LPPSA loans may be an unfamiliar term to some while others may have heard of it but have no idea how to utilise them. However, you might want to give it a try if you meet the eligibility criteria, as they are a convenient way for government employees to obtain a housing loan
Many Malaysians, especially the younger segment, want a house to call their own. Securing a housing loan can be a long and daunting process for most people, and older applicants may find it doubly challenging due to banks’ reluctance to lend to borrowers nearing retirement. But with LPPSA, there is no need to worry as it’s relatively easy to obtain financing.
Read on below to find out everything you need to know about LPPSA loans.
LPPSA stands for “Lembaga Pembiayaan Perumahan Sektor Awam”. LPPSA is a statutory body tasked with administering housing loans for civil servants in the public sector. There are seven types of LPPSA loans to cater to different financing needs. Every loan applicant must fill up an application form to initiate the loan application process. Eligibility reviews for LPPSA loans are conducted based on the applicant’s salary statement, without considering any external commitments such as other outstanding bank loans. Hence, LPPSA’s loan eligibility criteria is relatively lenient compared to other loan providers, allowing them to qualify for a loan via LPPSA where they would not have qualified for a typical private sector loan otherwise. More information regarding LPPSA loans can be found on LPPSA’s very own official website: http://www.lppsa.gov.my
First and foremost, you must be a Malaysian citizen to apply for an LPPSA loan. Second, you must be a permanent officer currently serving as any of the following positions:
Third, you must have served for at least one (1) year and have been confirmed in your position. Lastly, you must not be declared bankrupt, suspended from work, or subject to any disciplinary action resulting in dismissal from work. If you meet these requirements, then you are eligible for the loan.
It’s important to note that not all developments can be purchased through LPPSA. This scheme typically serves government-owned and residential-titled developments.
Properties that carry commercial titles, on the other hand, are normally not subject to LPPSA loans. Therefore, it would be useful to firstly check with the developer of the property to ensure that your desired home is officially registered under the LPPSA scheme.
This scheme covers various types of housing loans, as listed below:
(Note : Strata Title is generally for properties in a multi-storey building and the land usually belongs to the owners of the property. Individual Title is generally for landed properties. It is issued when you are the only owner of the plot of land.)
If the property has been mortgaged to a bank/institution, the balance of the seller’s debt must be within the limit’s eligibility of the applicant for the following six(6) months. Purchases of real estate from sellers who still have not acquired Individual / Strata Title yet, is only allowed with the condition that the purchase of property must be made in the secondary market.
Construction of the house can only begin after financing is approved. Houses should be built within privately owned land. The applicant can be the full property owner or co-owner between immediate family members. The house should follow the current financing guidelines. The costs of building site preparations are not covered under the loan and there must be no existing building on the land.
For houses that are still under construction, the purchase can be made from the contractor of the real estate and has Individual Title. The purchase must record the Developer License as well as Sale Permit in Sale and Purchase Agreement. Moreover, buying a residential apartment compartment with separate parking lot is allowed provided the Sales and Purchase Agreement must be separate and the application required to be submitted simultaneously. In addition, if the land is in the category of Agricultural Land, it is required to change the land conditions to Building. In order for that to happen, the developer must submit a copy of the approval letter regarding the change of land conditions as well as a copy of premium payment receipt that has been certified by the lawyer who’s in charge during the application process.
Purchases are only allowed if the land has Individual Titles and is ready for home construction. The purchasing amount must not exceed 50 percent of the maximum eligibility amount.
Banks/financial institutions must have fully settled the payment to developers/sellers. Secondly, Individual/Strata title must be in the name of the applicant and has been pledged to banks/financial institutions. If the property only has a Master Title, the Sales and Purchase Agreement must be in the name of the applicant as a buyer. In addition, this facility cannot be used for taking transfer of bank/financial institution financing debt balance on previously financed real estate through Treasury/Board financing. For taking over the financing debt of banks/financial institutions to buy land, the balance of the debt must not exceed the lower half of the qualifying amount or JPPH’s valuation.
Applications can be started submitting after APG on building for type 4 or type 5 financing has been activated. Building plans approved by the Local Authority and approval period should be still effective.
The following are the conditions for home renovations:
Renovation financing is only allowed if it involves enlarging the building and there must be no arrears of financing repayments.
Moreover, the husband/wife of the customer is also allowed to apply for financing for home renovation with few conditions.
Applications can be submitted after the withdrawal of financing money has reached 100 percent for financing Type 1 and 5. While for financing Types 2, 3, and 6, applications can be submitted starting from the date of issue of the payment voucher.
In addition, the salary deduction for the first financing must has been executed and there must be no arrears. Applicants will also need a copy of the building plan approved by the Local Authority which the period of approval is still active as well as a copy of the plan approval letter from local authorities.
The cost of home remodelling work needs to be evaluated by JPPH. If the Individual / Strata Title has been issued for cases of assignment of rights, home renovation work is only allowed after the property is mortgaged to the institution.
Home remodelling work can only be started after getting a letter of approval for financing and not allowed to make changes to the original plan and custom work specifications. The building plan prepared by the architect is necessary to get approval from local authorities.
So, how do you apply for LPPSA? Let us sum up for you:
*You could also calculate your home loan eligibility on the LPPSA website to avoid your application from being rejected.
Financing Application – Only allowed for one (1) lot/unit of property at a time.
Purchasing – Directly from the Developer for properties categorised as “Under Construction” or “Completed”.
Second Property – First financing must be fully paid off. Applicants applying for their second LPPSA loan are not eligible for Type 7 financing.
Purchasing Contra Property – This happens when the current owner is looking into selling his unit and buying another one and wants both transactions to be executed at the same time. For this 100% payment must have been issued and also the property must have been pledged to the LPPSA.
Purchasing Auction Property
Developer Term – Construction Projects exceeds if minimum completed buildings by developer:
Purchasing Real Estate in the Secondary Market (No Individual / Strata Title yet) – Developed by Developer and has been 100% ready. Financing money is withdrawn after the transfer of rights to the LPPSA is completed.
Purchasing Real Estate in the Secondary Market (Individual / Strata Title) – Individual Title has been issued in the name of the developer/landlord but ownership has not been transferred.
Purchase of Individual / Strata Titles Property – Applicant need to get permission to transfer/mortgage from the State Authority upon purchase of individual or strata titles property.
Co-Financing – Co-financing can be done either with husband/wife/father/mother/children.
Take Over Financing – Take over financing includes leaving services, divorce and property handed over or transferred on a court order.
Refer to http://www.lppsa.gov.my/en/peraturan-am-lppsa/ for more on general rules of LPPSA loan.
Why should you apply for LPPSA instead of the standard bank loan? Well, as a civil servant, you can rejoice as the process of applying for a house loan is easier for you compared to that for private workers/employees under a contract.
So, not only are you able to apply for a full loan, but you can also borrow for a longer period (up to 90 years of age) at LPPSA. What’s even better: the interest rate would also be fixed at 4% compared to bank loans with floating interest rates based on BLR. Normally, the longer the loan tenure period, the higher the interest rate over the years. However, under LPPSA, not only will you enjoy lower monthly repayment fees until you reach 90 years old, the interest rate will remain unchanged during the loan period!
The payment can be easily made via the following:
JomPay is a payment platform, where you can use many different banks to pay. It allows customers to pay bills conveniently and securely via Internet banking platforms such as Maybank2u, CIMBClicks, PBe and others.
Refer to the online payment user manual of CIMB Clicks and MAYBANK2u in http://www.lppsa.gov.my/ for payment through online banking transfer.
Good news! If you are the sort of person who enjoys financial efficiency right at your fingertips, LPPSA has developed a mobile “MyFinancing” app to enable easy and quick access to your finance account. With this app, you can check your:
LPPSA loan is the incentive given by the government to the public servants. If you are part of it, you would not want to miss this! Start to plan financially by fulfilling the application criteria and determining the maximum amount you can borrow. Bear in mind that you should also ensure your desired property is eligible for an LPPSA loan.