Installment / interest payable during construction (regular,interest in principal,DIBS)

Mainly 3 types of arrangements for mortgages for properties under construction.

Regular / standard arrangement

As disbursements happen on a progressive basis, the interest payable will be calculated based on corresponding disbursed amount and borrowers are required to pay the interest cost during the construction period. For instance, the first 10% of loan is disbursed to pay for the bill of the works below ground level, thus, interest which calculated based on this portion of disbursement is payable throughout the construction. All the payments during the construction period is solely for the interest incurred by the disbursement and nothing goes to knock off the principal.

Interest-in-principal mortgage (zero payment during construction)

There is a type of mortgages in the market which allows the borrowers to serve the installment after its completion / after a fixed percentage of disbursement (ie. >97.5%). The treatment is to accumulate all the interest incurred during the construction period and factor them to become part of the outstanding amount. ie. let's say the initial loan amount is RM 600k and total  interest cost which incurred during the construction period is around RM 24k, by the time of completion, the total outstanding will be RM 624k and installment is calculated based on the latter amount.

Developer interest bearing scheme (DIBS)

During the construction period, all the interest cost which incurred by the mortgages will be paid by the developers instead of borrowers. This arrangement is only available with certain projects and financiers (sometimes, it will be specifically assigned to certain branches). DIBS will come with a clause provision which stated that in any events, if the developers do not pay the interest, it will become the responsibility of borrowers to pay the interest due.