Please read this Product Disclosure Sheet before you decide to apply for this product. HOME FINANCING 1. What is this product about? The purpose of a home financing is for: Home Purchase: for the purchase of a proposed property from property agents or developer, ready completed property or second-hand home. Home Construction: for the construction of a new home. Shop-House Purchase: for the purchase of completed shop-houses. Financing Reschedule: Rescheduling of existing obligations from other Banks / Government. 2. What is the Shariah concept for this product? The shariah concepts for BIBD Home financing are Musyarakah Mutanaqisah and Ijarah. Musharakah Mutanaqisah (MM) The Bank and the Customer agree to jointly purchase and co-own a property, which is called a Musharakah agreement. Both Customer and the Bank will contribute to the Musharakah by contributing Musharakah Shares (the Customer will contribute by paying the deposit, while the Bank will contribute the remaining finance amount). The Customer undertakes to buy the shares owned by the Bank gradually until all of the Bank s shares are purchased by the Customer over the period of finance. Ijarah The Bank will lease its shares of the property to the Customer under the Shariah principle of Ijarah. In other words, the Customer will pay Ijarah rentals to the Bank over the period of finance. 3. Explain more in detail on how Musyarakah Mutanaqisah works Musharakah Mutanaqisah i. BIBD and Customer agree to contribute Musharakah to co-own a proposed property under construction, example: a) BIBD contributes 95% to the construction cost and customer contributes remaining 5%, OR b) BIBD will contribute 100% of the construction price and customer contribution will be in kind value i.e. land. ii. The element of Musharakah (Diminishing) is when the customer gradually purchases the Musharakah shares owned by the Bank in stages until 100% owned by customer at the financing term. Ijarah Mausufah Fi Al-Zhimmah i. BIBD (as lessor) will lease out its shares of the property to the customer (as lessee). It is based on the undertaking by the lessor to deliver the asset based on agreed detailed property specifications, value and time of availability. ii. Customer will pay advanced rental to BIBD during construction stage. The amount collected is kept in trust as deposit/security. If the property failed to be completed, the advanced rental will be reimbursed back to the customer. 1
iii. Upon completion of the construction, the customer will continue to pay the Ijarah rental on the usage of the usufruct of the property until the end of the Ijarah /financing term. Wakalah i) They will be 2 situations occurred: a) BIBD appoints the Customer as its agent under the Project Management under Construction Agreement to manage and oversee the progress of the construction project according to the agreed scope and specifications. b) BIBD appoints the Customer under the Wakalah Service Agency Agreement, as its agent to ensure that the property is properly maintained and ensures major maintenance of the property during the period of financing. ii) If the customer found to be negligent or failed in fulfilling his responsibilities under these agreements, BIBD has the right to appoint any third party to carry out these responsibilities. 4. How is the Syariah product structure and flow? Customer agrees a property to be constructed from developer for $100,000. Signs S&P with developer & pay $5,000. Apply for UCMM financin g $95,000 for 25 years. Signs the financing & security documents Financing Offer Letter Musyarakah Mutanaqisah Ijarah Mawsufah Fi Al-Thimma Wakalah Service Agreement Project Management Under Construction Agreement -Customer transfers his beneficial ownership in the house as 5% ($5k) Musharakah contribution. -BIBD pays developer $95,000 as 95% Musharakah Contribution. 2
(c) Construction Stage (e) Construction completed. (g) Maturity BIBD appoints customer as project manager to monitor progress. BIBD appoints customer as agent to look after the leased asset. (d) During construction, BIBD leases its 95% beneficial ownership to the customer under Ijarah Mausufah Fi Al-Zimmah and customer pay advanced rentals. Ijarah Mausufah Fi Al- Zhimmah/Forward lease will be converted to normal Ijarah. The 1 st rental will include total advanced rental payment paid during construction. (f) Customer purchase Musharakah Shares owned by BIBD on monthly basis. Customer ownership will gradually increase whilst BIBD ownership decrease until end of financing term. Upon payment of all BIBD s Musharakah shares by Customer, BIBD acknowledge full beneficial ownership transferred to Customer at the end of financing term. 5. What are the product features and benefits? The product features and benefits are: Get a higher financing entitlement of the property value Tenures for up to 25 years Higher Financing amount Attractive pricing Based on shared ownership principle based on the Musyarakah Mutanaqisah concept 6. Who is eligible to apply for this product? Home financing is eligible for applicants with the criteria as follows: Brunei Citizen / Permanent Residents Aged 18 and above Employed with the Brunei Government, semi-government or private sector recognized by the Bank. 7. How much can I get from this financing? The Home Financing eligibility is determined by customer s repayment capability, taking into consideration factors such as: Income Age (min 18 years old) Occupation 3
Remaining employment service Existing financing obligations Open Market Value (OMV) of Property The most important factor in determining their financing eligibility is the ability to pay off the monthly financing repayment. 8. What is the maximum amount customers can apply for? The maximum amount of financing is up to $750,000.00*. The maximum amount that they can apply depends on factors such as: The market value of the property. They will be offered financing amount of up to 100%* of the market value of the property. Their fixed monthly income. Their remaining employment service. The purpose of the financing. * (subject to T&C) 9. What is the maximum repayment period (tenure) for home improvement financing? The maximum tenor for home financing for all customers is 25 years or the remaining period of their employment service (whichever is lower). 10. What is the profit rate and method of profit computation for this product? The current profit rate ranges between 4.5% to 5.75% Annualised Percentage Rate (APR). 11. What are the fees and charges I have to pay? Customers will be subject to the Bank s fees and charges as per prevailing Schedule of Tariffs. 12. How do I apply? You will need to submit the completed application form along with the necessary documents*. The bank will review it after going through the application. The bank will also informally tell them the financing amount they are entitled for. *Refer: Required Documentations. 13. What are the required documents that I need to submit? Stage 1: At the pre-approval stage Basic Documents: Identification Card Latest Salary Slip Confirmation of salary / service contract / rental / pension (where applicable) Statement of savings with other financial institution (where applicable) For House Construction: House Plan (draft/approved) Land Title Development Agreement between contractor and customer Quotation on construction of the house 4
For House/Land Purchase: Letter of Intent from vendor/developer House Plan and/or Land Title Stage 2: Upon signing of financing agreement For House Construction: Approved House Plan Approval letter from Town & Country Planning Full Valuation Report For House/Land Purchase: Sales & Purchase Agreement between vendor/developer and buyer Full Valuation Report 14. What security/collateral do customers have to provide? Customers have to assign their salaries to BIBD and the property security documents will also be charged to the Bank. 15. Can a home financing be applied by 2 individuals or more (joint financing)? Yes, a home financing can be jointly applied by 2 individuals or more. All the coapplicants shall be proposed as co-owners of the property. Usually, co-applicants are: husband/wife, father/son, mother/daughter etc. 16. Does customer s salary have to be assigned to BIBD to apply for this product? Customer s salary does not necessarily have to be assigned to BIBD during the application stage. The bank can still process their home financing application provided that the bank can take over all their outstanding obligations with their current bank. However, disbursements of the home financing will only be implemented after their salary has been transferred to BIBD. 17. What is the monthly repayment? Monthly Repayment refers to the fixed sum of money that you will be paying to the bank every month. It comprises of both profit and principal repayment. The monthly repayment depends on the amount of financing, profit rate applicable and the term of the financing. Example: Financing Principal Amount: $150,000.00 Profit Rate: 4.5% APR Tenor: 300 Months (25 years) Monthly Repayment: $833.75 18. When do I start paying for the monthly repayment of my Financing? You will only start paying your monthly repayments one month after your financing is disbursed. E.g. if your financing is disbursed in September, your monthly repayment will commence in October. 5
19. How is the financing amount disbursed? The financing amount can be disbursed in full or in installments through progressive claims as stated on the payment schedule of the Ijarah agreement. 20. Can I settle-off my financing ahead of schedule? Yes, you can settle-off your financing ahead of schedule. However, an early settlement fee will be charged for any financing amount settled earlier than maturity date. Please refer to *Banks Schedule of Tariffs. Early Settlement means settlement prior to the expiry of the financing tenure or period by the Customers including but not limited to the situations as follows:- 1. early settlement or early redemption including those arising from prepayments; 2. due to financing structuring exercise; 3. in the case of default 4. in the event of termination or cancellation of financing before maturity date. The Early Settlement applies to Personal Financing (PF), Home Improvement Financing (HIF), Education, Naqad Facility and any other facility (ies) which BIBD may offer from time to time. Early Settlement Charges (ESC) means the charges that BIBD may impose on the Customer due to settlement of the financing facility before the expiry of the financing term. The ESC will apply when settlements are made from the following means:- (i) by any financial institutions and other banks including facility from the Government and TAIB; (ii) using Customer s own fund; (iii) via BIBD At-Tamwil Berhad; (iv) via re-financing of the same facility; (v) via mortgage facility 21. What do I need to do if there are changes to my contact details? It is important that you inform us of any change in your contact details or employment details to ensure that all correspondences reach you in a timely manner. 22. Where can I get assistance and further information? You may contact us at: Bank Islam Brunei Darussalam Berhad Lot 159 Jalan Pemancha Bandar Seri Begawan BS8711 Brunei Darussalam Contact Centre: +673 2238181 You may also visit our website at www.bibd.com.bn. The information provided in this disclosure sheet is valid as at 21 st February 2014. 6