 or 12 months, at no interest, subject to the available credit limit of cardholders at the point of application.

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