Loan Agreement for Property in Malaysia

A property loan agreement is the set of documents that records the financing and creates the bank's security over the property. It is prepared by a solicitor, executed by the borrower, stamped and, where the property has a title, registered as a charge at the land office.

What the loan documentation consists of

Where the property has an individual or strata title, the borrower signs a facility agreement setting out the loan terms and a charge in the prescribed statutory form, executed in Form 16A, which is registered against the title. The bank's interest then appears on the register.

Where no title has been issued, the security is taken by way of a loan agreement cum assignment together with a power of attorney, and the developer's or the previous owner's rights are assigned to the bank. The charge is registered later when the title is issued.

Who the bank's solicitor acts for

The loan documentation is prepared by a solicitor on the bank's panel. That firm acts for the bank, even though the borrower normally bears the legal cost. Its job is to make sure the lender's security is valid and enforceable.

This is why the purchase itself needs your own solicitor. The panel firm is not instructed to advise you on the sale and purchase terms, the seller's position, or whether the completion timeline is realistic for you.

When you need your own lawyer on a loan

• When you are buying and financing at the same time, so the loan and the purchase have to complete together
• When you are refinancing and the existing charge must be discharged as the new one is created
• When you are a guarantor and want to understand what you are signing up to
• When the borrower and the registered owner are not the same person
• When the property is jointly owned and only one owner is borrowing

What we do for you

1. Explain the letter of offer and the security documents before you sign
2. Coordinate the loan release with the completion date under the sale and purchase agreement
3. Liaise with the seller's financier on redemption and with your financier on disbursement
4. Attend to stamping of the security documents
5. Present the charge for registration together with the transfer where a title exists

Common mistakes

• Signing the letter of offer without checking the release conditions the bank has imposed
• Agreeing a completion period in the agreement that the loan disbursement cannot realistically meet
• Assuming the panel solicitor will raise problems with the purchase itself
• Overlooking a restriction in interest on the title that must be dealt with before the charge can be registered
• Guaranteeing a loan without advice on what happens if the borrower defaults

Frequently asked questions

Can I choose my own lawyer for the loan documentation?

Usually not. The bank appoints a firm from its own panel to prepare its security documents. You can, and should, appoint your own solicitor for the sale and purchase side of the transaction.

Do I pay for the bank's solicitor?

In most property financing in Malaysia the borrower bears the legal costs of the loan documentation, even though the firm acts for the lender. Some campaigns absorb part of these costs, and the letter of offer will say so.

What is the difference between a charge and a deed of assignment?

A charge is registered against an issued title and appears on the register. A deed of assignment is used where no title has been issued and transfers the contractual rights in the property to the bank as security instead.

What happens to the loan documents once the loan is settled?

The bank issues a discharge. Where a charge was registered, a discharge of charge must be registered to remove it from the title. Where an assignment was used, a deed of receipt and reassignment is executed.

Can the loan and the purchase complete on different dates?

They should not. The transfer and the charge are normally presented together so the seller is paid and the bank's security is created at the same time. Mismatched timing is a common cause of extension requests and interest on late completion.

Related services

• Sale and Purchase Agreement
• Discharge of Charge
• Memorandum of Transfer (MOT)
• Land Search
• Tenancy Agreement
• Lease Agreement
• Property Transfer & Transaction
• Caveat of Property
• Foreigners Buying Property
• Property Lawyer Malaysia

This page is general information about property law procedure in Peninsular Malaysia and is not legal advice for any particular situation. How a matter is handled depends on the title, the state and the facts, and Sabah and Sarawak have their own separate land legislation. Speak to a lawyer about your own circumstances.