Home Loan Agreement in Malaysia: What You Sign and Pay

The short answer

The loan agreement is your contract with the bank. It is a separate document from the SPA, signed after the bank approves your loan.

It has two costs of its own:

• Stamp duty: 0.5% of your loan. On a RM 450,000 loan, RM 2,250.
• Legal fee: set on the loan amount by the Solicitors' Remuneration Order 2023. On RM 450,000 the scale fee is RM 5,625, plus 8% service tax and disbursements.

Before you sign, read the rate clause, the lock-in clause and the default clause. To see the instalment, use the loan calculator. Want me to work it out for your own case? WhatsApp +60 17-279 8932.

Letter of offer, then loan agreement

These are two different papers, and buyers often mix them up.

The letter of offer is where you first see the rate, the spread, the tenure, the lock-in and the fees. Check it carefully, because the loan agreement follows it. The SBR guide explains how to read the rate.

What the loan agreement covers

A loan agreement is long, but most of it falls under a few headings:

• The facility. Amount, purpose (to buy the named property) and how the money is released.
• Interest. The reference rate (SBR or BR), your spread, and how changes are applied.
• Repayment. The tenure, the instalment and when it starts.
• Security. The bank's claim over the property until you pay it off.
• Your duties. Insurance, upkeep, paying quit rent and assessment, and telling the bank about changes.
• Early settlement. Any lock-in period and the fee for settling or refinancing during it.
• Default. What counts as default, the bank's rights, and the costs you bear.

The security documents

How the bank holds the property as security depends on the title:

• When the individual title is issued, the bank usually registers a charge over the property at the land office.
• When the individual title is not yet issued, as with many new projects and some strata homes, the bank usually takes an assignment of your rights under the SPA instead, and converts it to a charge later.

Your lawyer will tell you which applies. Either way, the bank's claim is released only when the loan is fully paid.

What it costs: a RM 450,000 example

These are generic figures on a round loan amount, not a quote.

Total before disbursements: about RM 8,325.

A few points on the legal fee:

• The Solicitors' Remuneration Order 2023 applies in Peninsular Malaysia. It sets 1.25% on the first RM 500,000 of the loan, with a minimum fee of RM 500, and 1% on the next RM 7 million.
• The loan fee is separate from the SPA fee. You usually pay both.
• Some packages offer to pay or finance the legal fees. Read the terms: there may be conditions, such as a lock-in, attached.

The legal fees guide covers the scale in full, and the stamp duty guide covers the duty and any exemption.

Clauses worth reading before you sign

Interest rate and changes. Confirm the reference rate and spread match the letter of offer. See whether a different spread applies after the first years.

Lock-in period. Find the period and the fee if you settle or refinance early. If you may sell within a few years, this matters.

Flexi features. If your loan is flexi or semi-flexi, check how extra payments and withdrawals work, and any fee.

Insurance. Some loans require fire insurance or takaful, and may offer MRTA or MLTA. Know what is required and what is optional. The MRTA vs MLTA guide explains the choice.

Default and costs. Read what counts as default, how much notice you get, and which costs you pay if the bank acts.

Full release for new projects. On a project still being built, the bank releases money in stages. Check when full instalments begin.

The steps, from approval to first instalment

1. The bank issues the letter of offer; you accept it.
2. The bank's panel lawyer prepares the loan agreement and security documents.
3. You sign in front of the lawyer, and the documents are stamped.
4. The lawyer registers the security and confirms conditions are met.
5. The bank releases the loan: in one go for a subsale home, in stages for a new project.
6. You start paying instalments as the loan agreement states.

Common mistakes

• Treating the letter of offer as a formality and missing the lock-in or spread.
• Forgetting that the loan has its own stamp duty and legal fee.
• Signing without asking the lawyer to explain the default clause.
• Assuming a "free legal fees" package has no conditions.

Check before you sign

This page explains loan agreements in general. It is not legal or financial advice. Ask the bank's lawyer to go through the agreement with you and to give you a written quote of fees and disbursements before you sign. For help with a specific property, WhatsApp Shyan Yee (REN 46305, IQI Realty) at +60 17-279 8932.