Buying Property: The Late Interest Charges
Before you decide to commit in purchase of property in Malaysia, you must make sure that you are financially ready for the entire transaction (not just the down payment).
In case you are wondering what other fees are involved in such transaction, click here to read about it.
In this post, we are going to look specifically at the Late Interest Charges, something which every potential buyer of property must be aware of.
What’s “Late Interest Charges” and Which Party is Involved?
Late Interest charges is a cost incurred if the transaction (of the sale/purchase of a property) is not completed within 3 months from the date of the Sales & Purchase Agreement (which is the normal completion date in a sub-sale) .
The Late Interest Charges is applicable to both the vendor and the buyer of a sub-sale property.
The vendor will need to bear the late interest charges if he/she fails to deliver the vacant possession of the property within the stipulated period.
On the other hand, the buyer will need to bear the late interest charges if he/she fails to pay the balance purchase price (BPP) within the stipulated period.
How to Calculate?
Here is the formula you can use to calculate the late interest charges:
8% × BPP × [No. of days late] ÷ 365
(BPP = 90% × Purchase Price)
Example of Calculation:
The BPP of a property is RM 450,000.
The buyer only managed to pay the BPP 100 days after 3 months FROM the date of the Sales & Purchase Agreement (the completion date in a normal sub-sale).
The amount of late interest charges incurred is:
8% × 450,000 × 100 ÷ 365
= RM 9,863.01
Planning Ahead is the KEY
To avoid the late interest charges, if you are a buyer, make sure that you have enough cash to cover the BPP regardless of whether you are entitled for 90% or 80% loan. (read from here about what you can do if you secure only 80% loan)
Nevertheless, we would also like to advise buyers to ensure that the bank disburses the loan within 3 months from the date of Sales & Purchase Agreement.
We have come across cases in which the loan disbursement was delayed somehow and, hence, there were late interest charges.
Below is an infographic as a summary to this post.
If you have any question, please feel free to drop us a message!
Z. Hashim & Co.