As you’re scouring through potential developments to invest in, the thought of becoming a first-time property owner can be both exciting and daunting at the same time. We know. We’ve been there. But as you take that first step forward into the next stage in your life, here are some terminologies that might come in handy, especially during your showroom visits!
- Sale & Purchase Agreement (SPA)
A legally binding contract that outlines the details of the sale made between the developer/seller and you.
- Memorandum of Transfer (MOT)
A document that officiates the transfer of ownership from the developer or property seller to you. This is to simply indicate the property is yours.
- Commercial Title
Properties invested for business use, and is not entitled to RPGT exemption (except for serviced apartments and SOHO). Not all properties under the commercial title are protected by the HDA.
- Residential Title
Properties invested for residential use, and is protected by the HDA.
- Housing Development Act (HDA)
A national public development agency established by the Act of Parliament (Act 23 of 2008). The agency promotes sustainable communities by making well-located land and buildings available for the development of housing and human settlements.
- Real Property Gain Tax (RPGT)
RPGT is a form of Capital Gains Tax levied by the Inland Revenue (LHDN). It is chargeable upon profit made from the sale of your land or real property, where the resale price is higher than the purchase price. Exemptions for the RPGT are made for first home sellers.
Think of it as a business transaction. Once you’ve made a profit from your sale, you’re subjected to declare it by paying a tax. Different tax rates are also incurred on different groups of people (such as Malaysians expatriates, and companies).
Good news: according to the new RPGT Act 2020, homeowners can now sell up to three properties at an RPGT tax exemption between now until 31 December 2021!
- Progressive Interest
A stage-by-stage payment you’ll need to make to the bank leading up to completion of your property. What this means is basically it’s a type of interest that you need to pay to the bank according to your property’s development stages. Bear in mind that It’s also not a part of the principle loan interest. The progressive interests are payments you need to make before 100% of the loan is released to the developer.
Say you’ve bought a property on the 2nd floor in a 20-storey development. Once the developer starts working on the first to fifth floor, you’ll need to start paying say RM400 a month as the progressive interest. Once they start working on the subsequent 5 floors, you’ll possibly need to pay RM800.
The charges are doubled by the year as the development progresses until its completion. But if you’ve bought a property that’s set to complete sooner than later, you won’t have to worry about the yearly subsequent charges. This is why most home-buyers (especially those who are renting and are not living with family) would prefer to buy a property with a sooner move-in date.
- Bumi Lot
Land or property that can only be bought, sold and owned by Bumiputeras.
Freehold property belongs entirely to the owner with no control from the government. Usually held at a higher value as it belongs to you (and your future family) indefinitely.
A leasehold property is owned by the government and can only belong to its owner for 30, 60, 99 or 999 years. Note that it can be extended BUT you’ll need to pay an additional premium to the government, on and upon approval basis.
- Mortgage Reducing Term Assurance (MRTA)
An insurance plan with a decreasing sum assured over time, used to pay your outstanding home loan in the event something happens to you (for example, death or total permanent disability).
- Mortgage Level Term Assurance (MLTA)
Similar to MRTA, except that it has a constant sum assured over time, and the pay-out is to the outstanding home loan AND your nominated beneficiary. MLTAs also generally cost more than MRTAs.
- Mortgage Reduction Term Takaful (MRTT)
A Takaful insurance product that's designed to provide financial support in the case of total permanent disability (TPD) or death. But as your home loan amount reduces, so too does the cover which MRTT provides – hence, the ‘mortgage reduction’ in the MRTT meaning.
- Mortgage Level Term Takaful (MLTT)
Similar to MRTT, except the sum covered under MLTT remains level throughout the period of the plan – hence ‘level term Takaful’. This policy is also designed to provide essential financial assurance for your family, in the event of death or permanent disability.
*These are of course, just some of the more common terms you’ll be hearing (and seeing) once you’re on the lookout for a future property. Be it now or later, it’s always good to do your research ahead of time and ask your agents about the terms you’re curious about, especially the ones you don’t understand!