When applying for a mortgage / home loan in Malaysia, a key consideration is the Loan-to-Value (LTV) ratio, also known as the margin of finance. It is common for property purchases to be abandoned because of unfavorable LTV ratios. So what affects the LTV ratio on your home loan?
Residential Property Loans
In Malaysia, it is normal to expect 90% LTV ratio for a residential mortgage loan (more commonly known as a housing loan). But Bank Negara closely regulates the LTV ratios for residential mortgage loans to prevent uncontrolled speculation.
- If a person has 2 or more existing residential mortgage loans, LTV is capped at 70% for the next housing loan
Additionally, there is a My First Home Scheme (Skim Rumah Pertamaku) to help first time home buyers who qualify for the scheme to obtain up to 100% LTV.
Aside from Bank Negara regulations, it is also common for banks to limit the LTV ratio for the following types of home loan applications based on their internal credit policies:
Aside from Bank Negara regulations, it is also common for banks to limit the LTV ratio for the following types of home loan applications based on their internal credit policies:
- Purchase for investment
- More than 1 existing housing loan
- Land for custom built houses
- Developer projects that have been known to give discounts to customers
Commercial Property Loans
Bank Negara does not impose a LTV cap on commercial property loans. However, it is more common to get only 85% margin of finance as banks are more cautious in financing commercial properties. But 90% margin of finance is still possible.
Do note though that banks tend to be more picky with the types of commercial property being financed, and may curtail the margin based on its usage (E.g. Office / Serviced Apartment / Shop Lot / Shopping Mall).
Bank Negara does not impose a LTV cap on commercial property loans. However, it is more common to get only 85% margin of finance as banks are more cautious in financing commercial properties. But 90% margin of finance is still possible.
Do note though that banks tend to be more picky with the types of commercial property being financed, and may curtail the margin based on its usage (E.g. Office / Serviced Apartment / Shop Lot / Shopping Mall).
Foreigners & Nationality
Banks are more cautious with those with less ties to Malaysia. So foreigners tend to have more LTV restrictions on their home loans.
Legal Fee and Valuation Financing
Aside from financing the property, it is common for banks to allow up to 5% additional margin of finance on the loan to finance the borrower’s loan documentation and valuation costs.
