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The
process of selecting your home can be an enjoyable yet tiresome
experience - especially if you are new to Malaysia and its cities. But
the question at the back of your mind probably is: "How much can I
afford for a new home and how much am I eligible to borrow (for the
purchase of the property)?"
The Mortgage selection process is a different experience altogether.
Property financing in Malaysia is a very competitive business and as
soon as you have made your purchase, you may begin "hunting" for the
best package. This process may take weeks as you search for the best
rate, highest margin and the most convenient way to bank. Applying for a
Mortgage in Malaysia is in no way different from applying for the same
in your home country.
But how should foreigners go about the whole thing and what should you
look for?
Margin of Financing
The first thing to look at is the Margin of Financing (MOF) For
Malaysians, the maximum MOF is 90% (and Bank Negara Malaysia has imposed
a cap of 70% from the 3rd loan onwards).
For expats and foreigners, the MOF is divided into 2 categories - those
residing in Malaysia (with a Work Permit, MM2H Visa, Spouse Visa, etc)
and those who reside abroad. For those who reside in Malaysia, the MOF
starts at 70% and may go up to 90% depending on income documentation and
the location of property. For those who don't reside in Malaysia (no
Visa status) the maximum margin of financing is 70%.
However, it is important to know that all loans come with a bank
valuation of the property. The MOF is based on the Purchase Price or the
Valuation - whichever is lower.
The MOF for Commercial Properties is normally 10% lower compared to
Residential Properties.
Interest Rates
The next thing to look into is the Interest Rate. For many, this is the
most important feature of the Mortgage. However, there are many other
features that should be taken into account before deciding.
Interest rates in banks are computed on a Daily Rest Basis (interest is
calculated on the outstanding amount of the Principal at the end of that
day - as the loan amortizes over time) as opposed to a Monthly Rest
Basis calculation. Interest Rates are determined by the
Base Lending Rate (BLR); which is set by
Bank Negara Malaysia as the cost of funds plus administrative charges
for the bank. Due to the competition, interest charged for mortgages,
for the moment, is below the BLR. Loans
with Fixed Rates are also available should you prefer not to depend on
the BLR. The current
BLR is 6.60%.
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There are, of course, other features of a Mortgage to consider such as
the Lock-In Period (the minimum period of the loan one would have to
service), Facility Type (Term Loan, Flexible Loan, or Overdraft
Facility), Repayment Terms and so forth. These features vary from bank
to bank and make up an important part of the Mortgage selection process.
The key criteria (from a Bank's point of view) to approving a Mortgage
is the Income of the borrower(s). Income can be derived from various
sources and is divided into two categories; the first being those who
are salary-earners is normally self-employed. Deriving income for
salary-earners is normally quite straight forward. For those who are
self-employed, though, would require company documents along with bank
statements to "derive" income; as in businesses, income varies from
month to month, year to year. Additional income like Tenancy Agreements
(stamped), Fixed Deposits, Dividends from Equity, Yields from Bonds and
Pensions can be used to justify income.
The approval of the Mortgage by the bank takes anywhere from 3 to 10
days, depending on the documents and complexity of the application. Upon
approval, a Letter of Offer comprising the borrower's details, property
details, interest rate, margin of financing and other terms and
conditions will be issued. Upon acceptance (the signing of the Letter of
Offer), the borrowers proceed to the Bank's panel lawyer to sign the
Facilities Agreement (a contract between the borrowers and Bank). The
disbursement of the funds would normally take from 10 to 12 weeks after
signing the Facilities Agreement.
Sources: www.propertyinmalaysia.com
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