A letter from the applicant indicating his willingness to accept the loan after the loan is approved by the banking institution.

Application Form

A form used to apply for loan.

Appraisal/valuation report

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

Base Lending Rate (BLR)

A minimum interest rate calculated by financial institutions based on a formula which takes into

account the institutions’ cost of funds and other administrative costs.

Commitment Fee

A fee charged by the financial institution for setting aside funding that are not utilised by

the borrower. Usually only applicable to overdraft facility.

Default

Failure to pay the monthly instalment/interest payments to financial institutions when due.

Disbursement Fees

Various type of fees such as registration of charge fee, land search fee, bankruptcy search

fee incurred by financial institutions and solicitors attending to the loan documentation

in relation to the loan which are payable by the borrower.

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.

Downpayment

An initial payment made by the buyer to the seller of the house.

Financial Institutions

All commercial banks and finance companies licensed under BAFIA 1989 and Islamic banks

licensed under the Islamic Banking Act 1983.

Flat Rate

A term used 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 RM10,000 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.

Foreclosure

Legal action available to the financial 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, Sosco, 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.

Homeowners Insurance

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

Interest Rate

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

Late Charge

A penalty charged by financial institution for not paying instalment due on time.

Letter of Administration

A Grant of representation issued by the High Court to a person to allow him to administer the estate of the deceased who died without a will.

Loan Tenure

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

Margin of Financing

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

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.

Outstanding Loan

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

Overdraft

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.

Prepayment

Payment of all or part of a loan before maturity.

Prepayment Penalty

A fee charged by financial institutions for early payment of loan in full. The fee charged is usually based on a percentage of the loan amount or “X” months of interest.

Principal

The amount borrowed from financial institutions, excluding interest and other charges.

Property

Refers to landed properties (like house, apartment,condominium) and land (like 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 financial institution.

Sale and Purchase Agreement

A written contract signed between the buyer and seller stating amongst others, the terms and

conditions under which a property will be sold.

Security

Real or personal property that guarantees the repayment of a loan. The borrower risks losing

the property if the loan is not repaid.

Term Loan

A loan which is repaid through regular periodic payments, usually over a period of time, for

example 10 years.

Title

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