Mortgage Loan (or Home Loan) is a loan taken out from a bank or financial institution to purchase a property, such as a house or commercial property. This allows you to own a home without having to fork out hundreds of thousands in cash upfront. When you take out a mortgage, your home becomes the collateral. This means that the lender (bank or financial institution) holds the property’s title throughout the loan tenure, until you have fully paid up all your monthly installments. If you consistently fail to pay your loan installments, the lender has the right to issue a foreclosure (or lelong).

It depends on the property price you are purchasing. Generally, banks allow borrowers to hold loans (including car loans and other monthly commitments) of up to 60% of their income. For example, if your monthly income is RM3,000 (after deducting EPF and socso) and you do not have any other financial commitments), you are generally eligible to apply for loans with a monthly commitment of up to RM1,800 (60% of RM3,000). Do take note that you should also have a good credit score to qualify for the best interest rates on mortgages. Your credit score is a summary of your debt repayment pattern (credit card payments, outstanding loans, debt defaults, etc).

Typically, most banks in Malaysia offer up to 90% of the property price for your first 2 residential properties. This means you are required to prepare 10% of the down payment in cash to cover the rest of the property’s price.

Banks normally offer mortgage loans with interest rates at a percentage above or below the Base Rate (BR = the reference rate set by Bank Negara Malaysia) or Standardised Base Rate (SBR = new reference rate set by Bank Negara Malaysia starting August 2022)*. Usually, a bank interest rate is represented as: BR/SBR + 1.25% (example) Your monthly repayment may increase or decrease following a change in BR/SBR. *BR is the common reference rate used prior to August 2022, whereby the rates for all financial institutions vary according to their own benchmarks. Starting from August 2022, SBR will replace BR as a common reference interest rate used by all financial institutions. This makes it easier for borrowers to calculate their interest rates.

You can use LOANPANDA mortgage loan calculator to do the math and work out the amount for you. Just key in your property price and the number of years you plan to borrow, it will do all the calculations to help you compare and choose the best mortgage plan.

Islamic vs Conventional Mortgages Islamic mortgages are Shariah-compliant. There is no interest charged on the loan. The banks will buy the property and sell it back to the borrowers at a markup. Conventional mortgages, on the other hand, are loans given out to borrowers with interest charged at a prescribed rate. Basic Term vs Flexi Mortgages Basic term mortgages are the conventional type of home loan in Malaysia. Basic term mortgages have a fixed amount of monthly installments and do not allow borrowers to reduce the loan interest even if the borrowers make any additional repayments. Flexi mortgages (similar to semi-flexi mortgages) allow borrowers to pay back extra money and reduce the amount of loan interest. Borrowers are also allowed to withdraw the additional payments anytime (normally with a service fee). Refinancing Refinancing is a form of mortgage loan that allows borrowers to take another loan for the current mortgages. Normally it is taken out when there are lower interest rates or better terms offered. Government Housing Loan Government housing loans refer to the loan facility extended to government servants, employees of Statutory Bodies and Local Authorities.

You can browse through the list of mortgage deals in LOANPANDA, to understand your mortgage options, as well as comparing the interest rates and terms from multiple lenders prior to a mortgage application. Most importantly, understand your budget and affordability. You can either submit a loan application via a banker or to several banks via a mortgage consultant. The latter will normally give you a better option to compare and find the best mortgage deals.

Mortgage insurance is a life insurance product designed to cover the financial risk of your mortgage loan in the event of death or total and permanent disability (including permanent loss of sight in both eyes, hearing in both ears, use of both hands / both legs). It is NOT compulsory to purchase mortgage insurance in Malaysia, but it is generally recommended to protect you from losing your property and seeing your property investment goes to waste in case of the unexpected. There are several types of mortgage insurance in Malaysia:

• Mortgage Reducing Term Assurance (MRTA)
• Mortgage Level Term Assurance (MLTA)
• Mortgage Reduction Term Takaful (MRTT)
• Mortgage Level Term Takaful (MLTT)

Yes, foreigners can qualify for mortgage loans in Malaysia. Generally, foreigners can be approved up to 70% Margin of Finance (MOF), i.e. the amount of loan granted as a percentage of the value of your property. MM2H holders can be qualified for up to 80% MOF.

Your mortgage consultant or banker will guide you as to the documentation required to apply for a mortgage loan. Generally, they will need your:

• IC photocopy
• Employment letter
• 3 to 6 months’ payslip
• 3 to 6 months’ bank statement (payslip matching the salary banked in)
• EPF statement (payslip matching the EPF amount)
• EA Form
• Personal income tax with payment receipt
• Fixed deposit or savings support