What should I do next? – Buying a property

To a first time property buyer, one could be confused and worried about the process to obtain a mortgage loan after confirming a property. We understand that the process could be complicated and confusing to many. Therefore, in this article we will highlight the steps involved.

Process

  1. Placement of Booking
    1. Purchaser normally place a booking through a real estate negotiator/owner (subsale-readily completed property) or developer (under-construction property) after a few viewing and satisfied with the property chosen.
    2. Normally a booking form/sales form will be issued upon confirmation and agreement by both buying and selling parties on price, terms and conditions.
    3. Typically a booking fee will be needed from Purchaser at this stage. (normally 2%-3% for subsale and as determined by developer for under-construction property)
  2. Application of Mortgage Loan
    1. Purchasers will normally have 14 – 21 days to source and secure for mortgage loan prior to confirmation on the purchase.
    2. Purchasers can do this through mortgage advisor or bank. Application can be done concurrently through several banks or financial institution. No cost involved for application according to the industry practice at this moment.
  3. Acceptance of Letter of Offer
    1. A Letter of Offer (LO) will be issued by financial institute if purchasers meet the borrowing criteria of their institution.
    2. Purchaser has the option to compare and understand the differences between different terms and conditions offered by different financial institution.
    3. Purchaser will then acknowledge the acceptance of the offer by signing the LO. A copy will be given to Purchaser for safekeeping.
  4. Sales & Purchase Agreement
    1. Purchaser could then proceed to sign the Sales & Purchase Agreement which confirm the purchase of the property.
    2. During this time, the purchaser will need to pay the balance down payment which sum up to 10% of the purchase price (the booking fee paid earlier should be considered as part of the down payment)
    3. This will be done at appointed Legal Firm. Purchaser will be required to pay the legal fees involved and stamp duty (or Memorandum of Transfer-MOT) during the signing. It could sum to 2.5% or higher of the purchase price. (The sum mentioned is merely for reference as it differ from case to case).
  5. Loan Agreement
    1. This is a separate agreement from Sales & Purchase as this is an agreement between Purchaser and Financial Institution for the loan granted for the property.
    2. This could sometime be done together with SPA if the same legal firm appointed and time allowed.
    3. During the signing too, purchaser will be required to pay the legal fees and stamp duty for this agreement. This would also sum up to around 2.5% of the loan amount. (Again this is merely for reference only)
  6. Own Your Property
    1. Purchaser will normally be informed by Legal Firm when all the processes completed and the property is ready to be handed over to purchaser.
    2. Another indication that a purchaser is about to take possession of the property will be the notice from financial institution with regards to full disbursement of loan and start of monthly instalment.

The flow discussed here is the simplified process without in depth discussion on matters that could arise throughout the process. Details in each process will be discussed in near future.

Feel free to contact us at ask@ethanteh.com for further clarifications or mortgage loan application.

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What does a Mortgage Advisor/Broker does? When to see one?

Many of the public has yet to know that there’s a group of Mortgage Advisers who work independently from bank to advise and assist client on mortgage loan application for property financing/refinancing.

Instead of being attached to a particular bank, mortgage advisor work independently and normally attached to some firms with license from certain banks as their sales representative. Mortgage advisor would then working as associates with the firm after meeting training and certain certification requirement as set by the bank.

As mortgage advisor, at most of the time, will assist client to do application to more than one bank to increase the chances of approval and for comparison of better offer from different banks since at this moment, there’s no processing charges for mortgage loan application. Also at this moment, there’s no charges to client from Mortgage Advisor but Mortgage Advisor earned the referral fees from whichever bank that secure the client.

When you should see a Mortgage Advisor?

  1. Whenever you need to apply for a property financing and do not have much time to see different salesperson from different banks.
  2. When you want to find out the loan eligibility before you search for the right property.
  3. When you need advice about restructuring of loan and find out more about existing property loan.
  4. When you need an unbiased advice regarding property loan. – “There’s no best product, but there’s product that best suit you”

When you should go to bank instead of Mortgage Advisor?

  1. Mortgage advisor needs full documents and cooperation from client to understand the client’s situation, needs and suitable package/banks. If client is unwilling to disclose or provide income documents, client should opt to visit the bank personally and preferably the existing bank that the client is maintaining the account as most of the information is readily available to them. However, this will limit the client to accept whatever offer made by that specific bank.
  2. Most of the Mortgage Advisor only representing certain bank/financial institution. If client has specific preference on a bank that is not represented by the Mortgage Advisor.

If you are interested to join us as Mortgage Advisor, kindly email you resume to: career@ethanteh.com

Why Base Rate (BR) instead of Base Lending Rate (BLR)?

With year 2015 approaching, many were concerned about the implementation of new interest reference rate for mortgage loan; Base Rate (BR) which is replacing Base Lending Rate (BLR). Many started to worry about their existing mortgage loan and more were advised to expedite their application of mortgage loan in order to secure a “BLR Minus” package as the new package after the introduction of BR will be “BR Plus”.

BRBLR

While this is true, there’s no need for panic and we believe many were actually confused and misled by many in the industry including bank’s salesperson. BR was meant to be more transparent and let borrowers know the actual profit banks are making and more reflective of market condition from time to time.

One of the question that I loved to ask most : “Who/Which institution set the BLR?”. The most common answer that you will get is? – “Bank Negara Malaysia (BNM)”. And this is one of the most common misunderstood fact even among mortgage salespersons. In reality, since 2004, BNM removed the control of ceiling rate for BLR set by bank and also the ceiling for interest spread. This enabled bank to determine the BLR and their offered package to their client based on their finance and operating cost. (refer to: http://www.bnm.gov.my/files/publication/ar/en/2004/cp05_002_whitebox.pdf)

This led to a situation that most if not all major banks set the same BLR which doesn’t really reflect their finance cost and then compete among each other by giving “BLR Minus” package. Next question –

If Base Lending Rate (BLR) is the base, how can bank offer a “BLR Minus” package which is below their base lending rate?

The answer to this question will be the BLR isn’t really their base rate.

Eventually, this provided a perception to the public that they are getting a loan at a discounted rate. Imagine this, there are housing loans out there offered with BLR -1.7 package which brought the effective rate to 5.15% (Current BLR: 6.85%). Client would generally perceives that they are still getting discounted rate but only the discount is not as great as those getting larger loan who are offered with BLR – 2.45 (effective 4.4%). But with the introduction of BR which, let us assumed at 4%, about 0.75% above Overnight Policy Rate (OPR) and is now offered with a package of BR + 1.15 (effective 5.15%) compared to a client offered with BR + 0.4 (effective 4.4%), client will definitely started to question why his/her loan was loaded with 0.7% higher than another client.

We believe that the purpose of BNM to restructure the Lending Interest Rate system is to rectify this situation and require banks to set a BR which reflect their fund cost and operation cost. Therefore, introduction of BR should be very much welcomed and there’s no need for worries.

While with BR, the package will be “BR Plus”, the BR will not be equivalent to BLR which is 6.85% at this moment (Dec 2014). We strongly believe that the after the introduction of BR, the effective rate will still be almost the same as current BLR system.

*This article is solely based on our own opinion and for general reading purpose only.

Feel free to contact us at ask@ethanteh.com for more details or any mortgage loan enquiries.