Most buyers obsess over MOT stamp duty — the tiered 1-4% charge on the property transfer. They forget the second stamp duty bill arrives separately, on a different document, at a different lawyer's office. Loan agreement stamp duty is the cost nobody budgets for until the invoice lands. On an RM800,000 property with 90% financing, that "forgotten" stamp duty is RM3,600. Not trivial. Not optional.
This guide covers exactly how loan agreement stamp duty works in Malaysia, how it differs from MOT stamp duty, what Islamic financing borrowers pay, and whether first-time buyers can avoid it entirely.
What Is Loan Agreement Stamp Duty?
When you take a housing loan or Islamic financing facility to purchase property, the bank prepares a loan agreement (or financing facility agreement for Islamic products). This legal document must be stamped under the Stamp Act 1949 before it becomes legally enforceable.
The stamp duty on this agreement is separate from the MOT stamp duty you pay on the property transfer. They are two different documents, two different calculations, two different payments.
Key distinction:
- MOT stamp duty = tax on the transfer of property ownership. Tiered rates of 1-4% under Item 32(a), First Schedule, Stamp Act 1949.
- Loan agreement stamp duty = tax on the financing instrument. Flat rate of 0.5% under Item 22(1), First Schedule, Stamp Act 1949.
Both are mandatory. Both must be paid within 30 days of execution. Skipping either results in the document being inadmissible in court — which means your bank cannot enforce the loan contract, and you cannot prove property ownership.
The Rate: 0.5% of Loan Amount
The calculation is straightforward.
Loan Stamp Duty = Total Loan/Financing Amount x 0.5%
There are no tiers. No bands. No progressive rates. It is a flat 0.5% applied to the full loan quantum.
| Loan Amount (RM) | Stamp Duty at 0.5% (RM) |
|---|---|
| 200,000 | 1,000 |
| 300,000 | 1,500 |
| 400,000 | 2,000 |
| 450,000 | 2,250 |
| 500,000 | 2,500 |
| 600,000 | 3,000 |
| 720,000 | 3,600 |
| 900,000 | 4,500 |
| 1,000,000 | 5,000 |
| 1,500,000 | 7,500 |
Notice the pattern. Every RM100,000 borrowed costs RM500 in loan stamp duty. Simple mental math for budgeting.
Worked Examples at Different Price Points
Example 1: RM400,000 Property (90% LTV)
A starter condo in Cheras or Setia Alam. First-time buyer taking maximum financing.
- Property price: RM400,000
- Loan amount (90% LTV): RM360,000
- Loan stamp duty: RM360,000 x 0.5% = RM1,800
Total stamp duty picture (MOT + Loan):
- MOT stamp duty: RM1,000 + RM6,000 = RM7,000
- Loan stamp duty: RM1,800
- Combined: RM8,800 (2.2% of property price)
Example 2: RM500,000 Property (90% LTV)
The most common entry point for Malaysian property investors.
- Property price: RM500,000
- Loan amount (90% LTV): RM450,000
- Loan stamp duty: RM450,000 x 0.5% = RM2,250
Total stamp duty picture:
- MOT stamp duty: RM1,000 + RM8,000 = RM9,000
- Loan stamp duty: RM2,250
- Combined: RM11,250 (2.25% of property price)
Example 3: RM800,000 Property (90% LTV)
Mid-range condo in KL, Petaling Jaya, or Penang.
- Property price: RM800,000
- Loan amount (90% LTV): RM720,000
- Loan stamp duty: RM720,000 x 0.5% = RM3,600
Total stamp duty picture:
- MOT stamp duty: RM1,000 + RM8,000 + RM9,000 = RM18,000
- Loan stamp duty: RM3,600
- Combined: RM21,600 (2.7% of property price)
Example 4: RM1,000,000 Property (80% LTV)
Premium condo or landed property. Second-time buyer with 80% margin.
- Property price: RM1,000,000
- Loan amount (80% LTV): RM800,000
- Loan stamp duty: RM800,000 x 0.5% = RM4,000
Total stamp duty picture:
- MOT stamp duty: RM1,000 + RM8,000 + RM15,000 = RM24,000
- Loan stamp duty: RM4,000
- Combined: RM28,000 (2.8% of property price)
Key takeaway: Loan stamp duty adds 0.35-0.45% to your total acquisition cost as a percentage of property price (assuming 80-90% financing). Small in isolation. Painful when stacked on top of everything else.
Islamic Financing: Same Rate, Same Treatment
If you take Islamic financing — whether Musharakah Mutanaqisah (MM), Bai Bithaman Ajil (BBA), Commodity Murabahah, or any Shariah-compliant product — the stamp duty treatment is identical.
The Stamp Act 1949 was amended to ensure Islamic financing instruments are not double-taxed. The financing facility agreement is stamped at the same 0.5% rate as a conventional loan agreement.
This matters because the structure of Islamic financing involves additional documentation. Under MM, for example, the bank and borrower enter a co-ownership agreement, and the bank's share is gradually purchased by the borrower. Despite the different legal structure, the stamp duty is applied once at 0.5% on the financing amount.
| Financing Type | Document Stamped | Rate |
|---|---|---|
| Conventional loan | Loan agreement | 0.5% |
| Musharakah Mutanaqisah | Facility agreement | 0.5% |
| Bai Bithaman Ajil | Facility agreement | 0.5% |
| Commodity Murabahah | Facility agreement | 0.5% |
No difference in cost. Choose your financing product based on rates, terms, and personal preference — not stamp duty.
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First-Time Buyer Exemptions
The Malaysian government has periodically offered stamp duty exemptions for first-time homebuyers. These exemptions can apply to both MOT stamp duty and loan agreement stamp duty.
Budget 2026 Exemptions (Extended to 31 December 2027)
Under Budget 2026, the government extended the first-time homebuyer stamp duty exemption for SPAs executed from 1 January 2026 through 31 December 2027. First-time buyers purchasing properties priced up to RM500,000 are eligible for:
- Full exemption (100%) on MOT stamp duty for properties up to RM500,000
- Full exemption (100%) on loan agreement stamp duty for the financing instrument
This exemption applies automatically during the purchase process through your lawyer, who submits documentation to LHDN. A statutory declaration confirming first-time buyer status is required.
Eligibility Criteria
To qualify for first-time buyer stamp duty exemptions:
- You must be a Malaysian citizen
- You must not have previously owned a residential property (including inherited property in some interpretations)
- The Sale and Purchase Agreement (SPA) must be executed within the exemption validity period
- The property must be for residential use
- Only one property per individual qualifies
The Savings Are Real
For a first-time buyer purchasing an RM480,000 property with 90% financing:
| Cost Item | Without Exemption (RM) | With Full Exemption (RM) |
|---|---|---|
| MOT stamp duty | 8,600 | 0 |
| Loan stamp duty | 2,160 | 0 |
| Total stamp duty saved | 10,760 |
That RM10,760 is money that stays in your pocket or goes toward renovation, furnishing, or your emergency fund. It is the single most valuable first-timer benefit in Malaysian property.
How Loan Stamp Duty Adds to Total Acquisition Cost
Loan stamp duty does not exist in isolation. It stacks on top of every other upfront cost. Here is the full picture for an RM500,000 property at 90% LTV:
| Cost Item | Amount (RM) | % of Price |
|---|---|---|
| Down payment (10%) | 50,000 | 10.0% |
| MOT stamp duty | 9,000 | 1.8% |
| Loan stamp duty | 2,250 | 0.45% |
| Legal fees — SPA | ~5,750 | 1.15% |
| Legal fees — loan | ~3,500 | 0.7% |
| Valuation fee | ~300 | 0.06% |
| Total cash needed | ~70,800 | 14.16% |
The loan stamp duty is the fourth-largest line item. Not the biggest. Not negligible either. When you are scraping together every ringgit for your first property, RM2,250 matters.
For investors buying multiple properties, loan stamp duty compounds. Five properties averaging RM600,000 each at 80% financing: that is 5 x RM2,400 = RM12,000 in loan stamp duty alone across the portfolio.
Payment Timeline and Process
When Is It Due?
Loan agreement stamp duty must be paid within 30 days of execution of the loan/financing agreement.
In practice, your lawyer handles this. The process:
- You sign the loan agreement at the bank's panel lawyer's office
- The lawyer prepares the stamping submission to LHDN (Inland Revenue Board)
- LHDN assesses and confirms the stamp duty amount
- The lawyer pays on your behalf (from funds you have deposited into their client account)
- The stamped document is returned — now legally enforceable
Late Payment Penalties
If stamp duty is paid late, penalties under Section 47A of the Stamp Act 1949 apply (effective 1 January 2025):
| Delay Period | Penalty |
|---|---|
| Within 3 months after deadline | RM50 or 10% of unpaid duty, whichever is greater |
| More than 3 months after deadline | RM100 or 20% of unpaid duty, whichever is greater |
On RM3,600 stamp duty, a late stamping beyond 3 months costs an extra RM720. Your lawyer should never let this happen — but verify.
Who Pays the Lawyer?
The legal fees for preparing and stamping the loan agreement are separate from the stamp duty itself. You pay both:
- Stamp duty: 0.5% of loan amount (goes to government)
- Legal fees for loan documentation: calculated on a tiered scale (goes to the lawyer)
These are two different payments to two different parties. Do not confuse them.
Refinancing and Loan Stamp Duty
Here is a fact that catches refinancing borrowers off guard: you pay loan stamp duty again when you refinance.
If you refinance your RM450,000 loan with a new lender, the new loan agreement must be stamped. That is another RM2,250 in stamp duty. This cost must be factored into your refinancing breakeven calculation.
Refinancing only makes financial sense if the interest savings over your remaining tenure exceed the total refinancing costs — which include:
- New loan stamp duty (0.5% of new loan)
- New legal fees for loan documentation
- Valuation fees
- Any lock-in period penalty on your existing loan
A common rule of thumb: refinancing should save you at least 0.5-0.75% in interest rate to justify the costs, depending on remaining tenure.
| Refinancing Scenario | Old Rate | New Rate | Loan Balance (RM) | New Stamp Duty (RM) | Monthly Savings (RM) | Breakeven (months) |
|---|---|---|---|---|---|---|
| Small gap | 4.5% | 4.0% | 400,000 | 2,000 | ~167 | ~18 |
| Medium gap | 5.0% | 4.0% | 400,000 | 2,000 | ~333 | ~9 |
| Large gap | 5.5% | 4.0% | 400,000 | 2,000 | ~500 | ~6 |
The stamp duty is a fixed cost. The larger the rate gap and loan balance, the faster you recoup it.
Common Questions
Can I add loan stamp duty into the loan?
Some banks allow you to capitalize stamp duty and legal fees into the loan amount — effectively financing these costs. This increases your total loan but reduces upfront cash outlay. Check with your lender. Not all banks offer this, and it increases your total interest cost over the loan tenure.
Is loan stamp duty tax-deductible?
No. Loan stamp duty is a one-off acquisition cost, not a recurring expense. It is not deductible against rental income under Section 4(d) of the Income Tax Act 1967. However, it forms part of the acquisition cost for RPGT (Real Property Gains Tax) computation when you eventually sell.
What if I take two loans on the same property?
If you take a first charge loan and a second charge loan (e.g., a bridging loan), each loan agreement is stamped separately at 0.5% of its respective amount.
Does the stamp duty change for commercial property loans?
No. The 0.5% rate applies to all property loan agreements — residential, commercial, industrial, and agricultural. The property type does not affect the loan stamp duty rate.
The Bottom Line
Loan agreement stamp duty is 0.5% of your financing amount. Period. No tiers, no exceptions for property type, no variation between conventional and Islamic products.
For most buyers, it adds RM1,500-5,000 to acquisition costs. First-time buyers purchasing under RM500,000 may get full exemption — check current policy. Refinancing triggers a fresh stamp duty charge, so factor it into your breakeven math.
Budget for it. Do not let it surprise you at the lawyer's office.
For a complete picture of all upfront costs, read our stamp duty guide or use the stamp duty calculator to get exact numbers for your property. If you are financing your purchase, our home loan calculator shows you the full monthly payment picture including how loan size affects your total stamp duty bill.
Sources
- Stamp Act 1949 — First Schedule (LHDN) — Item 22(1) for loan agreement stamp duty (0.5%), Item 32(a) for MOT stamp duty (1-4% tiered)
- Stamp Duty Penalty — Section 47A (LHDN) — Late payment penalty rates effective 1 January 2025
- Budget 2026: Stamp Duty Exemptions Extended (RinggitPlus) — First-time buyer exemption extended to 31 December 2027 for properties up to RM500,000
- Stamp Duty Waiver Extended to 2027 (IQI Global) — Full details on first-time buyer MOT and loan agreement exemption