10 mistake in housing loan
- Sign SPA first instead of waiting loan approved first
Starting by signing SPA without knowing your loan approval is suicidal. When you signed the SPA, you couldn’t retrieved back your booking fees if loan rejected and you are bounded to pay the remaining down payment of total 10% deposit to the owner, else paying hefty penalty.
Signing SPA, you will be oblige to get the house and it’s more important that your loan approved. What happen if loan rejected no matter how hard you tried or your banker tried?
So the best secure way is to always pay the booking fees first and apply loan right away, wait for loan approved only sign SPA. Moreover, by doing this, you have more flexibility in choosing your loan packages.
Didn’t inquire about MRTA or MLTA
Most of the time, I see lots of borrower just blindly sign the package offered by the banker and never really ask why, why why why for anything they doesn’t understand. Example for MRTA and MLTA protection, which is a paramount product for housing loan protection. Most of the banker doesn’t explain the features of the MRTA, worst never even introduce the existence of MLTA. Blindly fix MRTA amount into their loan package to hit their performance quota. It’s a very bad ethic.
That’s why lots of client end up not knowing what they had sign and purchase and complain at the end. What if they had no other bank approved their loan and only this bank which blindly give them the offer and package as the banker desired? Well, they can ask for amendment but usually banker reluctant to waste their time and force sign the letter offer..
- Didn’t inquire clearly package features
To avoid any misunderstanding and wasting time for amendment at the end, borrower should understand every package features, question them and selecting them based on their need, at the beginning pre submission.
– Loan tenure, you want it max 35 years or shorter tenure period
– Do you want to finance legal loan fees and valuation fees into the loan package? Meaning that the fees will be absorbed into the total loan amount and you will be paying it via monthly installment basis
– Do you want semi or full flexi account?
– Conventional loan or Islamic loan
All kinds of features that can added in. Borrower should understand and add or adjust according to their favorable terms.
- Didn’t state clearly who is borrower and SPA owner
Sometimes, when married couple getting a housing loan, they would like to have both the applicants in the SPA as property ownership and either one of the applicants as the borrower only.
Hence, borrowers must convey their wants to the banker clearly. Else, when Letter offer out, they found discrepancies, they need to ask banker amend it and it takes some time.
Time is money =)
- Didn’t read the clause carefully
When you sign housing loan letter offer, it’s best if you understand the clauses in the letter offer before signing. There’s plenty of hidden clauses for each banks. Let me give you an example: For bank A default clause shows that penalty of rate adjustment is when client default for 30days, Bank B 90days.. etc
Each bank has different policy clauses written in the contract.
So best practice is, before signing or meeting the agent. Ask them to send you a copy of the Letter offer for you to purview, so on actual meeting day, you can ask questions. Or you can compare the letter offer with other banks offer at your own space.
- Submitted too many banks
Borrower always have this mindset, submit my applications to all the bank, won’t need to worry about rejection. This is a wrong rhetoric and a general mistake made again and again.
Every bank has different guideline and appetite for loan approval, hence Bank A B C D E F G, all has its own different preference on target segment, DSR, INCOME calculation and debt calculation. What if A B C bank could approve your loan and DEF will reject your loan. When you spam all the bank, DEF reject, ABC will see rejection in the ccris by the other bank, though luckily still approved the loan, the bank won’t offer attractive interest rate package.
Hence, rule of thumb, submit the best 3 banks that can approved and offer best package. How to define the best bank? Ask experience banker to give suggestion based on your profile.
Don’t ever submit housing loan application to bank that you had defaulted their debt facility before. Though the debt isn’t recorded in your ccris anymore as you had settled it long time ago, but bank had their internal record of default clients, the black book.
So if you submit your applications, they will have high chances of rejection. So don’t be surprised when you have strong solid profile and got rejected out of the blue.
- Never calculate eligibility before submission
Be a smart borrower, always calculate your loan eligibility before submitting. Why submit to a bank when you know your DSR will burst? Why waste time?
- Wrong banker
Choosing the right banker is paramount to your success of loan approval, make it 99%!
Experience banker will firstly advise on your profile, whether any bank financing your property, check your property valuation beforehand legitly, calculate your max loan, meet up with you and explain all the features that suits your need. BEFORE SUBMITTING.
Their experience brings success or failure to your loan application.
They will be very attentive to your questions, quick reply.
They will update you the process of housing loan application
Give you great advise of what Not and Yes
Introduce you to a wide network of lawyer to choose from and the best.
Take MRTA just to reduce interest rate by 0.05%
MRTA isn’t the worst product, but there’s a better product for you to chose for protection. However, some borrower took MRTA just to reduce the rate by 0.05.
As above example,RM497,092 – Rm493,837 = RM3255.
0.05% reduction with the loan amount and interest above, borrower saved up Rm3255 throughout 35 years, by taking in MRTA that might cost around 2k-20k.
I ain’t stating taking MRTA is bad, the idea of taking MRTA for sole purpose of 0.05% reduction in interest rate isn’t wise.
Do drop your inquiries down below comment section 🙂