Purchasing property in Malaysia involves understanding how loans work, especially when you’re considering your first, second, or even third property. Whether you’re buying for personal use or as an investment, each comes with its own set of loan rules and considerations.
First and Second Residential Property Loans
For first-time homebuyers and even those purchasing a second property, Malaysian banks typically offer favorable terms.
Loan-to-Value Ratio (LTV): For your first and second residential properties, you can generally receive up to 90% financing from the bank, meaning you’ll need to pay a 10% down payment.
Interest Rates: First and second properties often enjoy competitive interest rates, especially if they are for your personal residence rather than investment purposes.
Eligibility: Banks assess your Debt Service Ratio (DSR), income stability, and credit score to determine your eligibility for these loans.
Third Residential Property Loan and Beyond
When you move on to your third residential property, the rules become stricter, as banks consider these as investment properties.
Lower LTV: For third and subsequent residential properties, the LTV is typically reduced to 70%, requiring you to pay a 30% down payment.
Higher Interest Rates: Since third properties are usually seen as investments, banks may charge a higher interest rate compared to the first two properties.
Commercial Property Loans
Commercial property loans are different from residential loans, especially in terms of financing and interest rates. These loans apply to properties such as office spaces, retail shops, or industrial lots.
Loan-to-Value Ratio (LTV): Banks generally offer up to 85% financing for commercial properties, meaning you’ll need a 15% down payment. This applies whether it’s your first or subsequent commercial property.
Shorter Loan Tenure and Higher Interest Rates: Commercial loans often come with shorter loan tenures (up to 25 years) and higher interest rates than residential property loans. The risk profile for commercial properties is higher, leading to stricter loan terms.
Key Takeaways for Property Buyers
- First and Second Residential Properties: Enjoy up to 90% financing, making these easier to afford with lower down payments.
- Third Residential Property: Expect stricter terms with only 70% financing and a higher down payment.
- Commercial Properties: Typically offer up to 85% financing, but come with higher interest rates and a shorter repayment period.
Understanding the different loan structures for residential and commercial properties in Malaysia is essential for planning your property investments effectively.