Mortgage agreements made simple with BNM's new rule
January 04 2013
Home loan agreements are now easier to comprehend thanks to a standard template introduced by Bank Negara Malaysia, reported The Sun Daily.
Starting 1 January, all commercial banks have to use a standard template for their housing loan agreements. The template outlines in easy-to-understand language, the most important terms, provisions and definitions found in the contract.
It also gives clear and consistent definitions of terms that are of greatest concern to a home buyer such as margins, prescribed rate, default rate and base lending rate.
The template, which can be downloaded from the website of the Association of Banks Malaysia (ABM) www.abm.org.my, makes complex mortgage documents more “consistent, streamlined and simplified,” said Chuah Mei Lin, Executive Director of ABM.
“Where before the order of the provisions, language and terminology used varied from bank to bank, it will now be the same across all banks, so there is no more confusion for the home buyer.”
Previously, borrowers complained of “hidden” terms and conditions in their mortgage agreement, albeit not purposely hidden by the issuing bank. More likely, the terms were “buried” underneath complex language and jargon, she explained.
“This template does away with all the complexities, since it simplifies the loan agreement to just 15 pages, and highlights the key areas for the consumer,” she added.
“The key areas include – how much do I have to pay each month, how much is the interest, what happens if I default, as well as what is considered a default.”
Furthermore, standardised documents are bundled into three parts. Part A contains standardised provisions and definitions of key terms. Part B contains other terms and provisions not covered in part A such as Indemnity for loss, Taxes and Withholdings, and Consolidation and Combination of Accounts. Finally, part C contains the bank’s letter of offer.