What is the margin of finance (MOF) for housing loans in Malaysia?

This will depend on the value of your property, your income and your repayment capability.

The amount of financing provided by a financial institution depends on the market value (for completed properties only) or purchase price of the house, whichever is lower.

The margin of financing 1 could go as high as 95% (inclusive of MRTA 2) of the value of the house.

It is assessed on factors such as:

• Type of property


• Location of property


• Age of the borrower


• Income of the borrower

The higher the margin, the higher you will have to pay per instalment.

Also, at a given rate, a shorter tenure will require you to pay higher instalment.

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References

1. Margin of Financing - The loan amount granted by the financial institution, expressed as a percentage of the value of property pledged to secure a loan.


2. Mortgage Reducing Term Assurance (MRTA) - A term insurance which reduces over the tenure of the loan. This form of insurance is used to provide cover for the outstanding loan amount, in the event of death or total permanent disability of the insured. MRTA is normally calculated to meet the outstanding loan amount.

Reprinted with permission from BankingInfo (A Consumer Education Programme by Bank Negara Malaysia)

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