Margin of Finance

Margin of Finance (MOF)

We are always being told about the margin of finance that bank is financing, margin of financing? what’s that?
MARGIN OF FINANCE is the % of the total loan that we wish to borrow for that property , example:

RM846,000 property, we wish to borrow 90% for this property price amount, which is
( 90% * 846,000 = RM 761, 400)

RM 761, 400 is the financing amount from the bank, with 90% margin of finance.

MARGIN OF FINANCE is the % of how much we wish to borrow from the bank or how much the bank would actually lend to us.

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If your Loan is RM846, 000, you wish to borrowed only 50% of 90%, yes it can be done. Bank allows you to borrow any % with 90% as the highest margin of finance. (However, different bank has down limit of how low Margin of finance can be approved, 10-40%)

The margin of finance guideline standardized across all the bank. If you have 2 Residential loan currently active, your 3rd Property Residential mortgage loan (housing loan) borrowing will be max 70% Margin of finance.

Example:

1.

Individual A has:

Residential Mortgage ABC: RM200,000 with Bank ABC
Residential Mortgage DEF: RM500, 000 with Bank DEF

His/Her third Residential property financing will be 70% only.

2.

Individual B has:

Residential Mortgage ABC: RM200,000 with Bank ABC
Commercial Mortgage DEF: RM500, 000 with Bank DEF

His/Her 2nd Residential property financing will be 90%
But, his/her 2nd commercial property financing will be 85% max

3.

Individual C has:

Residential Mortgage ABC: RM200,000 with Bank ABC
Commercial Mortgage DEF: RM500, 000 with Bank DEF
Residential Mortgage GHI: RM300,000 with Bank GHI

His/Her 3rd residential property financing will be 70%
His/Her 2nd commercial property financing will be 85%

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Isn’t it Weird for scenario 2 & 3

Bank has separate guideline for Residential and Commercial loan, hence if you are getting 2nd Residential property loan, you are allowed to finance 90% for your 2nd Residential Property loan.

Commercial loan will always be max 85% Margin of finance from the bank.

Cheers

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