Buying a home is a significant milestone for many individuals and families, and in Indonesia, achieving this dream often necessitates obtaining a home loan. However, navigating the complex world of home loans necessitates a thorough understanding of the terms and concepts involved. From interest rates to loan terms, a variety of factors can influence your financial commitment and long-term plans. This article is a comprehensive guide to help you decode the key terms associated with mortgages in Indonesia, ensuring that you are well-equipped to make informed decisions on your home financing journey.
Kredit Pemilikan Rumah (KPR)
The term KPR, or Home Ownership Credit, refers to a type of financing service offered by banks to customers who want to build or renovate a house. This term is also used by Bank Indonesia to describe a financing facility offered by banks to individual customers looking to buy or improve a home. Based on Sharia principles or other Islamic contracts, KPR can be classified as short, medium, or long-term financing for the purchase of new or used houses.
“KPA” is an abbreviation for “Kredit Pemilikan Apartemen” in Indonesia, which translates to “Apartment Ownership Credit” in English. It is a type of financial arrangement or loan made available by banks or financial institutions to individuals or businesses in order for them to purchase an apartment. Individuals can own an apartment through KPA without having to pay the entire purchase price upfront, instead opting for a structured payment plan over a set period of time.
Down Payment (Uang Muka)
The down payment (DP) is a partial payment made at the start of the purchase, with the remainder due later. The down payment amount is determined by government regulations and agreements between the customer and the developer. Down payments for home purchases have been regulated, with recent regulations establishing the minimum down payment for various property types.
Loan Term (Tenor KPR)
The repayment period of a loan is referred to as its loan tenor or loan terms (loan tenure). KPR has two tenor options: long tenor (3 to 30 years) and short tenor (less than 3 years).
BI Checking / iDeb SLIK
BI Checking entails checking borrowers’ credit histories using the Bank Indonesia Debitur Information System (SLIK).
Collateral (Agunan)
Collateral is an additional assurance given by the borrower to the bank for a Sharia-compliant credit facility. To qualify as collateral, it must meet certain criteria.
Appraisal
An appraisal is an estimate of a property’s fair market value that ensures the buyer pays a reasonable price.
Roya
Roya is the removal of a mortgage encumbrance from a land certificate.
Agreement (Akad)
In the KPR process, akad refers to the agreement reached between the bank and the borrower.
Transfer of Ownership (Balik Nama)
Balik Nama is the process of transferring ownership of the land certificate from the previous owner to the new owner.
Akta Jual Beli (AJB)
The Deed of Sale and Purchase (AJB) is a legal document that serves as proof that land rights have been transferred from the seller to the buyer. This document, created by a notary or a land deed official (PPAT), proves that you are the rightful owner of the land and related buildings. The signing must be done in the presence of a notary, as well as by a designated official. The AJB is not evidence of property ownership. The AJB is not a land certificate, but rather a valid document that serves as evidence of the transfer of land rights as a result of a buying and selling process.
Plafon Bank Indonesia
According to the Indonesian Dictionary (KBBI), the credit ceiling is the maximum limit (cost, credit, etc.) provided. In mortgage terms, the credit ceiling refers to the loan amount provided by the bank to the customer. Subtracting the down payment you pay to the bank from the house price yields the credit limit. As a result, the down payment has a significant impact on the amount of the loan ceiling you apply for, which in turn influences the monthly instalment payments for the house loan.
Suku Bunga
Banks use either fixed or floating interest rates. A floating interest rate indicates that the loan interest rate may change at any time during the loan term. Meanwhile, a fixed interest rate means that the interest rate remains constant throughout the loan period or for a set period of time.
The amount of interest paid by the debtor with a floating interest rate can fluctuate according to the interest rate set by the bank. In general, the bank sets the floating interest rate amount each month and notifies the debtor in writing if the interest rate changes.
SBDK (Basic Loan Interest Rate)
The Basic Credit Interest Rate is denoted by the acronym KPR SBDK. This term refers to the benchmark interest rate used by banks as the basis for charging customers loan interest. The Basic Credit Interest Rate (SBDK) is used to calculate the loan interest rate that the bank will charge customers.
The SBDK does not yet take into account the estimated risk premium component, the size of which is determined by the bank’s risk assessment for each debtor or debtor group. As a result, the interest rate charged to debtors may differ from the SBDK. Disbursement through credit cards and Unsecured Loans (KTA) are not included in non-mortgage consumer loans. The current KPR SBDK terms can be found in publications at each bank branch and/or on the bank’s website.
Loan to Value (LTV)
The term KPR LTV (Loan to Value) refers to the loan amount divided by the sale price of the land/building. In other words, loan to value is a financial term used by lenders to express the loan amount as a percentage of the purchase price of the asset. Loan to Value is also defined as a risk assessment metric that computes the loan amount as a percentage of the existing collateral value.
From the above definitions, it can be concluded that loan-to-value is a tool used to compare the loan amount with the property value being purchased, with the aim of evaluating the risk of a loan. The Loan to Value ratio is typically calculated before a financial institution approves a mortgage application or property loan. Assessments with a high LTV ratio are considered high-risk loans, while a low LTV ratio is considered low-risk.
Instalment (Cicilan)
KPR instalment (cicilan KPR) is a periodic cash payment made as part of a predetermined instalment payment, the length of which can vary depending on the instalment period. An instalment is also the amount of credit payment made at regular intervals. It incorporates both principal and interest payments.
Those interested in purchasing a condominium should be aware of the different types of SHSRS (Strata Title Certificates) that represent individual ownership of a vertical or apartment-style dwelling built on collectively owned land.
Subsidized Mortgage (KPR Subsidi)
Subsidized Mortgage (KPR Subsidi) is a credit facility designed for low- to middle-income individuals and families to meet their housing needs or to improve their existing homes. Subsidies can be provided in the form of lower interest rates and additional funding for home construction or improvement. The government regulates this subsidised credit, and not all applicants may be eligible. In general, the government determines eligibility based on income and maximum credit limits.
Subsidized mortgages are also homeownership loans that receive government assistance and/or benefits in the form of long-term low-interest funds and housing acquisition subsidies issued by the Implementing Bank, both conventionally and in accordance with Sharia principles.
Conventional Mortgage (KPR Konvensional)
The general public can obtain a conventional mortgage (KPR konvensional). The bank sets the terms and conditions for a conventional mortgage, determining the loan amount and interest rate based on the bank’s policies. In general, the bank’s requirements and conditions for mortgage applicants are relatively similar, both in terms of administrative processes and loan determinations. The transaction process is the most noticeable distinction between conventional and Islamic mortgages. Conventional mortgages involve monetary transactions, whereas Islamic mortgages are based on goods transactions.
PPJB (Agreement to Sell and Purchase Binding)
In Indonesian mortgage processes, we will come across some localised legal terms, one of which is the Agreement to Sell and Purchase Binding, also known as Perjanjian Pengikatan Jual Beli (PPJB). PPJB is a sales agreement between the seller and buyer that remains a mutual agreement and does not imply a legal transfer of land/house ownership. PPJB is a document that represents the seller’s commitment to sell to the buyer. PPJB is distinct from PJB (Rights Transfer) and AJB (Deed of Sale and Purchase).
Property Certificate (Sertifikat Properti)
Having the proper documentation is essential when purchasing or owning a property. A property certificate, for example, denotes ownership of property by an individual or a company.
According to Applicable Laws, there are several types of Property Certificates. The SHM (Hak Milik Certificate), which grants the certificate holder full ownership rights over land, is perhaps the most well-known. There’s also the SHGB (Hak Guna Bangunan Certificate), which allows the holder to use the land to build structures for a set period of time while the state retains ownership.
Those looking to buy an apartment should be aware of the Strata Title Certificate (SHSRS), which denotes ownership of a vertical or apartment-style dwelling built on collectively owned land.
Booking Fee KPR
A booking fee is another mortgage term for a sum of money paid as a form of commitment, seriousness, or down payment when purchasing an item. When a potential buyer commits to reserving a specific property unit, the booking fee acts as a down payment.
The booking fee demonstrates the buyer’s commitment to buying the house. If you make a down payment on a property reservation and then cancel it, the booking fee may be forfeited or non-refundable. However, because there is no official regulation governing this matter, some property developers may refund the booking fee, depending on their policies.
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