Foreigner Guides

Presently in Malaysia, there are no government regulations prohibiting foreigners and expatriates from taking or owning a mortgage in the acquisition of Malaysian real estate. Even the loan or lending policies is determined by individual bank which will require foreigner to do some market survey on loan package offer by banks. However, some countries may require their citizen to first obtain consent from their own central bank or equivalent before applying for a housing loan in Malaysia.

In Malaysia, basically Foreigners/Expatriates that seeking for a housing loan come under 4 categories,

  1. Expatriates/Foreigner married to a Malaysian citizen
  2. Expatriates/Foreigner with a valid working permit and/or an ongoing business in Malaysia
  3. Expatriates/Foreigner coming into Malaysia under MM2H program
  4. None of the above (Pure Foreigner Status)
Expatriates/Foreigner married to a Malaysian citizen

Provided the Malaysian spouse is a co-borrower most banks would treat the application as if coming from a Malaysian citizen. In this case, the Margin of Finance (MOF) may be as high as 90% to 95% of the purchase price/value of the property. The loan tenure may also goes up to 70 years of age based on the younger borrower’s age.

Whilst it may help that the Malaysian co-borrower is gainfully employed, lenders are prepared to base their assessment on a single income source provided that such income meets with the Debt Servicing Ratios (DSR, also known as Payment To Income Ratio) of the lender. DSR is the percentage of the borrower’s gross income that the monthly servicing of the loan applied for, will take. As a general rule a Debt Servicing Ratio of 40% or under is considered good.

All calculations are in Malaysian Ringgit based on prevailing published exchange rates. So, a USD4, 000 pm income may very well be able to support RM1Million loan.

Expatriates/Foreigner with a valid working permit and/or an ongoing business in Malaysia

In all probability, an expatriate working in Malaysia will have a housing/rental allowance of RM6k-RM10k per month. That amount is more than adequate to support an RM1Million loan. Hence, it is often said that presently, it is cheaper to buy than rent Malaysian properties.

Lenders look for the borrower’s commitment to treat the country as their permanent resident. Therefore a healthy bank balance in a local bank and the ability to show monthly wages being credited into a local bank account augurs very well.

In cases where part of the income is paid into an overseas bank account, the borrower must be prepared to provide bank statements of the said bank oversea bank account.

Be wary not to be caught in-between jobs as Lenders prefer to see longevity in a particular post rather than a new job that may only be weeks old, even if at a higher pay.

Expatriates/Foreigner coming into Malaysia under MM2H program

MM2H is a program run by Malaysia’s Government to allow foreigner who fulfil certain criteria to stay in Malaysia under a 10 years renewable multiple entry visa.

The Participants of Malaysia My Second Home Programme are provided with various incentives to make the Foreigners stay more comfortable and enjoyable in Malaysia. Certain Banks are more actively involved with the expatriate community and the MM2H programme, and hence more willing to offer “softer” financing terms such as higher margin of finance.

However, for this program there are a few differences in the term and condition between West and East Malaysia (Sabah & Sarawak). In Sarawak, the criteria is explained as below,

How to apply?

Application may direct through Ministry of Tourism or appoint authorised MM2H agent.

Eligibility

In Sarawak, this program is currently only available to applicant over 50 years old.

Finance/Income

The following sets out the financial criteria which depend on the age of the applicant. If a married couple apply the oldest person’s age decides the appropriate criteria.

It should be noted that applicants who choose the fixed deposit option do not have to place it until their visa application is approved. At that time they will receive a “conditional approval” letter by the immigration department. They have to bring this letter, together with evidence of completing any other conditions specified in the letter, to the immigration department. The visa will then be stamped in their passport.

Applicants aged below 50 years old:
  • Not available in Sarawak
Applicants aged 50 years and above: 
  • Have to place a fixed deposit account of RM150, 000. (If they receive a government pension or a pension from a well recognized global company in excess of the RM10,000 the requirement may be waived) or
  • Can withdraw up to RM90, 000 of the fixed deposit after one year to purchase of house, medical insurance or children’s education expenses.
  • Must maintain a minimum balance of RM60, 000 throughout their stay in Malaysia under this programme.
Sponsor/Assistance

There is no longer a requirement for a Malaysian sponsor. This requirement is only necessary if you use an agent in which case the agent will act as your sponsor. Through authorised agent, you may make the application without coming to Malaysia and once the letter of conditional approval is issued the agent will advise you to collect the visa.

Insurance Coverage / Medical Report

Applicants must possess a medical insurance coverage from any insurance company that is valid in Malaysia. This may be waived for older applicants who are denied coverage because of their age. All applicants are required to have a medical examination in Malaysia.

Education

Applicants are allowed to bring along their dependants (children) either not schooling or are schooling in primary, secondary or in any Institution of higher Learning. Dependants who are schooling are also required to apply for a Student Pass to continue their education in schools or Institutions of Higher Learning recognised by the government. Children have to be aged under 18 to be included under the MM2H visa programme.

Taxes

Successful applicants are bound by the policies, systems and regulations of taxes of this country however their overseas income will not be taxed in Malaysia.

Security Vetting

Approvals are given subject to security vetting clearance conducted by the Royal Malaysian Police.

Restrictions
Successful applicants are STRICTLY forbidden from the following:
- Being employed anywhere in Malaysia unless approved by the government.
- Participating in activities that can be considered as sensitive to the local people like political or missionary activities.
None of the above (Pure Foreigner Status)

The last 2 years has witnessed a spike in foreign ownership of residential properties in Malaysia. This is largely driven by the fact that Malaysia presents one of the most attractive upscale property bargains in the world. In addition, the abolishment of the Real Property Gain Tax (RPGT) has provided a further financial incentive for overseas buyers to invest widely in Malaysian property market.

In line with the Malaysian Government relaxation of the rules on foreign ownership of real estate, Lenders have become friendlier towards foreign buyers in term of their lending guidelines. Some lenders are even willing to offer Margin of Finance of up to 80% of the property.

However, the lending terms and conditions to Foreigners are still rather subjective and Banks may impose additional terms and conditions on a case to case basis.

As a guide (and this applies to all categories of Foreigners) here are some of the factors that Lenders look out for:

  1. Country of origin with a preference for developed Countries
  2. Required loan size. Under RM2Million is preferable.
  3. Location of the property.
  4. Credit profile & financial standings of the applicants.

    Whilst Lenders do not necessarily discriminate between employed and self employed borrowers, it is easier for borrowers under employment to establish credit worthiness by showing pay slips and corresponding entries into a regular bank account. For those who own businesses it may a wise move to just show the amount of salary drawn instead trying to make a local lender understand how your business mechanics. Remember that you only need to establish a good Debt Service Ratio of preferably under 40%.

  5. Margin Of Finance.

    Try and avoid anything over 60% lending. However, should a borrower manage to “package” his/her application to fall neatly into items (i) to (iv) mentioned above, an 80-90% may not be out of the question. Be wise on the selection of the property type. A “landed” property (house) is usually more accepted than a “non-landed” property (apartment/ condominium). A completed property with title scores better than a property which is under construction due to the completion risk. Whilst premier high-end condominiums have been very popular amongst, do bear in mind that most Lender have limited appetites to any one development project and a Lender’s exposure to certain property projects may well affect the terms the Lender may be prepared to offer a buyer, regardless of the his/her credit strength. For a lot of Banks, the magic ingredient seems to be the ability to show liquidity (cash in savings accounts and fixed deposits) and perhaps the placement of some savings in the Bank that you are trying to obtain credit from, without necessarily having to pledge the money as collateral.