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By Jason Lim, REN 84424 · IQI Realty · Checked on 9 November 2026
This guide is for buyers from Singapore, Indonesia, India, China, MM2H participants and Malaysians looking at a Johor Bahru subsale home whose owner still has a home loan on it. The short answer: this is normal and safe when the lawyers follow the usual steps. The seller’s bank holds a charge (gadaian) over the title; your lawyer gets a redemption statement showing what the seller owes, your bank pays that sum straight to the seller’s bank at completion, the seller’s bank releases the title and signs a discharge, and only the balance of the price goes to the seller.
Quick answer
- Common, not a red flag: many subsale homes in JB still carry the seller’s loan. A charge is a registered security, and it shows on the title search.
- Money goes to the bank first: the seller’s outstanding loan (the redemption sum) is paid directly to the seller’s bank, never to the seller’s own account.
- Paperwork: the seller’s bank releases the original title and signs a discharge of charge on Form 16N (section 278, National Land Code), registered with your transfer.
- Timing: the balance is commonly due about three months after the SPA, often with a one-month extension at interest. Delays by the seller’s bank usually extend your time.
- Main risk: the seller owing more than the price, or being in arrears. The SPA should make the seller pay any shortfall before your money moves.
- Foreign buyers: Johor state consent and, for most homes, a RM1 million minimum price still apply. The chargee bank’s consent is part of the Johor transfer file.
What a charge on the title means
When an owner borrows against a home with its own individual or strata title, the bank registers a charge (gadaian) under the National Land Code. It stays on the register until the loan is paid and the bank’s discharge is registered. Your land title search shows it as an encumbrance, with the bank as chargee and the date of the charge.
Homes without an individual or strata title yet, still on the developer’s master title, work differently. There the seller’s bank holds an assignment of the seller’s rights under the developer’s sale agreement rather than a charge, as a Bar Council conveyancing committee member explained in a 2006 newspaper column republished by the National House Buyers Association. Both are covered below.
| Situation | The seller’s bank holds | How it is cleared |
|---|---|---|
| Individual or strata title issued | A registered charge (gadaian) on the title | Redemption sum paid; bank signs a discharge of charge (Form 16N), registered at the land office with your transfer |
| No individual or strata title yet (master title) | An assignment of the seller’s rights under the developer’s SPA | Redemption sum paid; bank reassigns its rights back, usually by a deed of receipt and reassignment, and the sale goes by deed of assignment with the developer’s consent |
| Islamic home financing | The same security, under a sale-based or other Shariah contract | Settled on the financing’s own terms; the settlement figure is set out by the financier in the same way |
How the redemption works, step by step
The seller’s lawyer deals with the seller’s bank; your lawyer, often also acting for your bank, makes sure money only moves against documents. The usual order:
- Offer and title search. You sign a letter of offer with an earnest deposit, usually 2 to 3%. Before or right after, a title search shows the charge and the chargee bank. See making an offer on a JB subsale.
- SPA and 10% deposit. You sign the sale and purchase agreement (SPA) and top up to 10%. The SPA sets out how the redemption is handled.
- Redemption statement. The seller’s lawyer asks the seller’s bank for a redemption statement: the full amount needed to settle the loan up to a stated date, with daily interest after it. The bank also gives an undertaking to release the title and a signed discharge once paid.
- Your loan documents. You sign the loan agreement and charge; your bank’s lawyer checks the redemption figure against your loan.
- Your own top-up. If your loan is less than 90% of the price, you pay the gap (often called the difference or differential sum) to your lawyer or the seller’s lawyer as stakeholder. Banks usually release nothing until this is in.
- Undertakings and redemption. Your bank undertakes to pay; the seller’s bank receives the redemption sum directly and sends the original title and the discharge of charge to your bank’s lawyer.
- Registration. The discharge, the transfer (Form 14A) and your bank’s new charge are presented together at the land office, so the title moves from “seller, charged to bank A” to “you, charged to bank B”.
- Balance to the seller. After presentation and a fresh search, your bank releases the rest of the loan, and the seller’s lawyer pays the seller what is left after the bank, the RPGT retention and agreed costs.
The Penang Land and Mines Office’s checklist for Form 16N shows what the land office looks for: only the chargee can sign it, it must be stamped, the duplicate charge goes with it, and quit rent must be paid when it is presented. Unpaid quit rent can hold up the file. My legal steps guide for Johor shows where each document fits, and legal fees in Malaysia covers the scale fees for the SPA, the loan and the discharge.
Worked example (illustration with round numbers)
A Malaysian buyer agrees to pay RM600,000 for a JB condo; the citizen seller owes the bank RM350,000; the buyer has an 80% loan. Made-up figures to show the flow.
| Step | Amount | Who receives it |
|---|---|---|
| Earnest deposit plus SPA top-up (10%) | RM60,000 | Seller’s lawyer as stakeholder, or as the SPA says |
| RPGT retention for LHDN (3% for a citizen seller) | RM18,000, held out of the price | Buyer’s lawyer, paid to LHDN within 60 days |
| Buyer’s own top-up (price less deposit less loan) | RM60,000 | Stakeholder lawyer, before the loan is released |
| Redemption sum, from the buyer’s loan | RM350,000 | Seller’s bank, directly |
| Rest of the buyer’s loan (RM480,000 less RM350,000) | RM130,000 | Seller’s lawyer, after the transfer and charge are presented |
| Seller’s net before fees and apportionments | About RM232,000 | Seller |
Timing: the completion period and the seller’s bank
Completion dates in a subsale are contractual, not fixed by law, so read your SPA. The common pattern, described by a Bar Council conveyancing committee member in the 2006 column, is:
- Three months from the SPA date to pay the balance, or three months from the last consent when the title has a restriction in interest or the developer’s consent is needed.
- An extension of usually one month or more, with interest at the SPA rate counted daily on the unpaid balance.
- Bank delay clauses. A 2007 column in the same series noted a common clause: if the seller’s bank does not return the title and documents within 14 days, the buyer’s time is extended day for day, without interest.
Redemption statements expire because interest keeps running; if completion slips, a fresh one is needed. Any lock-in charge or notice period on the seller’s loan is the seller’s cost, but ask early. My SPA guide explains the deposit, completion and default clauses in more detail.
Found a unit with the seller’s loan still on it?
Send me the project and unit. Before you offer, I’ll check the title for the charge and any caveats, look at recorded prices nearby and tell you what to ask the seller about the loan.
WhatsApp JasonRisks to check before you pay a deposit
| Risk | What can happen | What usually protects you |
|---|---|---|
| Seller owes more than the price (negative equity) | Your loan and deposit cannot clear the bank, so the title cannot be released | An SPA clause making the seller pay the shortfall into the stakeholder account before your money moves; ask the seller early for a rough loan balance |
| Seller is in arrears | The bank may have issued a Form 16D default notice and be moving towards an order for sale or auction | Ask if the loan is up to date; the bank must confirm in writing it will accept redemption. See missed home loan payments |
| Other entries on the title | A prohibitory order (perintah larangan) from a court, a Registrar’s caveat or a second charge freezes or complicates the transfer | An up-to-date title search before the SPA and again before completion; every entry must be removed or dealt with in the SPA |
| Seller is bankrupt | The property vests in the Director General of Insolvency, and the seller can no longer sell it | A bankruptcy search on the seller (the Malaysian Department of Insolvency offers one) |
| Bank valuation below the price | Your loan is smaller, so you top up more cash, while the seller’s redemption figure stays the same | A loan-subject clause in the offer and SPA; see bank valuation lower than price |
The 2006 column put the shortfall point plainly: where the redemption sum exceeds the price or the balance, the SPA needs terms making the seller pay the excess. If the seller cannot fund it, the deal may not complete, so I ask about the loan before an offer goes in.
Safeguards that keep your money safe
- Stakeholder deposits. Your earnest deposit and 10% are commonly held by a lawyer as stakeholder, released only as the SPA allows, not handed straight to the seller.
- Direct payment to the bank. The redemption sum goes from your bank or your lawyer to the seller’s bank, never through the seller.
- Undertakings. The seller’s bank undertakes to release the title and discharge on payment; your bank undertakes to pay.
- Private caveat. In many subsales your lawyer lodges a private caveat after the SPA so the seller cannot deal with the title again before your transfer is registered (The Edge Malaysia, July 2022).
- Your own lawyer. You are not obliged to use the seller’s lawyer. Pay only into a lawyer’s client account or as the SPA directs; see property scams in JB.
Master title units and developer financing
If the unit has no strata or individual title yet, the sale runs by deed of assignment. Your lawyer needs the developer’s consent to the sale, and the three-month completion period usually runs from that consent. The seller’s bank is paid off in the same way, then reassigns its rights so that they can pass to you and your bank. See my strata title guide.
The developer’s own financier may also hold a charge over the whole master title. In a 2022 article reproduced by the Malaysian Bar, the National House Buyers Association’s secretary-general described the usual protection: a letter of disclaimer in which that financier agrees not to foreclose on a unit once its redemption sum is paid. Ask your lawyer to confirm the unit has been released or disclaimed.
Cash buyers and buyers paying from abroad
Cash buyers. Your lawyer pays the redemption sum from your funds, held in the lawyer’s client account, against the seller’s bank’s undertaking to hand over the title and discharge.
Foreign buyers. The same mechanics apply, with extra steps:
- Price floor. Johor generally requires RM1 million or more for most homes bought by foreigners, with some exceptions in designated zones (New Straits Times, April 2026). See Johor’s minimum price and quota.
- State consent. Your lawyer applies under section 433B of the National Land Code. PTG Johor’s 2026 transfer checklist asks for the chargee bank’s consent where the land is still charged, so the seller’s bank is involved early.
- Longer timeline. Completion usually runs from consent, so the redemption statement will need updating.
- Paying from abroad. Bank Negara’s foreign exchange policy lets non-residents invest in ringgit assets in Malaysia. Send funds to the lawyer’s client account in good time. See paying for Johor property from abroad and home loans for foreigners.
- Foreign seller. If the seller is also a foreigner, the RPGT retention is 7% instead of 3% (LHDN, June 2026), which matters when the loan balance is high. See selling as a foreigner.
For MM2H buyers, I coordinate with a MOTAC-licensed MM2H agent and handle the property side; approval is decided by the authorities. See MM2H property support.
Questions to ask before you make an offer
- Is there a loan (conventional or Islamic), and roughly how much is owed?
- Is the loan up to date, and has the seller received any notice from the bank?
- Individual, strata or master title? Any restriction in interest?
- Are quit rent, assessment, maintenance fees and utilities paid up?
- Is the price in line with recorded sales?
- Is there a tenant? If so, see buying a tenanted property.
Where to buy if this matters to you
Established areas have many titled subsale homes, which keeps the redemption simple.
- Mount Austin: an active resale market of condos and landed homes.
- Tebrau, Setia Indah and Molek: established neighbourhoods with many titled landed homes.
- Bukit Indah and Gelang Patah: west-side homes near the Second Link.
- Iskandar Puteri: newer projects where some units may still be on master title.
- Permas Jaya and Senibong: east-side condos and landed homes.
Compare them on my JB property map.
More Johor living guides: Land title search and caveats · The SPA explained · Making an offer on a JB subsale · Stamp duty in 2026
Frequently asked questions
Is it safe to buy a property that still has the seller’s bank loan on it?
Yes, when the usual steps are followed. Your lawyer gets a redemption statement, your bank or lawyer pays the redemption sum directly to the seller’s bank, and the bank’s discharge is registered with your transfer. Your deposit is normally held by a lawyer as stakeholder.
Who pays off the seller’s loan in a subsale?
In effect you do, out of the purchase price. At completion your bank, or your lawyer for a cash purchase, pays the redemption sum straight to the seller’s bank. The seller receives only what is left after the loan, the RPGT retention and agreed costs.
What is a redemption statement?
A letter from the seller’s bank stating the full amount needed to settle the loan up to a given date, with daily interest after that. If completion is delayed past that date, the seller’s lawyer asks for an updated statement.
What is Form 16N?
The discharge of charge under section 278 of the National Land Code. It is signed by the seller’s bank once the loan is redeemed and is registered at the land office together with your transfer and your own bank’s charge.
What happens if the seller owes more than the selling price?
The title cannot be released until the bank is paid in full, so the seller must cover the shortfall, usually by paying it into the stakeholder account before completion. A well-drafted SPA requires this. If the seller cannot pay, the sale may not complete.
How long does completion take when the seller has a loan?
Commonly about three months from the SPA, or from the last consent, often with a one-month extension at interest. Many SPAs extend your time if the seller’s bank is slow to return the title. Foreign buyers usually need longer because of Johor state consent.
Can a foreigner buy a Johor subsale home that is still charged to a bank?
Yes, on the usual Johor rules: generally a RM1 million minimum for most homes and state consent under section 433B of the National Land Code. PTG Johor’s checklist asks for the chargee bank’s consent where the land is still charged.
Want the title and loan checked before you offer?
Send me the unit you are looking at. I will check the title for the charge, caveats and restrictions, compare the price with recorded sales, and tell you what to ask the seller about the loan before any deposit is paid. You can also book an appointment for viewings, or a Zoom consultation if you are abroad.
Sources: National Land Code (Act 828), section 278, discharge of charges, checked November 2026; National Land Code (Act 828), sections 254 (default notice) and 433B (approval for non-citizens), checked November 2026; Penang Land and Mines Office, Senarai Semak Bagi Urusan Melepaskan Gadaian Borang 16N (checklist for discharge of charge), reviewed 3 March 2015; Pejabat Pengarah Tanah dan Galian Johor (PTG Johor), Senarai Semak Borang Pindahmilik (transfer consent checklist), 2026; Cheong Yoke Ping (Conveyancing Practice Committee, Bar Council), “Understanding an SPA (Part 1)”, The Sun, 8 December 2006, via the National House Buyers Association; Malaysian Bar, “Law & Realty: Understanding an SPA (Part 3)”, The Sun, 5 January 2007; Malaysian Bar, “Conveyance lawyer: professional service trumps theoretical knowledge (Part 2)”, by Chang Kim Loong, reproduced 30 May 2022; The Vibes, “Risky redemption sums and disclaimers in home buying (Part 1)”, National House Buyers Association letter, 19 April 2021; LHDN, Tanggungjawab Pelupus dan Pemeroleh (responsibilities of disposer and acquirer, RPGT retention), updated 26 June 2026; The Edge Malaysia, “Know your stuff: the importance of private caveats”, July 2022; Malaysian Department of Insolvency (MdI), bankruptcy FAQ, checked November 2026; Bank Negara Malaysia, foreign exchange policy for non-residents investing in Malaysia, checked November 2026; New Straits Times, “Foreigners hit Johor property resale wall”, 20 April 2026
Jason Lim, REN 84424, IQI Realty Sdn. Bhd. E (1) 1584/6. General information checked on 9 November 2026, not legal or financial advice. SPA terms, bank procedures and land office requirements differ; confirm with your lawyer, your bank and the land office before you sign. The worked example uses made-up figures.