Most people dream of owning a home in the future, but the process, from loan application to loan disbursement, can seem complicated at first.
In this article, we look into various formalities involved in the loan disbursal process and various other factors that can delay a loan disbursement.
But before we get into the loan disbursement process in Malaysia, we must first understand the various property titles in Malaysia.
Important Property Titles in Malaysia You Need to Know
1. Individual Title
An individual title is a property title issued when you are the sole owner of an entire piece of land. This is given to homeowners of landed properties such as semi-D houses, terrace houses, and bungalows.
2. Strata Title
A strata title is a property title often issued for high-rise properties such as condominiums and apartments.
The land owner with a strata title will have to share the common facilities and areas of the property with other residents, for example, the swimming pool, gym, elevators, lounge and more.
The strata title is essential for homeowners because it serves as proof of ownership of the apartment or condominium and can prevent complications should the developer come under liquidation or become bankrupt.
3. Master Title
During a property’s construction and development stage, the entire project or land is put under the master title. It is usually registered under the name of the proprietor or developer.
Once the construction and development stage is completed, its separate units will be divided and sold into individual titles or strata titles.
However, the common areas and shared facilities, such as playgrounds, swimming pools and outdoor spaces, will remain under the master title.
4. Freehold Property
In Malaysia, when the State Authority disposes of land to an individual for an infinite period, it will be considered a freehold title.
The buyer will own the land the property is built on and have the freedom to do what they want with the land.
5. Leasehold Property
On the contrary, when the State Authority disposes of a piece of land to an individual for a period of time (not exceeding 999 years), the land will be considered a leasehold title.
Once the leasehold period expires, the land returns to the State Authority. If the owner wants to retain the land, they will have to apply for a leasehold extension before the lease expires.
Unlike properties with a freehold title, leasehold title owners must abide by stricter rules and regulations.
Understanding the Loan Disbursement for Different Properties in Malaysia
1. For Individual & Strata Title Properties
For individual and strata property owners who want to refinance their loan, the time needed to refinance their loan will be different.
On the other hand, for landowners with a freehold property, the loan disbursement process will take approximately 3 months. However, for leasehold property owners, it may take up to 6 months because they need to receive consent from the State the property is in.
2. For Master Title Properties
In Malaysia, there are two common issues regarding strata titles:
- Developers have not applied for strata titles or
- Strata title has been issued, but the buyer has not obtained it.
Suppose a property is not given its strata title or the developed does not complete the title transfer process. In that case, the land still legally belongs to the developer (or the registered proprietor).
This can become problematic as the homeowner may face difficulties with the loan disbursement process.
Banks require more cost and time to provide financing for Master title properties of more than 10 years (an additional 3 months) or a property with a bankrupt developer (1-year process).
What is Property Encumbrance?
A property encumbrance is an interest or right held by a third party that hinders a transaction, such as a real estate transfer.
For example, you have a mortgage with the bank. If you have not paid it off, your property’s deed will not be released by the bank.
Instead, the lender retains an interest on your property until the mortgage is paid in full. But if the mortgage is not repaid, the lender may foreclose, seizing your home as collateral and evicting its inhabitants.
Therefore, knowing if your property is free from encumbrance is essential as it impacts its transferability. If the property is free of encumbrances, refinancing can be carried out.
But take note, the title transfer process from your ‘old’ bank to the new one will require an additional month.
4 Other Common Factors That Can Delay a Loan Disbursement
1. Bank Operations Vary
The loan disbursement process varies from bank to bank. For example, different banks require different documents and may have different loan policies or applicant screening processes in place.
2. The Law Firm You Work With
The law firm you work with can impact your loan disbursement process. When looking for legal representation to work with, you should consider the following:
3. Experience & Track Record
Do the lawyers have experience? You need to find attorneys who specialise in the legal service you need. Such a lawyer will know all the factors that may affect your case ahead of time.
Another effective way to evaluate potential attorneys is to look at the ratings and reviews given by their clients and peers in the legal community.
Ask if the firm can provide the names of past clients you can contact as references.
When choosing a law firm, bigger isn’t always better. Many larger firms need to run through numerous cases at a time, and therefore, the unique aspects of each client’s case can get lost in the process.
An experienced law firm often partners with other law firms when it’s in the client’s best interest, particularly in complex, high-value cases.
For example, sometimes attorneys join forces to share their research, expertise, and other resources to build the best case for you.
7. Missing Loan Documents
The loan application process requires many documents to be filled out, and keeping track of all your documents can be difficult.
Small errors such as a misspelt last name or using a nickname instead of a legal name can delay the loan disbursement process.
Misplaced documents can also delay the process, as the buyer must prepare another copy.
8. Land Office Operations
A land office, also known as the Land Registry in Malaysia, receives all applications to register a newly purchased or transferred property.
Land titles must be registered with the Land Registry to conclude the ownership transfer process and allow the new owner to have complete property ownership and rights.
The property registration process in Malaysia is carried out in 4 steps:
- Submission of the sale and purchase agreement at the Stamp Office
- Property valuation
- Registration of the property with the Land Registry
- Transfer of property
However, the transfer process is different according to the type of property. Freehold properties have a faster transfer process as the owner does not need to receive consent from the State.
However, for leasehold properties, the owner will need to wait approximately 3 months to obtain the State Authority’s consent. The information provided by the seller also determines the time required to obtain consent.
How Bluebricks Can Help You
As a trusted loan consultant company in Malaysia, Bluebricks offers efficient refinancing loan rejected services to increase our client’s chances of having their loan application approved. Moreover, if you are in need of cash urgently, we are also a licensed money lender. We provide our clients with fast cash at a 1 to 1.5% interest rate.
Loan Disbursement – FAQs
To help you on your loan application journey, we have compiled some popular questions on the loan disbursement process in Malaysia.
1. How long does the loan disbursement process take?
A bank will take approximately 3 months to disburse funds for a home loan or refinancing.
2. What happens after a loan is disbursed?
Once your loan disbursement is approved, you will receive a letter from the bank stating the disbursed amount, instalment date, loan tenure, and interest rate.
3. What do I do if my loan is not disbursed?
You can contact your loan officer for assistance if the amount is not disbursed even after proper approvals.
Rest assured that you will not be charged unless the amount is disbursed and has reached your bank account.