Malaysia’s Government always encourages foreigners to choose Malaysia as their second home, whether for a long-term stay, retirement, or investment purposes.
The Government recently reduced the minimum price threshold from RM1million to RM600,000 for foreign property purchase with selected properties and projects.
Foreigners are most welcome to buy and invest property in Malaysia; the tricky part is getting the financing. Banks in Malaysia can be selective in providing financing for foreigners.
So, which bank is more suitable for foreigners to get a home loan?
A couple of years ago, the banks in Malaysia started to tighten their policy towards giving out loans to foreigners, so it can be challenging to get a home loan approval here.
Here what we know about the bank’s policy. The banks categorized the foreigner in a few categories, like below.
Category 1. Pure foreigner
A pure foreigner is when a foreigner does not have a business or work in Malaysia. And the decision to buy a house here is purely for investment purposes.
Category 2. Foreigner with the Malaysia My Second Home (MM2H) program
Foreigner with Malaysia My Second Home (MM2H) program is a foreigner that holds MM2H.
If you’re not familiar with MM2H, MM2H is a program introduced by the Government of Malaysia. The program launched in 2002 to allow foreigners who meet the criteria to stay in Malaysia for a long time.
Those who fulfill the Programme criteria will be offered a renewable ten years multiple-entry social visit pass.
Category 3. A foreigner that works and own businesses in Malaysia
Under this category, a foreigner either working or run businesses in Malaysia. They will have a certain period of renewable working permit – usually 2-5 years.
Category 4. Foreigner with Permanent Resident (PR)
There are many paths towards the permanent residence in Malaysia. However, they all usually share the same basic requirement before the PR application can be considered: at least five continuous years of living in Malaysia.
The five ways to be a permanent resident (PR) in Malaysia are as below:
a.Investor
Many countries have immigrant investor programs in place to attract investment and contribute to the country’s development. In return, these investors are rewarded with a permanent residence or even citizenship. Malaysia is no exception.
b.Expert
For professionals such as licensed lawyers and surgeons, this is another way to get a PR in Malaysia. However, the difference with getting a PR this way is that you’ll be required to prove to the immigration authorities that your skillset is valuable and worthwhile.
c.Professional
You may also get your company to recommend you for a Malaysian PR for other professionals, especially those working in a reputable Malaysian corporation.
d. Spouse of Malaysian citizen
No, marrying a Malaysian citizen does not automatically grant you a “red” card. The same goes for buying a property.
For spouses of Malaysian citizens looking to get a PR, you’ll need to:
a. Be married to a Malaysian citizen.
b. Already possess a Long Term Visit Pass and have stayed continuously in Malaysia for five years.
c. Your Malaysian spouse has to be your sponsor.
Most banks are reluctant to give out a loan to a pure foreigner because most of them have less reason to be here in Malaysia.
While, for categories 2,3 and 4 in some ways, they all have reasons to be here. They either working here, have a business, or are married to a Malaysian. So, their risk is considerably lower compared to the category 1 group.
Category 1 group is merely buying for investment, and there is no deep connection to Malaysia, increasing the risk of Non-Performing Loan substantially.
For category 2,3 and 4 group people, if they work with a multinational company and come from a famous country like Singapore, Australia, the US, or the UK, the loan approval chances are high. They might even get a loan margin of 70-80% of the purchase price.
The category 1 group typically either the application declined or the loan margin reduced to 50-60%. But, it still depends on many variable factors.
There are a few ways to improve loan approval chances. You might want to consider these.
Massive Saving
Showing massive savings or funds locally or oversea will increase the chances of approval. Banks do prefer a high net worth client.
Working In Multinational Company
Working with a Multinational company shows stability and consistency in income for the applicant; if the applicant holds a higher rank in a multinational company, that will be even better.
Strong Income
The bank highly seeks an applicant with higher income. This is because high-income applicants usually will have more savings, funds, investment, and stable employment.
Years in the same employment
Working with the same company for years ( at least two years) will have an absolute advantage as it shows the stability and consistency of receiving monthly income.
Existing Client Of The Bank
A client with an existing relationship with the bank will have an extreme advantage like a current account holder, home loan account holder, investment portfolio holder, etc.
However, it can also have the opposite effect. For example, if the home loan account is not paid on time, and there are months of arrears, it can indirectly affect the approval decision.
CONCLUSION
If you’re a foreigner, you want to choose a bank that you have an existing relationship.
For example, if your monthly income is credited to HSBC Bank, you want to try HSBC bank for your home loan application.
This is because HSBC knows you.
They know who you are, where you stay, where you work when you receive your income, and lots more.
Compared to the other bank that you have non- existence relationship, they don’t know you, and it’s difficult for them to give out loans to strangers.
In our observations, foreign banks like UOB Bank, HSBC Bank, and Standard Chartered Bank are more likely to approve foreigner applications than local banks like Maybank, RHB, Public Bank, CIMB bank, etc.
However, there is no harm in trying the local bank if you intend to go ahead with them.
Good luck!
Before you go, we were hoping you could take this opportunity to read up our article about 3 important things to check before signing a bank letter offer.
As usual, if you have any questions, reach us at 012-6946746 and talk to our experienced consultant Mr. David.
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