Do you know the Legal Fees For Loan Agreement can be financed in the loan? This means you can finance the Legal Fees, and not only that, but you can finance other fees like stamp duty, valuation fees, and mortgage insurance too.

When it comes to buying a house in Malaysia, most of us will require a bank loan to finance the property.

Generally, in Malaysia, we will apply for financing from a Bank. If I am not mistaken, there are almost 27 commercial banks in Malaysia that you can apply for your home loan financing.

The most common banks will be Public Bank, OCBC Bank, Maybank, RHB Bank, CIMB Bank, Standard Chartered Bank, Bank Islam, Bank Rakyat, HSBC Bank, et cetera.

THE PROCESS OF GETTING A BANK LOAN

After putting down a house deposit with the property agent or house owner, a purchaser will naturally apply for a bank loan from the bank. The bank will process the client documents hence granting loan approval.

The bank’s approval will come with a bank letter offer. Once the bank letter offer signed by the borrower, the borrower will require to attend a signing with the Bank’s appointing Lawyer to execute a Bank Loan Agreement.

Most of the time, a Borrower can request to appoint a Bank’s panel lawyer firm as long as the lawyer is in the bank panelist.

A Bank Loan Agreement is an agreement between a bank (the lender) and the Borrower.

The Bank Loan Agreement consists of the Primary Agreement, the Facility Agreement, followed by subsidiary documents like Charge documents, Deed of Assignment, and Power Attorney. Depending on the property title status, each of these agreements consists of many legal clauses and terms that hardly any layman will understand.

Most of the clauses and terms would cover the property’s bank rights if the loan were defaulted by the borrower. The clauses might bias toward the bank, but I think it is fair considering the upfront cost a bank will need to come out for financing the property.

When preparing a Bank Loan Agreement, there will be a Legal Fees for Loan Agreement.

Normally, the Legal Fees for Loan Agreement quotation is including,

  1. Legal Fee on Loan Agreement
  2. Stamp Duty For Loan Agreement
  3. Disbursement Fee
  4. 6% Service Tax.

how to calculate legal fees for loan agreement

HOW TO CALCULATE LEGAL FEES FOR LOAN AGREEMENT IN MALAYSIA?

Firstly, you should know the Legal Fee On Loan Agreement is based on a scale fee. Check out the table below.

Legal Fee on Loan Agreement

LOAN AMOUNT PERCENTAGE CHARGE
For the first RM500,000 1.00% (subject to a minimum fee of RM500.00)
For the next RM500,000 0.80%
For the next RM2,000,000 0.70%
For the next RM2,000,000 0.60%
For the next RM2,500,000 0.50%
Excess of RM7,500,000.00 shall not exceed 0.50%

Based on the above legal fee on loan agreement scales, we will calculate the actual legal Fee. Refer to the two examples below.

Example 1.

For instance, Jenny applies for a bank loan. And the loan amount is about RM500,000. So, how much is the legal fee on loan agreement?

The answer is RM5000.

The formula,

RM500,000 x 1% = RM5000.

Okay, that’s an easy one.

Example 2.

Suppose Jenny applies for a bank loan for RM1 million. How much is the legal fee on loan agreement now?

The answer is RM9000.

The formula,

For the first RM500,000 x 1% = RM5000.

For the next RM500,000 x 0.8% = RM4000.

The total legal fee on the loan agreement is RM9000.

On top of the loan agreement’s actual legal fee, there are charges on the subsidiary documents like Charge documents, Entry and withdrawal of Private Caveat, Consent to charge, Deed of Assignment, and Power Attorney.

Depending on the property land title status, either is a Freehold with Individual Title, Leasehold with Individual Title, Freehold with Master Title, or Leasehold with Master Title.

For every subsidiary document, the cost is 10% on the Legal Fee except for the Entry and Withdrawal of Private Caveat, which is RM350. However, the maximum cap will be at RM1200 each.

For instance, if the legal fee on loan agreement is RM9000. The subsidiary documents will be RM9000 x 10% = RM900.

However, if the legal fee on loan agreement is RM16,000. The subsidiary documents is RM16,000 x 10% = RM1600.

But, because of the maximum cap, the lawyer is only allowed to charge at RM1200 maximum. Hence, only RM1200 will be charged for each subsidiary document.

stamp duty for loan

STAMP DUTY FOR LOAN AGREEMENT

If you are applying for a home loan in Malaysia, regardless you are a Malaysian or Foreigner, everyone requires paying a Stamp Duty for Loan Agreement.

Stamp Duty for Loan Agreement is based on one fixed rate.

LOAN AMOUNT RATE CHARGE
Any loan amount 0.50%

Based on the Stamp Duty For Loan Agreement above, we can calculate the Stamp Duty. Refer to the two examples below.

Example 1:

For instance, Jenny applies for a home loan. And the home loan amount is RM500,000. So, how much is the Stamp Duty for Loan Agreement?

The formula,

RM500,000 x 0.50% = RM2500

The total Stamp Duty For Loan Agreement is RM2500.

Example 2:

If Jenny applies for a home loan and the home loan amount is RM1 million. How much is the Stamp Duty for Loan Agreement now?

The formula,

RM1,000,000 x 0.5% = RM5,000.

The total Stamp Duty for Loan Agreement is RM5,000.

legal fees for loan agreement

DISBURSEMENT FEE

When preparing for the Bank Loan Agreement, there will be some other small fees involved like, Stamping on Statutory Declaration and Affirmation, Stamping on Letter Offer, Registration fees for charge annexure, registration fees for Entry and Withdrawal of Private Caveat, a Registration fee of consent to charge, winding up and bankruptcy search, land search, bank purchase document, traveling and courier services, photocopy, printing, faxing, et cetera.

All these small fees are lump into one and called Disbursement Fee.

Generally, the total charge of the disbursement fee will be in the range of RM1500 to RM2000.

6% SERVICE TAX

The Service Tax is imposed on specific prescribed services provided by a taxable person in the course or furtherance of Malaysia’s business. The current service tax in Malaysia is 6%.

A lawyer charged a 6% Service Tax to the client. The portion being charged is the Legal Fee on Loan Agreement and the subsidiary documents.

For example, If the Legal Fee on Loan Agreement is RM5000, the subsidiary documents are RM500, Entry and Withdrawal of Private Caveat is RM350, the total is RM5850.

The Service Tax is RM5850 x 6% = RM351.

So that concludes all the fees in Loan Agreement Quotation.

Here we have one example with all the legal fees on loan agreement calculation come together.

Example:

Jenny applies for a home loan. And the loan amount is about RM500,000.

Legal fee on loan agreement: RM5850

Formula,

RM500,000 x 1% = RM5000

Charge Document, 10% x RM5000 = RM500

Entry and Withdrawal of Private Caveat = RM350

Stamp Duty For Loan Agreement: RM2500

Formula,

RM500,000 x 0.50% = RM2500

Disbursement Fees: RM1799

6% Service Tax : RM5850 x 6% = RM351

TOTAL COST OF LEGAL FEES FOR LOAN AGREEMENT: RM10,500.00

That about 2.10% of the loan amount.

Formula,

RM10,500/ RM500,000 x 100 = 2.10%

Example of LEGAL FEES FOR LOAN AGREEMENT QUOTATION

legal fees for loan agreement quotation

If you guys are interested in getting an accurate Legal Fee For Loan Agreement Quotation, send your request by clicking HERE.

Or fill-up the form below, and we will send you the Legal Fee For Loan Agreement Quotation to your WhatsApp or email.

In case you’re wondering about SPA Legal Fees, you can check the article here – LEGAL FEES FOR BUYING A HOUSE.

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