"My loan was approved for 90%. Why do I still need more than the 10% deposit?"

Sarah agrees to buy a house for RM600,000.

She has saved RM60,000 for the 10% deposit and applies for a 90% housing loan. The bank approves a facility of RM495,000.

Sarah is confused.

“Ninety per cent of RM600,000 should be RM540,000. Why is the bank lending only RM495,000?”

The bank’s valuation placed the property at RM550,000. Its approved financing was calculated at 90% of that value—not 90% of Sarah’s agreed purchase price.

Sarah must now find RM105,000 to complete the price, before taking legal fees, stamp duty and other expenses into account.

A “90% loan” does not necessarily mean that the buyer only needs 10% cash.

1. The financing margin may be applied to the bank’s accepted value

The purchase price is the amount agreed between the seller and purchaser.

The market value is an opinion of value, commonly determined through a valuer accepted by the bank.

The bank may calculate its financing based on the lower of the purchase price and the value it accepts, subject to its lending policy and the terms of the Letter of Offer.

In Sarah’s case:-

• Purchase price: RM600,000

• Bank valuation: RM550,000

• 90% of accepted value: RM495,000

• Cash required towards price: RM105,000

Her initial 10% deposit of RM60,000 forms part of that RM105,000. She still needs another RM45,000 towards the purchase price.

This additional amount is commonly called a valuation shortfall or financing differential.

2. Loan approval and loan disbursement are different stages

A bank may issue a Letter of Offer approving the financing, but the funds will only be released after the relevant conditions are satisfied.

These may include:-

• execution and stamping of financing documents;

• satisfactory legal documentation;

• valuation requirements;

• proof that the purchaser has paid the differential sum;

• redemption of the seller’s existing loan;

• consent from the relevant authority;

• registration or presentation of security documents; and

• insurance or takaful requirements.

The purchaser should not treat the approved amount as cash that is immediately available.

If the bank requires proof that the purchaser has first paid the difference between the purchase price and the loan, that payment must be planned within the SPA completion timeline.

3. The 10% deposit is not the purchaser’s only cost

Apart from the balance purchase price, the purchaser may need funds for:-

• legal fees for the SPA and transfer;

• stamp duty on the instrument of transfer;

• legal fees and stamp duty for financing documents;

• valuation fees;

• registration fees;

• land and company searches;

• consent fees;

• insurance or takaful;

• adjustments for tax and outgoings; and

• renovation, moving and utility deposits.

The actual amount depends on the property, financing structure, available exemptions and transaction documents.

A purchaser should request an estimated transaction breakdown before signing the offer to purchase.

Promotional statements such as “low entry cost” or “90% financing available” should not replace an itemised calculation.

4. The transfer duty may be assessed using the market value

Stamp duty on a conveyance or transfer of property is generally assessed on the monetary consideration or market value, whichever is higher, under the applicable provisions of the Stamp Act 1949.

This means a lower contractual price does not always result in duty being assessed on that lower amount. Conversely, the bank’s valuation is not necessarily the final valuation adopted for stamp-duty purposes.

The relevant authority conducts its assessment according to the statutory framework.

Purchasers should therefore budget based on a reasonable estimate rather than assuming every cost will follow the loan amount.

5. What if the bank values the property above the purchase price?

Suppose the house is purchased for RM600,000 but valued at RM650,000.

The purchaser should not assume that the bank will automatically lend 90% of RM650,000 and provide cash above the purchase price.

Financing is subject to the bank’s approved purpose, margin, product terms and credit decision.

The bank may limit disbursement by reference to the actual purchase price and the amount required to complete the acquisition.

Any rebate, cashback or special arrangement must be disclosed accurately. The purchaser should not participate in an inflated-price arrangement intended to obtain financing beyond the genuine transaction.

6. What happens if the purchaser cannot pay the shortfall?

The SPA will not necessarily be cancelled without consequence.

If the agreement is unconditional and the purchaser fails to pay the balance within the completion period, the purchaser may face:-

• late-payment interest;

• termination of the SPA;

• forfeiture of the deposit;

• a claim for losses; or

• other consequences stated in the agreement.

The fact that a bank approved less than expected does not automatically transfer the risk to the seller.

A financing condition, if required, should be negotiated and recorded before the purchaser commits. Even then, the wording must address the required amount, application period and evidence of rejection or shortfall.

A general assumption that “the bank should lend enough” is not a contractual protection.

7. Can the buyer apply to another bank?

The purchaser may seek another valuation or financing offer, subject to time and eligibility.

However, a second application may involve further processing time and valuation costs. There is no guarantee that another bank will adopt a higher value.

The SPA completion period continues according to its terms unless an extension is available or agreed.

The purchaser should therefore act quickly and keep the solicitors informed.

8. Should the buyer rely on an agent’s loan estimate?

An estate agent or mortgage consultant may provide a useful preliminary estimate, but only the financier can approve the facility.

Approval depends on matters such as:-

• income and financial commitments;

• credit assessment;

• age and financing tenure;

• property type and condition;

• remaining lease term;

• valuation;

• the number of existing housing facilities; and

• the bank’s internal policies.

A preliminary eligibility check is not a binding loan offer.

The purchaser should also read the approved amount, tenure, rate, instalment, conditions and security requirements in the Letter of Offer rather than relying on a verbal summary.

9. Prepare a full cash-flow schedule before signing

The calculation should answer:-

• How much deposit is payable?

• What is the likely loan amount?

• What if the valuation is lower?

• When must the differential sum be paid?

• What are the estimated legal and stamping costs?

• Are any exemptions confirmed or merely expected?

• What other payments fall due before completion?

• Is there an emergency reserve if disbursement is delayed?

The price shown in an advertisement is only the starting figure.

A purchaser may qualify for a 90% margin and still require substantially more than 10% cash to complete the acquisition safely.