Owning a home for many is a life goal. It is the culmination of many years of hard work and to many, it is a form of social status and to others, it is a sense of accomplishment. Home loans are loans offered by banks and financial institutions to a borrower for the sole purpose of buying a home. These home loans are secured against the property that is intended to be purchased. This means that the bank will have a conditional ownership over the home until the loan is repaid.
Owning a home is not a decision that should be taken on a whim. When a borrower goes in for a home loan, it is usually a large amount with tenures ranging anywhere between 5 years to 10 years. This means that the borrower will have a long period of financial obligations and thorough research should be put into the terms and conditions of a loan, its fees and charges, the type of interest rates offered and only then settle on a loan which not only suits their property requirements but also fits into their budget.
Many leading banks in Malaysia such as Maybank, Citibank, Standard Chartered, CIMB, and RHB among others offer home loans in both conventional and Islamic formats. The table below shows the main features of various bank home loans such as interest rates, tenures and maximum loan amounts.
Compare Home Loan Interest Rates in Malaysia
|Bank||Bank Home Loan||Interest Rate||Tenure||Min age limit||Max Age Limit||Max Loan Amount|
|Maybank Home Loan||BR + 1.45%||35 Years||21 Years||70 Years||RM100,000|
|CIMB Home Loan||4.95%||35 Years||18 Years and above||70Years||More than RM200000|
|AIA Home Loan|| |
iii.4.39%p.a (2 years)
|35 Years||18 Years||70Years||RM100,000 and above|
|Public Bank Home Loan||3.65%||35 Years||21 Years and above||70Years||RM100,000 and above|
|BSN Home Loan|| |
i.RM 100,000 and below BR + 2.85%
ii. RM 100,000 to < RM 300,000 BR + 0.65%
|35 Years||21 Years||70Years||RM300,000 and above|
|Ambank Home Loan|| |
i.RM100000 – 200000 (4.65%)
ii. > RM200001 (4.45%)
|30 Years||18 Years and above||Not Exceeding 65 Years||RM300,000 and above|
|RHB Home Loan||4.00%||35 Years||18 Years and above||70Years||RM300000 - 600000|
|OCBC Home Loan||4.02%||35 Years||18 Years and above||70Years||RM350,000|
|Bank Islam Home Loan||3.90%||35 Years||18 Years and above||70Years||RM120,000- RM500000|
|Bank Rakyat Home Loan||4.87%||35 Years||18 Years and above||70Years||RM350,000|
Home Loan Malaysia
Some of the important features of home loans are listed below –
- Home loans can be availed at a fixed or floating or a mixture of fixed and floating interest rate.
- Usually, banks require collateral to be submitted as security against a home loan. This collateral can either pertain to the property that is being funded by this home loan or to any other property owned by the borrower.
- Repayment of home loans is made via monthly loan installments.
- Prepayments are allowed which are either free or are charged a penalty fee, depending upon the lending institution.
- Home loans are usually long-term in nature with tenures ranging between 5-35 years.
- Up to 90% of the property value can be availed as home loan.
- Payment of processing fees, stamp duty and other such charges may be required.
- Interest rate on home loan depends upon the bank and the customer generally has a choice of fixed, variable or a combination of fixed and variable rate of interest.
- Many banks offer Flexi Home Loans which come with a loan account coupled with an overdraft account. This can be used to deposit additional amounts in times of surplus and hence lowering the principal and thereby the corresponding overall interest amount. This facility can also be used for withdrawing excess cash in times of need.
Every lending institution has a different criteria, however, listed below are the common points on which any home loan applicant may be judged while applying for a home loan.
- The age of the applicant should be between 21 and 60. This can vary a bit at both ends depending upon the bank from which the loan is sought
- A minimum salary requirement needs to be met which again varies from bank to bank
- Loans are granted to both Malaysians as well as non-Malaysians
- A good credit history is an added plus while applying for a home loan
- The nature of employment also plays a vital role in deciding the eligibility
Following is the list of documents that may be requested by the bank before approving home finance for to a customer –
- A photocopy of identity card
- Latest salary slips
- Latest bank statements
- Latest Income Tax statements
- Letter of confirmation from the employer
- Purchase agreement for the property under consideration
Additional documents may be requested by the bank depending upon certain internal bank requirements.
Housing Loan Comparison
There are various comparison tools available online which let you know your home loan installment even before you have availed your home finance. Also, several comparing web tools are available that compare various home loan options from different banks and let you know the most suitable loan option.
Alternatively, customers can visit the official websites of various banks and research through their home loan options and then decide which home loan product offering suits their financial requirements the most.
Home Loan Approval Process
Home loan approval process in Malaysia is pretty straightforward if all required documents are furnished on time. CCRIS report which lists down the credit history of customers is the first and foremost document that banks consult before sanctioning home finance to customers.
In general, best practice is to first obtain your CCRIS report and check your credit history before applying for home loan. This will ensure rectification of problems in the CCRIS report before you apply for housing finance and get rejected.
Housing Loan Balance Transfer
Almost all major banks in Malaysia provide customers with the option of balance transfer on their existing home loans. This means that if home loan from a particular bank has a higher rate of interest then customers can choose to shift their home loan to another bank that is offering a lower rate of interest. This would lower the monthly home loan installment for customers and will also lower the overall interest amount that is paid by customer to the bank.
Some prominent Malaysian banks which offer home loan balance transfer facility are Maybank, Citibank, Standard Chartered, UOB etc.
Housing Loan Guarantor
Banks in Malaysia may require loan guarantors to sign home loan applications of customers. Banks may or may not require a loan guarantor depending upon the financial standing of customers.
Banks follow up with loan guarantors in case borrowers default in repaying their home loan. Becoming a loan guarantor is a tricky job and should only be done for people who you know very well.
Housing Loan Pre-approval
Obtaining a pre-approved home loan is generally seen by banks as a huge positive. Firstly, it pegs you as a serious buyer who is on the look-out for property and secondly, you get to know the exact home loan amount you are being offered. Both these things ease out the process of searching for a suitable house. Once the home loan limit is set, you can look for houses only in that price range and can thus avoid any hassle of over-borrowing or under-borrowing.
Types of Home Loans in Malaysia
When most people think of home loans, the picture that comes to mind is that you want to buy a house, go to a bank, and walk out with money. However, that is not how it works. Most banks provide a wide array of home loans that are targeted at specific customers and purposes. Some of these loans are:
Regular Home loans
The regular home loan is the one where you can borrow money to either finance the construction of a new house or to purchase a plot of vacant land. These loans can also be conventional in that, they come with interest rates and do not follow the rules of Islamic banking.
Home Loans for Expatriates
Home loans can also be extended to those who are working in the country on a valid work visa. These loans can be tailored especially to suit the needs of the expatriates and may not be made available to residents of the country. These loans can also cover those who are not working in the country but stay for extended periods of time and also those who are citizens of Malaysia but have becomes permanent residents in other countries.
Islamic Home Loans
Islamic home loans are those that follow the rules of Islamic banking. There is no interest charged with these loans. They tend to charge a profit rate which is paid every month along with the monthly instalments. These loans can also come in the form of hire purchase where the bank buys the property and gives it to you on leases till the loan is paid back.
Home loans for Furnishing
Not all home loans are meant for the purchase of property. Sometimes banks will provide home loans that can be used to furnish a house or to get work done in a property that has already been constructed. The amounts sanctioned for such loans may be lesser than that sanctioned for other home loans.
Home Loans for Approved Projects
At times banks can have certain construction projects that are on their approved list for loans. Customers of the bank will be able to take loans to purchase property in these projects but they may only get such funding if the property has passed a certain percentage of construction. This rule however may change from one bank to another.
Home Loan Base Rates
Base rates is the new system that has been adopted by the banks in Malaysia to replace the old system called the Base Lending Rate. The base rate is what banks use to determine the interest that they intend to charge on loans offered. The change was adopted in order to bring more transparency in the interest rates. According to the new system, banks announce their base rate, which is the bare minimum they can charge. They also announce their margins and based on these two, the effective lending rate is determined.
The base rate changes from one bank to another and can range from 3.2% per annum to 4% per annum or more. When banks talk of interest rates, they will say that the interest rate will be BR + 1.25%. If we assume that the a particular banks base rate is 4% per annum then the effective lending rate will be 4% + 1.25% which comes to 5.25% per annum.
Do's and Don’ts for Home Loan in Malaysia
While there are a lot of home loans available in Malaysia, there are certain thing that you need to keep in mind when dealing with one, in order to ensure that your eligibility for the loan is not affected. Here are the do’s and don’ts for home loans in Malaysia.
Do’s for Home Loans
- Check the amount that you can borrow before applying for the loan.
- Ensure that you are eligible for the loan by checking the eligibility criteria.
- Check to see if the interest rates are acceptable.
- Once you get the loan, ensure that you make all payments on time.
- If you can, then try to go in for a prepayment as you can save a considerable amount of interest if you do.
Don’ts for Home Loans
- Don’t borrow more than you need.
- Don’t apply for a loan that is not applicable to you.
- Make sure you factor the home loan repayments into your monthly budget.
- Don’t apply for a loan if your credit score is not good.
- Don’t go for the first loan that is available to you.
Home Loan Application Procedure
With most banks, you will need to fill out the application form for the home loan and then provide a host of supporting documents. These documents can include:
- Proof of identity
- Proof of employment
- Proof of income
- Bank statements
- Passports and visa for expatriates
- Document for the valuation of the property
- Title of the land depending on the type of loan
- Proof that the property is complete to a certain degree, if the banks ask for it.
Best Housing Loans in Malaysia:
- MBSB Housing Loan
MBSB offers home loan products tailored to suit the need of a variety of customers. These loans are offered at competitive profit rates. The maximum tenure offered for these loans is 35 years. You can choose your preferred type of insurance which comes bundled with the MBSB home loan. These loans are offered both for properties that are under construction and those that are ready for occupying. Minimum finance amount offered is RM 5,00,000 and processing fee is waived while legal fee is charged at a nominal rate. Mode of repayment can be chosen by customers and can be fixed or bullet payments. A relationship manager is provided by the bank to offer consultation to home loan customers.
- CIMB Housing Loan
CIMB offers home loan products that can be customized to suit individual customer needs. The minimum loan amount for home loans is RM 15,000 and the rate of interest offered is variable and is a function of the base rate. Capped home loan packages are also offered wherein the maximum applicable rate of interest is capped in case the base rate goes up substantially. Loan tenure offered on CIMB home loans is a maximum of 35 years. Margin of finance is 90% with an additional 5% being granted if the bank deems suitable. Insurance along with these home loan products is advisable although does not come mandatory with the loans. A separate home loan scheme is offered to customers who are looking to buy their first house; this scheme is called My First Home Scheme and offers a margin of finance as high as 100%.
- Maybank Housing Loan
Maybank offers flexible and customizable home loan products to customers. These home loans also come with overdraft facility wherein the customer can partially withdraw funds in case of urgent financial need. Lock-in period offered for home loans is 3 years after which you can pre-close your home loan if you want. This will be charged at 2% of the outstanding loan amount. Loan tenure offered is a maximum of 35 years. Margin of finance offered by Maybank home loan is a high 95%. These home loans can be applied by residents of Malaysia as well as foreigners. When you sign your home loan application you will be given the flexibility to revise your repayment schedule and get your loan repayment started as soon as the loan is sanctioned instead of waiting for full loan disbursement.
- RHB Housing Loan
RHB offers housing loans to suit the housing finance needs of different customers. These loans are highly flexible and can be availed for completed house projects or for under-construction projects. The rate of interest offered RHB Home Loan is 4.95% per annum. Two types of home loan packages are provided to customers, one is a semi-flexi package which allows customers to make extra payments over and above their monthly installment and the other loan offering is for customers who are about to buy their first house. Early settlement of loan is charged at 2% of outstanding loan amount. Maximum applicable loan tenure is 35 years.
- AIA Housing Loan
AIA housing loans are a great home loan product to avail. These home loans are offered at fixed rates of interest to safeguard customers against any rate hikes, however, loans are also available at floating rates of interest. AIA provides home loans for buying of new as well as old houses. AIA Home Loan can also be availed for switching from one home finance to another. AIA offers the flexibility to repay home loans earlier than their stipulated repayment period. Customers can choose from the two insurance options available along with the AIA home loans. These insurance schemes are offered to make sure that your housing loan is well covered in case of any unforeseen circumstances.
- Public Bank Housing Loan
Public Bank home loan are a smart and perfect way of procuring cash for buying your dream home. Public Bank offers customers the flexibility to choose from a couple of available home loan packages. With an option to go for an overdraft facility, Public Bank home loans make it easier for you to control payments. This helps to keep interest rate in check during today’s times of ever- increasing real estate prices. There is also an option of linking your home loan account to your current account which can be used to reduce your home loan balance. The maximum home loan tenure offered is 35 years and the rates of interest are quite attractive.
Other Loan Products
Home Loan FAQs
How much will the bank lend?
The amount a bank will lend depends on its policies and the type of loan. In general banks can fund up to 90% of the cost of the property but some banks will also fund up to 100% of the cost.
What will the interest rate be?
The interest rate will depend on the base rate announced by the bank. Sometimes the interest rate can be fixed while other times it can be variable.
How long can I take to repay the loan?
The tenure of the loans will depend on the banks and your capacity to pay back the amount that you borrow. The maximum tenure that banks can offer can be either 35 years or till such time as the borrower turns 65 years old.
Does the property have to be complete before applying for a loan?
No. These loans can be taken even to purchase vacant land, however, with some of the loans, there is a possibility that the bank will ask for it to be completed before it funds the purchase.
Are valuation certificates mandatory?
The approval of the loans that are extended can depend on the value of the property being above the banks minimums, therefore, valuations may be necessary in order to avail a loan.
Will the loan cover Takaful for the property?
Yes. Many of the loans will provide a sum that can also cover the payment of the premiums for Takaful cover for the property being purchased.
If I am not a resident or an expat in Malaysia, can I still take a home loan?
Yes, banks can extend home loans to foreigners, but there may be a clause that states that such purchases be made for investment purposes.
Are early payments allowed?
Yes, almost all banks will allow customers to pay back the loan before the tenure gets over.
Are there any discounts available?
While discounts on the actual loan or its interest rates may depend on the banks, if customers go in for a prepayment of the loan, banks will offer a rebate which is basically a sizable amount of interest that customers won’t have to pay as a result of prepaying the home loans.
News About Home Loan
Budget 2017 focuses on first time property buyers
The Budget 2017 focussed more on the first time home buyers. There has been a lot of measures taken by the government to help the B40 group. The financing will be better and more accessible to the buyers. Stamp duty exemption has increased to 100% for house purchase and loan. The budget introduced urban areas for rental to eligible youths. The developers are not benefitted. The budget disappoints the listed developers under the research arm’s coverage as it is below its market expectations.
25th October 2016
First-time house buyers can opt for Govt. Schemes
Considering the increased pressure on banks to relax lending rules, the lending entities have come up with a plan of encouraging government sponsored schemes for obtaining housing finance. Skim Rumah Pertamaku or SRP is one of the popular schemes for housing finance in Malaysia. This scheme is facilitated by the Malaysian government and 11 commercial banks and 11 Islamic financial institutions are promoting this scheme among their customers.
Association of Banks of Malaysia or ABM is educating customers about the perils of obtaining more credit while popularising the government owned schemes for home loans. First time home buyers have been advised to look around for as many loan options as possible by the ABM. ABM currently has 27 members all of which are commercial banks.
18th August 2016
Bank Negara believes that they have taken sufficient measures to keep the household debt at cautious level
Bank Negara Malaysia is confident that the measures they introduced in the last couple of years will keep the household debt at cautious level. The current household debt stands at 89.9%. This is the highest in Asia. Datuk Muhammad Ibrahim, the BNM Governor, said that the household debt was monitored by the central bank regularly. He also said that those who are eligible and want to borrow can get access to financing. The recent cut in overnight policy rate is to make sure that the economy will keep growing in the second half of the year and beyond. The rate cut in induce spending and which will in turn benefit the economy. The central bank wants household debt to improve but at the same time they want to see employment and income growing.
27th July 2016
Glomac held by Hong Leong Research
Glomac has been put on a hold call by Hong Leong since the bank is not expecting too much from the property sector of Malaysia. Also, the stringent home loan sanctioning has added fuel to the falling property demands in Malaysia. As for Glomac, the first quarter profit rose by 15% owing to projects such as those in Puchong Lakeside Residences, Saujana Rawang, Glomac Centro and Reflection Residences.
Key launches in the year 2016 hold promise for Hong Leong as Glomac plans to launch RM 802 Million worth construction projects in the coming fiscal. The bank aims to see a surge in demand of property as well steady growth of Glomac. Unbilled sales for Hong Leong Research House decreased slightly from RM 796 Million to RM 737 Million this year.
21st September 2015
Property units in Malaysia wait to be sold
With the current economic crisis faced by the Malaysian economy, the country's real estate sector has taken a serious hit in terms of sale of property units. Currently a huge chunk of property units lies unsold and the number is continuously on the rise. This has been fueled by unreleased bumiputeras lots and loan rejections. End of the first half of 2015, in June, saw 1 14% increase in the unsold property unit numbers. Most unsold properties are in the cities of Kedah, Penang, Selangor and Johor.
On the other hand, the percentage of potential property buyers who failed to secure property loans has increased from 29% last year to 35% during first half of this year. Also a survey indicated that GST or Goods and Services Tax had increased the cost of doing business in Malaysia while pushing up the property prices too, making it a double-edged sword for slashing the demand for property in the country.
Home loans in Malaysia form a huge chunk of the lending products in the Malaysian financial market. Home loans are offered by banks in both regular as well as Islamic banking variants.
14th September 2015
KRI Reports Overly Expensive Property Prices in Malaysia
Khazanah Research Institute’s (KRI) report based on their latest research throws light on Malaysia’s residential property market to be concluded of being “seriously unaffordable”.KRI’s report shows that the median house price is around 4.4 times the median annual household income.
Datuk Charon Mokhzani, MD of KRI, said that the report shows that an affordable market for property is where median house prices are three times median annual household income. In the case of Malaysian property market the median house prices are way beyond that mark.
Charon added, “The challenge of providing affordable homes for all households has captured the focus of policymakers. In Malaysia, policy initiatives relating to housing affordability have been through transferring physical or financial resources to low-income households. Middle-income households, however, are neither eligible for social housing nor able to afford private sector-supplied houses.”
The report also raised alarms on the fact that the increasing housing prices is considered as a factor that determines rising land prices and not the other way around. This could be driven by the non-negotiable demand for the increased land prices, as developers are forced to pay due to the increasing housing prices.
7th September 2015
Malaysian Housing Market Becoming “Severely Unaffordable”
A survey done by Khazanah Research Institute found that the median house price in Malaysia was 1.4 times higher than the price of an affordable market. The median house price in the country was found to be 4.4 times the median annual income, making it an extremely unaffordable market for most. A median house price equivalent to three times the median annual household income is considered as an affordable market in Malaysia.
Willingness on part of developers to pay increased land rates are the primary cause to push house rates higher, according to the study. Low-income families in the country find policies which look after their housing needs, which is not the case with middle income families who are not eligible for social housing and cannot afford houses supplied by the private sector.
Experts believe that the housing policy should be made more flexible, to include those sections of the population who need it but are not eligible for it. KRI hopes to address this problem by concentrating on social housing, an initiative it will bring up with the government.
24th August 2015
Household Debt in Malaysia Leaves Economists Concerned
Malaysian household debt has left economists very as it is alarmingly high when compared to other countries. According to Dr Muhammad Abdul Khalid, renowned economist, half of the income of people of Malaysia is said to be spent on debt payments.
Though there are Malaysians who are saving, but the ones who are not has left a reason for concern.
Dr Muhammad Abdul Khalid also added, “What is alarming is that 90 per cent of Malaysians have no savings. And 70 per cent of those who have investment like Amanah Saham Berhad, only have RM500 in the accounts," when addressing the 9th Malaysian Students Leaders Summit here, held on August 9,2015.
He commented about the lack of management skills in the youth for personal finance. University students account for very high debts in the country. Despite their lack of income, the youth in Malaysia show no concern when it comes to their expenditure.
He mentioned the probable solution to the debt concern in Malaysia is enabling financial and consumer literacy.
21st August 2015
Real Estate Developers and Buyers Foresee An Inadequate State of Economy, Restricting Growth
The Malaysian currency, ringgit performance vis-a-vis other currencies becomes of importance, but the country’s export volume has however declined and foreigners are not showing much enthusiasm for purchasing eligible Malaysian property or assets. To top it all, imported building material costs are soaring.
Foreign ownership of Sabah's real estate property is only short of 5%. Some developers claim that the figure is actually 3%. According to the latest Bank Negara report, gross exports fell by 3.7%, in the second quarter 2015 despite the favourable condition of the ringgit depreciating in the period which ideally should drive raising exports and arrest declining tourism receipts.
Some property developers are facing stringent requirements in getting bridging financing for starting off real estate development projects from financial institutions who are requesting for additional supportive document or collateral.
At the moment, given the current scenario various professionals in the field are facing non-payment woes for services even for big projects, where delayed or slow payments are yet a blessing.
Malaysia's very high household debt ratio and property speculation is predicted cause more trouble for make adjustments more painful. The next hit that the Malaysian economy is going to take, will be lead by the US Federal Reserve hikes in rates due in September. Due to Malaysia’s restricted export capacity exports are not expected to rise in the short duration.
20th August 2015