Glossary of Terms for Home Loans Malaysia

Home Loan Glossary

Worried about getting a home loan? It’s not difficult actually provided you know the nitty-gritties of the approval process and how home loans work. To help the customers to get acquainted with the terms and nomenclatures used throughout the procedure, here is a glossary for home loan.


Approval Process: The process that takes place after a customer applies for a personal loan till the point he/she gets approval or rejection for it by the bank or financing service is known as the approval process.

Accrued Interest: It is an interest on a loan that has been accumulated since the time of investment been made. It is referred to an interest that has been charged, but not collected.

Annual Value: It is an estimated annual rent of the property. It is not inclusive of the furniture and other facilities provided in it.


Base Rate: In Malaysia, a Base Rate or BR is known as a reference rate for any new retail floating rate loan schemes in the country. The interest rate of the banks can be derived by using a formula set by central bank that involves base rate. BR is a floating rate and can change as per the local and global economic circumstances.

Booking Receipt: It is a receipt a purchaser gets after giving the payment for any residential property to the developer. A customer may need to show the booking receipt while making a loan application to a bank/financing institute.


Ceiling Rate: It is defined as the maximum rate that a bank or financing institution can charge to a customer while getting a loan.

Commitment Fee: A commitment fee is a fee that a loan borrower has to pay to the lender (usually while acquiring an overdraft facility) for setting aside a funding that is not utilised by the borrower.

Cancellation Fee: A customer needs to pay a cancellation fee is he/she has already applied for a loan to a bank but does not want to proceed ahead.

Completed Homes/Properties: It is a commonly used term for home loan/financing referring to the residential properties that have finished their construction process and perhaps are ready to move in.


Diminishing Musharakah: It is a concept in Islamic banking for home loan purpose where the financier and the applicant will have a joint ownership of a property or the share of a financer is divided into a number of units that will later on be purchased by the applicant on periodic basis.

Down Payment: It is referred to an amount that a borrower needs to make to a bank generally at the time of closing the loan. The amount of down payment depends upon the values of loan and the property’s worth.

Disbursement Fees: It includes an array of fees and charges put together including registration fees, bankruptcy search, to name a few..


Effective Lending Rate: It is an effective interest rate that a customer actually have to pay to the bank after getting a home loan or financing.

Early Termination or Early Settlement Fee: It is a type of fee charged by the bank to a customer when he/she decides to settle the home loan before its maturity.


Fire Insurance: It is a type of home insurance which a house that covers any damage caused due to fire.


Guarantor: A guarantor is a person who is responsible for the loan lent to a borrower. A guarantor has to pay back the loaned amount if and when a borrower fails to do so.


House Developer: Builder/seller of the residential property that a person needs loan for.

Home Loan Calculator: A tool available on banks website that helps a customer to calculate estimated home loan amount or monthly instalments or the interest/profit rates involved.

Home Mortgage: Home mortgage is a type of financing that is secured against the borrower’s property. A bank or financing institute can collect/repossess that property if the borrower fails to pay off the loan amount.


Interest Rate: Interest rate is the rate of interest charged to a borrower on the loaned amount in the form of fixed (pre decided rate), variable (pegged to the base lending rate) or combination of both the rates.

Instalment: It is an amount a loan purchaser has to pay on monthly basis until the amount of financing is fully cleared.


Joint Ownership: If the ownership of the property is shared by more than one person, it is known as joint ownership.


Land Title: It is a title of the land in question describing the details like size, location, and other specifications.

Late Charges: Late charge is the fee that a customer needs to pay in case he/she fails to make the repayment of the assigned date.

Legal Fees: It is the type of fees charged to a customer at the time of making a loan agreement, which comprises of duties for the legal procedures and documents involved.

Loan Tenure: A flexible or fixed period of time set by the bank within which you have to clear off the loan amount.

Lock-in Period: It is a period of time where one cannot clear off the loan without incurring penalties.


Margin of Financing: Loan amount margin given to a customer.

MRTA: Referred to as Mortgage Reducing Term Assurance, it is a term insurance that is utilised to provide cover for an unsettled loan amount in the event of death or total permanent disability of the insured person.


Outstanding Amount: The remaining loan amount inclusive of interest and other charges.

Overdraft: It is referred to the advances given to a loan borrower to overdraw on his current loaned amount.


Profit Rate: It is a concept of Islamic banking where profit rate is charged to a customer instead of an interest rate.


Residential Property: A property bought or being bought for the purpose of living there.

Refinancing: It is the process of taking a new loan from another bank or financing institute with an intention of paying off the current loan.


Shophouse: A house where a part of the owner’s resident is also used as a shop opening (commercial purpose).

Sale and Purchase Agreement: It is a contract between the buyer and the seller over the purchase and selling of a residential property.


Takaful Cover for Residential Property: It is a protective cover or insurance purchased by a buyer or a borrower for financial protection to his/her abode/property against fire, explosion, malicious damage, riots or any other adversities.


Under Construction Properties: Incomplete properties or houses which are still under construction process.


Valuation Fee: It is the fee charged by the bank to the customer for accessing/determining the market value of the property.

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