Monday, January 17, 2011

property glossary

Acceptance Letter
A letter from the applicant indicating his willingness to accept the loan after the loan is approved by the banking institution.

An increase in the value of a property due to changes in market conditions, or for other reasons. The opposite of depreciation.

Balloon (payment) mortgage
Usually a short-term fixed-rate loan which involves small payments for a certain period of time, and one large payment for the remaining amount of the principal at a time specified in the contract.

Base Lending Rate (BLR)
A minimum interest rate calculated by financial institutions based on a formula which takes into account the institutions’ cost of funds and other administrative costs.

A violation of any legal obligation.

Certificate of Statutory Completion (CSC)
The Commissioner of Building Control will issue the Certificate of Statutory Completion to a building project when it is completed. The building can only be occupied when a Certificate of Statutory Completion (CSC) or Temporary Occupatancy Permit(TOP) is granted. The requirements for a CSC is more rigorous than a TOP and is compulsory, unlike a TOP.

Commitment Fee
A fee charged by the financial institution for setting aside funding that are not utilised by
the borrower. Usually only applicable to overdraft facility.

Legal work involved in buying and selling a house.

Failure to pay the monthly instalment/interest payments to financial institutions when due.

Disbursement Fees
Various type of fees such as registration of charge fee, land search fee, bankruptcy search
fee incurred by financial institutions and solicitors attending to the loan documentation
in relation to the loan which are payable by the borrower.

Endowment Mortgage
Type of mortgage where monthly payments are made into a endowment (life assurance) policy. The loan is paid off in one lump sum at the end of the loan period.

Fixed-Rated Mortgage
A mortgage on which the interest rate is set for the term of the loan, regardless of future interest rate fluctuations. This makes payments precisely predictable, but it is not always the cheapest alternative.

Flat Rate
A term used to describe interest that is charged as a fixed percentage of the loan amount
throughout the tenure of the loan. The flat repayment amount is usually determined before the commencement of the repayment programme. For example, interest charged on a RM10,000 loan at a flat rate of 10% per annum is RM1,000 annually until the loan is fully settled.

Floating Rate Loan
A term used to describe a loan, where the interest charged fluctuates due to the rise and fall of a certain indicator such as the Base Lending Rate.

Absolute ownership of property and land.

Graduated Payment
A scheme that allows the borrower the flexibility to pay a lower installment sum at the beginning of the loan tenure before progressing onto a higher installment sum as the borrower’s purchasing power improves.

Gross Monthly Household Income
The sum of gross monthly pay of all working family members before deducting income tax, Sosco, EPF, loan installment or other deductions plus any additional income from overtime, commissions and other sources.

Document in which the owner of a freehold property lets out their premises to a named party at a certain price and for a specified time.

The ownership of a lease.

Loan Tenure
Number of years taken to fully repay the loan principal and interest as agreed under a specific repayment programme.

Margin of Financing
The loan amount granted by the financial institution, expressed as a percentage of the value of property pledged to secure the loan.

The date on which the principal balance of a loan is due and payable

A long term loan to fund the buying of a property.

Mortgage Term
Period over which mortgage is to be repaid.

Mortgage Over Finance (MOF)
A percentage figure indicating the size of the housing loan on a property in relation to its value. Thus, a house worth RM500 000 with a mortgage of RM400 000 would have a MOF of 80%. Most banks and financial institutions have better housing loan deals for MOF 80% and below. The maximum MOF that lenders can legally go to in Malaysia is 90%- 100%.

Mortgage Reducing Term Assurance (MRTA)
A term insurance which reduces over the tenure of the loan. This form of insurance is used to provide cover for the outstanding loan amount, in the event of death or total permanent disability of the insured. MRTA is normally calculated to meet the outstanding loan amount.

Sale and Purchase Agreement
A written contract signed between the buyer and seller stating amongst others, the terms and conditions under which a property will be sold.

Stamp Duty
A government tax.

Term Loan
A loan which is repaid through regular periodic payments, usually over a period of time, for example 10 years.

A legal document establishing the right of ownership on a property.

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