There are probably thousands of real estate terms and jargon in Malaysia that you need to know when buying or selling a
Keep reading to learn the most important ones that you may find in the documents that you need to sign.
Real Estate Terms and Jargon
When you are looking to buy a house in Penang, your bank or real estate agent may use terms that you don’t know.
It is important to learn all these terms to make the process a lot easier. Here are the most common terms you need to know:
1. Valuation
A valuation is required by law for buying a property in Malaysia. It is a judgment of the property’s value; the Stamp Duty of the property is also based on the property’s worth.
There are two types of valuation:
• The transactional value. Here the value is made within the houses in the same area. The value may not consist of the real value of the property.
• Valuation by a licensed valuer
Of course, the valuation made by a licensed valuer is the one that the bank relies on.
2. Margin of Financing
The margin of Financing (MOF) is the percentage of the property price that the bank is offering to lend you.
It is important to know that in Malaysia, the maximum margin of financing for a home loan is 90% of the house price. You can get a margin of financing of up to 100% if you qualify for the My First Home Scheme.
3. Base Lending Rate
The base lending rate (BLR) is a minimum interest rate based on a calculation that includes the bank’s cost of funds and other costs.
In Malaysia, the current base lending rate is 6.6%.
For example, if the bank offers a home loan interest rate as BLR -2.20% then the interest rate for your mortgage will be 4.40%.
4. Sub-sale
The term sub-sale refers to existing residential properties that are obtainable and can be occupied or vacant.
5. Sale and Purchase Agreement
The sale and purchase agreement, also known as SPA or S&P, is a formal contract signed by both the homebuyer and property developer or seller, in the case of sub-sale.
This contract includes all the details such as the buying price, payment form, information of the property time and manner of vacant possession delivery and other important elements of the transaction.
6. Payment Terms
A sale and purchase agreement must have a stipulation to define the payment term of the buying price.
Most of the time the terms of (salas and purchase agreement) SPA determine that there would be a 10% deposit of the buying price to the buyer upon the execution of the SPA.
The rest of the money will be paid to the buyer within three months from the SPA for the property without restriction in interest such as freehold property.
7. Fixed-Rate Home Loan
When an interest rate stays the same throughout the entire time of the mortgage, it is called a fixed-rate home loan.
8. Variable Rate Home Loan
If your loan has a variable rate, also known as floating rate or flexible rate home loan, the interest rates can go up or down, as they are settled to the base rate.
Tip
Most of the time variable rate loans offer lower interest rates than fixed-rate loans. But you should know that if the base rate increases, you could pay higher interest rate loans than fixed-rate loans.
9. Monthly Installments
Monthly installments are the payments that you must do to make upon procuring your loan. The monthly payment is dependent on the Loan Agreement you signed with the bank.
10. Capital Appreciation
When the value of the property increases due to improvements in market conditions, it is called capital appreciation. In other words, it is the positive gain you made from the sale of a capital asset.
11. Leasehold
A leasehold is when a person leases property for a period. In Malaysia, the minimum time a person can lease land is 3 years and the maximum period is 99 years according to the National Land Code 1965.
12. Freehold
Freehold is a person who is the permanent and absolute tenure of land or property with the freedom of selling to someone else at will.
13. Base Rate
The base rate is a floating interest rate established by financial institutions in Malaysia. This base rate is based on their benchmark cost of funds and the Statutory Reserve Requirement. All banks have different BRs, that goes from 3% to 3.95%.
The above are some of the common real estate terms you should understand and learn to make the whole buying or selling process easier. Don’t get intimidated by these jargon.
If you need more clarification, feel free to get in touch with our friendly staff at Airmas.
