What Loans Are Available For Public Sector Employees?

Category: Step 2: Land Your Loan | Tags: Banks, Finance, Home Loans

Hello, government servants (and others)! As we all know, landing the loan for your home is the bridge you need to conquer to finally achieve homeownership. But sometimes, you may potentially run into rejection hurdles from the banks that you have to get over. Most rejection has to do with your credit score and DSR (Debt Servicing Ratio), a few reasons that you might first want to solve. But, if you’re a government servant looking to buy a home, you should know more about the Government Loan that was designed especially for you!

LPPSA (Lembaga Pembiayaan Perumahan Sektor Awam) is a housing loan scheme that provides housing loans for public sector employees. Interesting fact, not many government servants know of this useful incentive since last I heard, 53% of ya’ll are still renting! As this scheme is only for government servants who are looking for a residential-title property, commercial title properties are usually not part of the LPPSA loan, so before you apply, be sure to check with the developer that the home you have your eye on is part of the scheme!
Now, you might think that LPPSA only offers loans for a home. While that is somewhat true, this scheme also covers other types of housing loans like the 7 ones listed below!

  1. For a completed/ready-made house
  2. For a home under construction
  3. Buying a home on your own plot of land
  4. Settling a housing loan debt with the financial institution
  5. Buying a piece of land to build a home
  6. The renovation for a home
  7. Building a home on the land purchased under BPP/LPPSA

Now, let’s weigh the pros and cons.

As a civil servant, getting approval for your gov housing loan is much much easier than you applying for a normal bank loan. Why this is so is because the approval status of the gov loan is subjected to the civil servant’s HOD green light. The head will check if you can afford the loan based on your payslip instead of your credit report. You’ll also be able to get a finance margin of a maximum of RM700,000 per individual or a 100% for your loan instead of the usual and most commonly practised margin of up to 90% (but most developers already kinda give out rebates that can help cover your 10% downpayment). But not only that, the interest rate will be fixed at a 4% rate throughout your tenure regardless, whilst normal bank loans are usually based on the Bank Lending Rate, a base interest rate that banks check within themselves before telling you how much the interest rate is for your home loan, and it’s actually based on the Overnight Policy Rate (OPR). So for example, during the COVID-19 period, the OPR was slashed down 4 times to help the Malaysian economy. Borrowers were able to benefit as it cost less because the loan’s interest rate has already been decreased! But unfortunately, government servants could not enjoy this slashed rate as theirs is fixed at 4%.

The interest calculated for government loans would be based on a monthly outstanding balance. Government servants will be able to utilize their government loans twice! Your first loan will have a tenure of over 30 years, and 25 years for the second loan till you’re 90 years old. However, to utilize your government loan for the second time, you’ll need to make sure that your first loan has been fully repaid for. Additionally, instead of a yearly balance like other bank loans where the loan tenure can be over 30 years up only up till 70 years old for the borrower.

Now, do joint home loans work if let’s say you’re a civil servant and your life partner isn’t? Yes! You’ll be able to join with a conventional loan with the condition that at least one of you is a government servant. So, added to the list of benefits, joint loans can reduce your monthly commitments since the repayments are split between the borrowers. But p.s: be sure that you pick your joint loan partner very very carefully! If one does not repay the bank on time, it will affect both your credit scores.
Let's summarize it up!

So, are you eligible?

To apply for an LPPSA loan, here’s what you need:

  1. Malaysian citizenship
  2. Government employee with a permanent position
  3. Employment confirmation letter
  4. At least 1 year of service
  5. Application submission must be 1 year before retirement or end of service
  6. Have a lawyer witness the Sales and Purchase Agreement (SPA)
  7. Marriage Certificate: for your joint loan and SPA

And here’s what you must avoid:

  1. Bankruptcy
  2. Burdened with debt
  3. Discipline procedures
  4. Insufficient income

To keep things healthy, don’t exceed 60% of your salary and fixed allowance especially for your first home loan’s amount. For your second loan, it should not exceed 50%. Now that you know of this goodie deal, remember to utilize it! It’s time to start planning for your finances and application to LPPSA. Good luck and thank you for your service to this country. <3

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