When you refinance your mortgage, there are two important documents you need to sign: the offer letter, and the loan agreement. Every bank offers different terms and conditions on home loan package. Most of the time, you will be too busy to read the offer letter and loan agreement. If you can’t get the time to read it, make sure you asked the following questions before you sign the documents.

Frequently Asked Questions on Home Loan

1. Can I make capital repayment anytime?
There are banks that require you to produce one month notice before you make repayment to reduce the principal portion of your mortgage. It is better to choose the bank that doesn’t require that. Just imagine that you excitedly bring your hard earn bonus to the bank, but the officer asks you to fill up a form, go home and come back one month later to pay.

2. Can I make advance payment? Does it require notice?
Advance payment is some small amount that you pay before the due date of your regular installment. It is paid in advance. Understand the minimum amount require for advance payment. The lower the better it is.

3. Is there any redraw facility? How long does it take?
Most banks offer redraw facility on capital repayment anytime. Some take longer time to process. Possibly choose the bank that can let you withdraw anytime, flexibly and immediately.

4. Daily rest interest calculation?
Daily rest interest calculation based on daily loan balance is the best choice. You will save interest charges immediately after you make advance payment or capital payment. Avoid monthly rest interest calculation, you will eventually end up paying more interest.

5. How long is the lock-in period?
Industry practice is 3-5 years. The shorter the better.

6. When do you start counting the lock-in period?
When you are borrowing loan to buy house that is still under construction, the bank will pay the developer portion of the loan. Only until your home is completed, the bank will fully release the mortgage amount. Choose the bank that start calculating the lock-in period from the first draw down of the loan. Avoid those banks that count it starting on the date the full amount is released. You will end up with longer lock-in period.

7. How much is the early settlement penalty?
You might be able to settle the loan during the lock-in period. Early settlement will occur also when you refinance mortgage during that period. Normally the penalty is 3%. Of course, look for the lower penalty.

8. How do you calculate the early settlement penalty? On the outstanding loan amount or the loan limit?

Let’s say you borrow RM100,000. After 2 years, your outstanding loan is RM50,000. If you want to settle the loan, and the bank calculate the penalty base on the loan limit, you will be paying 3% of RM100,000 instead of RM50,000. The amount is doubled!

9. Is there any set up fees or monthly account maintenance fees?

Try to get those package without service charges

10. Do you absorb the moving fees (loan agreement fees and stamp duty)?

Usually banks offer different package with lower interest rate if you pay the charges of loan agreement, house valuation fees, and stamp duty.

11. Do you provide optional payment mode: single or multi tier?
Let’s say your loan interest is first year 2.5%, thereafter 6%. You shall pay lower installment on the first year, and higher installment thereafter. If possible, opt for single tier so that you can pay higher amount on the first year. The excess will be used to reduce the principal portion, therefore shorten your tenure.

12. Do you require me to buy MRTA from your bank?
There is no rules that the borrower should fork out extra money to buy Mortgage Reducing Term Assurance ( or MATI RUMAH TETAP ADA) (MRTA) to protect the bank. If you buy the MRTA, the insurance policy will be assigned to the bank. I advice that you get your personal financial planner to work out a flexible protection plan for you instead of buying MRTA from the bank.

13. Ask for their customer service call center number.
Try calling their customer service call center. If the bank provide good service, you will definitely realize it by calling the number. Talk to the customer service representatives to have a feel. Bear in mind that you will be engaged with this bank for years. Avoid those banks that had nobody answering the phone!

Want to know how you can take advantage of refinancing, read these articles:
How to save mortgage interest by refinancing home loan
Save interest on homeloan
Mortgage: the cheapest debt
Buy House before Car
Malaysia Home Loan Resources

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Personal finance author and trainer

    9 replies to "Question you should Ask Before You Sign the Home Loan Offer Letter"

    • Mala

      I would like to know after the acceptance of the loan offer letter can the bank change the loan amount upon loan approval?

    • Peter Lee

      Hey KC,

      I am newbie here. so very sorry if i dont know anything. I just google around and found alot of conflicting info on MRTA. Below are the conflicting posts. Hope to hear your opinion. I am going to need to decide soon..so please let me know in your blog. I will be always watching.

      mrta vs mlta which one is the best housing loan insurance
      MythBusters : Must Buy MRTA When Buying A HOuse?

    • Jokal

      Hi KC,

      I am going to purchase a 196K house. I got 2 letter offers already, one from HSBC (total financing RM 177K,BLR-1.9%, 24 year loan, exit period 5 year, exit penalty 3.5% from total loan amount,NZMC- i ask if they will include MRTA and legal fees in the loan package but they refuse). The other one is from CIMB (i ask them to include the MRTA and legal fees and they agree, so the total financing is RM 177K + 6.5K but rate is BLR-1.7%, exit period is just 3 year,exit penalty is 3.0% from total loan.

      For HSBC i will pay RM 971 per month for 24 years but if I choose HSBC I will pay RM 1003 for 25 years (higher because HSBC’s rate is -1.9% while CIMB is -1.7% and legal fee and MRTA are included in CIMB loan package).

      At first glance,HSBC does offer a better package because even if I pay the MRTA and legal fees using my own pocket money I can still save about RM 14500 throughout the whole 25 years.

      However, I realise that by choosing HSBC I have to let go RM 6500 in one shot from my Amanah Saham savings which could guarantee me a return of at least 7.0% per annum. I calculate that by paying the MRTA and lawyer fee of RM 6500 upfront I will lose a total of RM 35000 from the amount that I can accumulate (initial investment of 6.5K + compounded interest of 7.0% per annum) during the 25 years.

      Therefore instead of saving RM 14500 I am actually losing RM 20500 (RM 35000 minus RM 14500) if I choose HSBC because although the interest rate is lower I am losing out on the opportunity cost of not being able to invest the RM 6500 in the Amanah Saham because I have to pay the fees upfront.

      Please I really need your thoughts and comment on this. Am I calculating it the right way or do I miss anything in my calculation? Hope for a prompt reply as the developer /bankers has already asked me to decide. This has been bugging me for quite a while. Thanks for your help

    • Mrs

      Hi KCLau, I would like to ask if it is possible to loan more than the sales and purchase agreement (for house improvement expenses) depite of the bank’s lower indicative market value?

      • KCLau

        It all depends on the market value of the property. So, talk to the valuer.

    • zaimatul sulfiza


      I was approached by a friend from freemen (freemen.com.my) and said that I can save a lot of my homeloan interest. Its too good to be true. Is this thing real? I will save Rm115k of in interest savings and they will charge me RM2419 as a consultation fee.

    • spike

      i came across mortgage brokers 5 years ago through CNBC astro channel 518 every saturday n sunday. lots of tips on money matters, managing personal finances. many people do not know that in many countries lock in period by banks are illegal. on top of that you will find a very intersting clause in most home loan agreements a SUSPENCE ACCOUNT this is also illegal in many developed countries. what happens is this any additional money that is put in your loan goes into this account and it is kept there at the discreation of the bank, and it does not go against the principle. SHOCKING. ask around and you find many people are not aware of this, the lawyers say that is a standard agreement. ( this agreement benefits the bank, they are the banks appointed lawyer) they protect the banks interest more than the lenders interest.

      Check out freemen.com.my, this guys have help me and my friend lots of money on our home loan. as much as RM120 K on a 250 K loan.



    • […] before you sign it. If you find that there is too much details for you to look at them in depth, ask these important questions for thorough explanation before you sign the mortgage offer […]

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