Margin of Finance (LTV) in Malaysia

The short answer

The margin of finance is the share of a home's value that the bank lends you. The loan-to-value ratio, or LTV, is the same idea. If the margin is 90%, the bank lends 90% and you pay the other 10% yourself.

What sets the margin:

• Bank Negara Malaysia caps it at 70% for an individual's third and later housing loans, a measure in force since 3 November 2010.
• For the first and second homes, there is no single Bank Negara cap; each bank decides. A 90% margin is common, but a bank may offer less.
• The base is usually the price or the bank's valuation, whichever is lower.
• The tenure for a property purchase is capped at 35 years by Bank Negara Malaysia.

On a RM 500,000 home, a 90% margin means a RM 450,000 loan and RM 50,000 of your own money. At 70%, it would be a RM 350,000 loan and RM 150,000 of your own money. To try your own numbers, use the loan calculator. Want me to work it out for your own case? WhatsApp +60 17-279 8932.

What the margin means, in plain words

Every home purchase has two parts: what the bank lends and what you put in. The margin of finance decides the split.

Loan = value × margin of finance

Your part = price − loan

Two things catch people out. First, "value" usually means the lower of the price and the bank's valuation, not always the price on the SPA. Second, the margin is the maximum a bank will consider; whether you get it also depends on your income and debts, which the bank checks with your DSR.

How Bank Negara Malaysia frames it

Bank Negara Malaysia has set two rules that touch the margin and the loan size directly:

Beyond these, Bank Negara Malaysia expects banks to lend responsibly and check affordability, which is where DSR comes in. It does not publish one margin for first and second homes. That is why different banks, or the same bank for different buyers, can offer different margins.

Worked examples: a RM 500,000 home

Same assumptions as the DSR guide and the salary guide: 30 years, an assumed 4.2% a year. The rate is for illustration only, not a quote and not a forecast.

Example 1: different margins on the same home

A lower margin means a smaller instalment but much more cash up front.

Example 2: when the valuation comes in lower

The SPA price is RM 500,000. The bank's valuer puts the home at RM 480,000. The bank lends 90% of the lower figure:

• Loan: 90% × RM 480,000 = RM 432,000.
• Your part: RM 500,000 − RM 432,000 = RM 68,000, not RM 50,000.
• Instalment: about RM 2,113 a month.

The RM 18,000 gap comes from your own pocket. In a subsale, where the price is negotiated between owners, a valuation gap is more common, so it helps to get an indication of the value before you sign.

Example 3: tenure

The same RM 450,000 loan over 35 years, the maximum, comes to about RM 2,047 a month, against about RM 2,201 over 30 years. The instalment is lower, but you pay interest for five more years. Banks also look at your age at the end of the loan, so an older borrower may not get the full 35 years.

Example 4: costs that do not come from the loan

The loan covers the price, up to the margin. Other costs are usually separate:

• Stamp duty on the transfer: RM 9,000 on RM 500,000 for a citizen or permanent resident, unless an exemption applies.
• Stamp duty on the loan agreement: 0.5% of your loan, so RM 2,250 on RM 450,000.
• Legal fees for the SPA and the loan.
• Valuation fee, if any.

Some banks let you add certain costs, such as a home loan insurance premium, to the loan. That raises the loan and the instalment. See MRTA vs MLTA and the stamp duty guide.

Working out your cash need, step by step

Before you book a unit, it helps to run the numbers in this order:

1. Start from the lower figure. Take the price, and if you can, an indication of the bank's valuation. Use the lower one.
2. Apply the margin. Use 90% for a first or second home if your bank has said so, or 70% if this would be your third housing loan.
3. Work out your part. Price minus loan. This is the cash you need for the purchase itself.
4. Add the costs on top. Stamp duty on the transfer, 0.5% of your loan for the loan agreement, legal fees and any valuation fee.
5. Check the instalment against your income. Put the loan into the loan calculator and compare the instalment with your take-home pay and other debts.

If any step does not fit, the usual levers are a lower price, a larger cash part, a longer tenure within the 35-year cap, or a joint borrower.

The third housing loan: who it hits

The 70% cap is for the third house financing facility taken out by an individual. Points to know:

• It is about housing loans, not properties. A home you own outright, with no loan, is not a housing loan. Ask your bank how it counts yours.
• Joint loans count. If you are a joint borrower on a loan, it may count as one of your loans. Ask your bank before you apply.
• Settling an earlier loan may change the count. Banks look at your record when they assess you, so the timing matters.
• The cap does not affect the first and second homes. Those margins are set by each bank's own credit policy.

Margin and DSR: two separate tests

A bank checks two things:

1. Margin: how much it is willing to lend against the property.
2. DSR: whether your income can carry the instalment, with all your other debts.

You need to pass both. A buyer can qualify for 90% on margin but get less because the DSR is too high, or have strong income but get 70% because it is a third housing loan. See the DSR guide.

What to check

• How many housing loans you already have, on your own and jointly, and how your bank counts them.
• The margin in the loan offer, in writing, and whether it is based on the price or the valuation.
• The valuation, before you sign a subsale SPA if possible.
• The tenure offered, against your age.
• Your cash for the gap, including any valuation shortfall, stamp duty and legal fees.
• For foreign buyers: each bank's policy for foreign borrowers, consent from the land authority in Kuala Lumpur, and the minimum price for foreigners.

Mistakes buyers make

• Assuming every bank gives 90%.
• Forgetting that the margin is on the lower of price and valuation.
• Not counting a joint loan with a family member as one of their own.
• Budgeting only the 10% and forgetting stamp duty and legal fees.
• Choosing the longest tenure without seeing the extra interest.

Related terms

• DSR (debt service ratio)
• MRTA vs MLTA
• SPA (sale and purchase agreement)
• Stamp duty
• Home loan guide for foreign buyers

Check before you sign

This page explains how the margin of finance generally works. It is not financial advice, and banks change their own policies. Before you sign a booking form or SPA, ask the bank for a written loan offer showing the margin, the tenure and the valuation. For help with a specific property, WhatsApp Shyan Yee (REN 46305, IQI Realty) at +60 17-279 8932.