LPPSA: An Easy Housing Loan Guide for Government Workers

LPPSA: What is it?

Buying a property in Malaysia can be tough, as you may potentially run into several difficulties. Rejected loans from bankers would be one of the common cases. Well, what other option would you have to finally seize your own house?

If you are a government worker seeking to buy a new property, this article is for you. Lembaga Pembiayaan Perumahaan Sektor Awam (LPPSA), otherwise known in English as the Public Sector Home Financing Board, is a housing loan scheme aiming to easily provide housing loans for public sector employees, bridging the gap between property prices and approved loan amount. It appears to be the case that not everyone has heard of this useful incentive since 53% of government employees are still renting.* 

Thus, this guide will help you to understand what exactly is LPPSA and the criteria to apply, its application process, and most importantly, its benefits.

LPPSA is not eligible for all developments 

It’s important to note that not all developments can be purchased through LPPSA. This scheme typically serves government-owned and residential-titled developments. 

Properties that carry commercial titles, on the other hand, are normally not subject to LPPSA loans. Therefore, it would be useful to firstly check with the developer of the property to ensure that your desired home is officially registered under the LPPSA scheme.

7 Types of Loans by LPPSA

You might think that LPPSA only offers loans to buy a new house. But, that’s not all! This scheme does not only ease the process of purchasing a future residential home for public service workers, but also covers other types of housing loans, as listed in the figure below:

Benefits of LPPSA

Why should you apply for LPPSA instead of the standard bank loan? Well, as a civil servant, you can rejoice as the process of applying for a house loan is easier for you compared to that for private workers/employees under a contract. The table below shows the comparison of advantages between LPPSA loan and bank loan. 

So, not only are you able to apply for a full loan, but you can also borrow for a longer period (up to 90 years of age) at LPPSA. What's even better: the interest rate would also be fixed at 4% compared to bank loans with floating interest rates based on BLR. Normally, the longer the loan tenure period, the higher the interest rate over the years. However, under LPPSA, not only will you enjoy lower monthly repayment fees until you reach 90 years old, the interest rate will remain unchanged during the loan period! 

Joint Home Financing 

Interested to apply for a joint home loan with your spouse or children but they are not in the public sector? Don’t worry! In partnership with MBSB Bank Bhd, LPPSA offers spouses, parents, and children to apply for a shared home loan, with the condition that at least one of the joint applicants is a government employee. 

In simpler words, any government servant can apply for a home loan under LPPSA, while their parents, spouse or children (who are working in the private sector) can obtain funding from MBSB Bank. For example, if a public sector employee manages to obtain a RM 350,000 loan for a house worth RM 400,000, the spouse, parents, or children who are private-sector employees are eligible to apply for a separate loan that can cover for the remaining balance (RM 50,000) from MBSB Bank. 

Therefore, adding to the list of benefits shown on the table above, this joint home financing scheme can reduce your monthly funding commitments (as repayments are divided between joint borrowers) and you can obtain a greater amount of financing compared to individual home loans!

Application Criteria 

To apply for an LPPSA loan, you must:

1. Be a Malaysian citizen
2. Be a government employee with a permanent position 
3. Already receive an employment confirmation letter
4. Have at least 1 year of service 
5. Submit the application one year before retirement/end of service 
6. Have a lawyer as a witness for the Sales and Purchase Agreement (SPA)
7. Include a marriage certificate for 
   • Joint home financing with the spouse, or 
   • Loans that are registered in joint (2) names under SPA
8. Not be: 
   • Bankrupt
   • Burdened with too much debt
   • Earning an insufficient amount of salary
   • Undergoing any discipline procedures 

How LPSSA works 

So, how do you apply for LPPSA? Let us sum up for you:

Loan amount:

• For a first home loan: Should not exceed 60% of your current salary & fixed allowance
• For a second home loan: Should not exceed 50% of your current salary & fixed allowance.

Debt Commitment

• Not exceed 80% of the net income
• At least 20% of your gross income

*You could also calculate your home loan eligibility on the LPPSA website to avoid your application from being rejected.

How much should you borrow?

By referring to the table below, you can know the maximum amount of loan you can borrow based on your net income: 

Once you've got the green light for a housing loan, you may then follow the step-by-step process to apply for LPPSA, as follows: 

MyFinancing App

Good news! If you are the sort of person who enjoys financial efficiency right at your fingertips, LPPSA has developed a mobile “MyFinancing” app to enable easy and quick access to your finance account. With this app, you can check your: 

• Latest application status
• Financing account information/status 
• Enquiry information 
• Withdrawal payment information
• Financial balance
• Amount of monthly installment 
• Amount of outstanding payment 

LPPSA loan is the incentive given by the government to the public servants. If you are part of it, you would not want to miss this! Start to financially plan by fulfilling the application criteria and determining the maximum amount you can borrow. Bear in mind you should also ensure that your desired property is eligible for an LPPSA loan. 

Once done, do not hesitate to surf our property portal; there are various new homes for you to choose from!

*Congress of Unions of Employees in the Public and Civil Services (CUEPACS)