Financing Facilities for Foreigners Investing in Malaysia Property- An Overview
Most bankers in Malaysia adopt a liberal financing system to all foreigners. They provide a full range of financing facilities for foreigners investing in Malaysia’s property from Conventional to Islamic banking to choose from. However, the facilities can be difficult, especially foreigners from sanction countries. As an Independent Investment Consultant, to-date, we are very glad to be able to obtain many successful financing approvals for the sanction countries’ clients. For certain applications, bankers may require additional supporting documents and, in some cases possibly require a personal interview.
Malaysia Central Bank current Base Lending Rate (BLR) is 6.6%. Most bankers offer an average loan interest of BLR (6.6%) – 2.2% = 4.4% per annum. Some bankers may offer better interest package to you based on tie-up with the property developers, your personal profile, property profile, etc for your financing facilities investing in Malaysia’s property.
Margin and Tenor of Financing
The amounts which you will be approved, varies based on these factors:-
• Type and Location of the Property
• The valuation of the Property
• Your age and Income
• The type of visa you are currently holding in Malaysia. For an example, Malaysia My Second Home 10-years visa holders will usually entitled to higher margin of financing, up to 80%
• For some countries, the bank may perform a World Check on your profile and back ground
In general, most foreigners are able to get margin of financing up to 70% and the length of loan can range up to 30 years or to maximum age of 65, whichever is earlier, at the discretion by the bankers. The margin of financing is calculated on X% of the value as per the valuation report by the valuer appointed to appraise your property or value on purchase price, whichever is lower.
Fees and charges on taking up loan financing offer will involve six major costs :-
A. Loan Agreement charged by the banker panel lawyer
0.5% of the loan amount
B. Stamp Duty on Transfer of Title
1% for the first MYR 100,000
2% for the next MYR 400,000
C. Disbursement Fee including registration of charge, land search and bankruptcy search on seller. Range from MYR 300-700
D. Processing Fee charged by the banker
MYR 50 – loan up to MYR 30,000
MYR 100 – loan MYR 30,001-MYR 100,000
MYR 200 – loan above MYR 100,000
E. Valuation Report fee
Some example of appraisal fee charged by the valuer is as follows:-
Property Value Valuation Fee
MYR 500,000 MYR 770
MYR 800,000 MYR 1,210
MYR 1,000,000 MYR 1,510
MYR 1,200,000 MYR 1,720
F. Fire Insurance
Most bankers will apply for the fire insurance policy for the property they are financing for, the premium varies from few hundred to thousands.
Early Termination Penalty of Bank Financing in Malaysia
Most bankers will impose penalty for early termination of your loan account if you decided to do so within a stipulated period lock-in period. The penalty will be either a flat rate of fee of X amount or 2% -5% (varies according to bankers) of the loan amount, whichever is higher.
Example of an offer: If your loan amount is MYR 500,000, the penalty maybe MYR 5,000 or 2% of loan amount within the lock-in period of 3 years. At such, the penalty fee for this case will be MYR 10,000 charged by the banker for early termination.
Property Loan Application Requirement and Procedure in Malaysia
Each bankers may have different requirement for set of documents for loan application, however these are the must have :-
1. Latest income documents of minimum 3 months
2. Latest bank statement of minimum 3 months
3. A copy of your passport together with your joint names, if you would like them to be borrower
4. A copy property booking and deposit receipt
The processing will take up to 3 weeks. The period may be extended if your income and financial documents needed to verify by your bankers in your country.
Once your loan is approved, these are the steps to follow:-
1. Banker will generate the Offer Letter stating the main terms and conditions of the loan such as margin of financing, tenor, monthly, repayment amount and penalty on early termination, if any.
2. Upon your acceptance of the Offer Letter,the banker will assign you a lawyer of their panel to prepare the Loan agreement for your signing usually within two weeks.
3. Disbursement of your loan to the seller or it’s banker (if the property is pledged to the bank) is done after the Land office’s consent is obtained. For under construction property, the loan will be disbursed according to the progress of the property development which will be certified by the architect, surveyors, etc as required by our Malaysia Housing Board.
A copy of Valuation Report and Fire insurance policy will be obtained during the purchase process and they are to be handled by the lawyer.
The loan agreement execution can be done in your residing country if you are not in Malaysia, by which you may require to perform the signing attestation at the Malaysia consulates or to be certified by the Notary Public.
Loan application under company would be the same, except some bankers may require a local Malaysian as guarantor if the company is newly formed. Foreigners can register a local Malaysia Private limited company as investment holding company fully foreign owned. For more information on this, please log on to www.ssm.com.my.
FAQ on Property Loan in Malaysia
Is there any waiver of interest for early settlement?
Please discuss with your banker on your plan of repayment and decision will be at the discretion of the banker.
How many maximum months instalment default to avoid foreclosure?
Default in three months of your monthly instalment, you are also given 7-14 days grace period to repay. Please discuss with your banker if you have difficulty in your repayment for possible restructuring of your loan package.
Do I need a guarantor for my loan?
Under personal name, usually bankers would not be required. However, if the loan is giving to the company, local Malaysian as guarantor will be required.
When will I get my property title?
As soon as your loan is fully paid, the bank will return the title back to your ownership.
How do I make payment for my monthly repayment?
You may set up an auto repayment, transfer via Internet banking, telephone banking or deposit cheque at the deposit box provided or you may pay cash at the banking counters.
Can I do refinancing if other banker offered me a lower interest?
Yes you can, however you may also want to consider the cost involved for all the fees of paid as well as the penalty cost if you are still within the lock in period for your current loan.
Can I be the only borrower when my property under joint names with my spouse and children?
Yes, you can as long as you fulfill the eligibility of repayment by the banker
Financing Facilities for Foreigners Investing in Malaysia Property-How To Apply?
Expatriate Advisory as an Independent Investment Consultant will act on your behalf to negotiate for best deal with various Malaysia bankers for the following task :
- Professional profiling of your documents
- Scrape the best deal from various suitable bankers
- Negotiate for the better margin based your profile
- Justify your case to get higher loan margin
- Manage the approval process within the time frame according to your booking requirement
- Finalizing the loan package with bankers on terms and conditions suited to your needs
- Presentation of all loan proposals from bankers and recommend best to your needs
By engaging our expertise, the risk of rejection is remote with a complete peace of mind while you can enjoy your stay in your country, without the need to be presence in Malaysia to handle various bankers calls, attending to queries, etc!
Here is the estimate of monthly instalment for the following loan amount based on 4.4% interest rate. Loan amount of MYR 500,000 will be as follows:
Tenor 15 years – MYR 3,775
Tenor 20 years – MYR 3,120
Tenor 25 years – MYR 2,725
Loan amount of MYR 800,000 will be as follows:
Tenor 10 years – MYR 8,214
Tenor 15 years – MYR 6,039
Tenor 20 years – MYR 4,975
Tenor 25 years – MYR 4,356
*Most banks will give a loan tenor of maximum 35 years or age 60 whichever is earlier. Loan application and approval processing will take about 2 to 3 weeks, subject to complete submission of all required documents.
Fact about Malaysia Financial System must know!
- Not every banker provides loan to foreigners due to its internal policies
- Each banker has their own rating system for the nationalities of the borrowers- low, medium or high risk. High-risk countries will be granted much lower loan margin
- Each banker has its own policy on approving loan based on nationalities and personal background
- Different approving process and conditions for sanctions and money-laundering countries (listed by Malaysia Central Bank)
- Each banker offers different packages from Islamic to Conventional loans
- Each banker may offer different package on interest rates and tenor based on your profile
- Not every property banker will be able to provide financing as they may not be enlisted by as the panel banker by the developers
- Bankers will have their own panel of property valuers to value the property you intend to purchase, some banks are very conservative in valuations resulting in a low margin of loan financing for your application
- Every banker can access to know all your financial profile in banks which you have the relationship with in Malaysia
Thus, any black record will be viewed by all bankers wh0 will affect your credit rating
At all cost must avoid “Reject” remark in the banking system if the bank rejected your loan application to avoid other banks misunderstood your profile