Glossary
Letter of Offer
A formal document issued by a bank to a loan applicant, outlining the approved loan amount, interest rate, tenure, terms, and conditions. Acceptance of the Letter of Offer is legally binding.
In Detail
After your housing loan application is assessed, the bank will issue a Letter of Offer (LO) detailing the terms of the approved loan. Key elements include: loan amount and margin of finance (e.g., 90% LTV), interest rate (fixed or variable), loan tenure (up to 35 years), monthly installment, lock-in period (typically 3–5 years), legal fees, stamp duty, insurance requirements (MRTA or MLTA), and any special conditions (e.g., completion guarantees, revaluation clauses). You typically have 14 days to accept the LO by signing and returning it to the bank, along with payment of the booking fee (usually 0.25–0.5% of the loan amount). Once accepted, the LO becomes a binding contract — you cannot unilaterally cancel without incurring penalties. Carefully review the LO before signing, especially the interest rate type, lock-in terms, and early settlement penalties. If terms are unfavorable, you can negotiate or walk away before accepting. Many buyers make the mistake of signing immediately out of fear of losing the offer — take your time, and compare with other banks if possible.
Investment Impact
The Letter of Offer locks in your financing cost for the property. Key investor focus: lock-in period (limits refinancing flexibility), early settlement penalty (3–5% of outstanding principal if you exit early), and interest rate floor (caps your savings if rates drop). If you're buying for short-term flipping (3–5 years), minimize the lock-in period or choose a loan with lower early settlement penalties. For long-term holding, prioritize the lowest effective interest rate, even if the lock-in is longer. Always model your exit costs — a 3% penalty on a RM2M loan is RM60,000, which can wipe out two years of capital gains.