Purchasing property in Australia is a dream for many investors, particularly those from Malaysia. As the Australian property market offers potential for long-term capital growth and rental income, it’s no surprise that more and more Malaysian buyers are looking to invest in Australian real estate.
However, one of the primary concerns is financing the purchase, especially when securing a loan from Malaysian banks. Fortunately, Malaysian banks have recognised this demand and now offer overseas property financing options for properties in Australia.
While this opens up opportunities for property investors, it also comes with challenges and requirements. This blog post will discuss everything you need to secure a loan from Malaysian banks for an Australian property purchase.
Let’s Get Straight To The Point
Malaysian banks, including OCBC Malaysia, Maybank, and CIMB, offer loans for purchasing Australian properties, making it easier for Malaysian investors to enter the Australian real estate market.
These loans typically cover up to 70–80% of the property value, require a minimum property value of RM1 million, and often focus on properties in major cities like Sydney and Melbourne. Loan tenures can extend up to 30 years or until the borrower turns 70.
However, there are key considerations: strict eligibility criteria, additional documentation, location and developer restrictions, and currency exchange risks. Potential borrowers must understand the specific terms, evaluate the financial risks, and align the loan features with their investment goals to succeed.
Availability Of Overseas Property Financing
Yes, Malaysian banks do provide financing options for overseas property purchases, including properties in Australia.
Several banks, including OCBC Malaysia, Maybank, and CIMB, offer overseas property loans, though the terms and conditions vary across different banks.
With these loans, the goal of owning real estate in Australia might become a reality, but it’s important to comprehend the requirements and accessible possibilities.
OCBC Malaysia
OCBC Malaysia offers an Overseas Property Financing product tailored for properties in Australia. The bank funds properties in Melbourne, Perth, Sydney, and Brisbane.
OCBC’s loan offerings are designed for Malaysian investors looking to buy in popular Australian metropolitan areas, making it a viable option for those seeking investments in these locations.
Maybank
Maybank provides a Foreign Currency Offshore Property Financing-i product to finance properties in Australia. The product is available to individuals and businesses investing in Australian real estate.
This financing option is especially useful for those who wish to manage their property financing in a foreign currency, reducing potential exchange rate fluctuations.
CIMB
CIMB offers overseas property financing, including options for Australian properties. It provides fixed—and floating-rate financing and its loan terms are flexible to cater to different investor needs.
The exact cities and conditions depend on the specific loan package, but CIMB’s offerings are competitive in the Malaysian market.
Loan Features And Requirements
When securing a loan from a Malaysian bank for your Australian property purchase, it’s important to understand the typical loan features and requirements of these financing products.
Here’s a breakdown of what to expect:
Loan-To-Value (LTV) Ratio
One of the most crucial considerations when applying for a loan for real estate abroad is the Loan-to-Value (LTV) ratio. Malaysian banks typically offer financing for up to 70-80% of the property value.
You must contribute at least 20-30% of the property’s purchase price as a down payment. The higher your LTV, the more you will have to pay upfront.
Loan Tenure
Loan tenures for overseas property financing typically extend up to 30 years. However, the loan tenure is subject to a few conditions. The loan period will end when the borrower reaches 70, whichever comes first.
This means that even if you are eligible for a 30-year loan term, the loan may mature earlier if you turn 70 before the full tenure elapses.
Minimum Property Value
Most Malaysian banks have a minimum property value requirement for overseas property financing. The minimum threshold is often set at RM1 million (or its equivalent in other currencies).
This limit ensures that the bank is financing higher-value properties, which are more likely to generate rental income and capital appreciation, thus reducing the bank’s risk.
Loan Denomination
Some banks, like OCBC Malaysia, offer the flexibility of loans denominated in Malaysian Ringgit (MYR) to avoid foreign exchange risks. Your monthly repayments will be in MYR, even if the property is in Australia.
This can be an advantageous option for Malaysian buyers who want to avoid the fluctuation of exchange rates between the Malaysian Ringgit and the Australian Dollar (AUD). However, depending on their specific terms, some banks may require you to pay the loan in the local currency, i.e., AUD.
Redraw Facilities
Certain Malaysian banks, such as Maybank, offer the flexibility of redraw facilities, which allow you to access any extra funds you have prepaid into your loan.
This feature can be beneficial if you plan to make additional repayments during the loan tenure, providing greater flexibility should you need access to cash.
Eligibility Criteria
You must meet the eligibility criteria before applying for an overseas property loan from a Malaysian bank. While these criteria vary slightly between banks, the general requirements are as follows:
Age Requirement
You must be between 18 and 70 years old to qualify for an overseas property loan from a Malaysian bank.
This means you can apply for a loan as soon as you turn 18, but depending on the bank’s specific terms, the loan will need to be repaid before you reach 70 years old.
Income Requirements
Banks usually require a minimum monthly gross income, which might vary depending on the bank and the loan amount. In general, most banks require a minimum income of RM5,000 per month.
However, this requirement may be higher for larger loans or properties in more expensive areas like Sydney or Melbourne. Your income will also determine your eligibility for higher loan amounts, as Malaysian banks generally assess your capacity to pay back the loan, given your income.
Property Purpose
In most cases, the property you plan to purchase in Australia must be for investment. This means the property should not be intended as your primary or personal residence.
Banks generally offer financing for properties that generate rental income or provide long-term capital gains, as these factors reduce the lender’s risk.
Location Restrictions
Many Malaysian banks place restrictions on the locations of the properties that can be financed.
For instance, some banks will only finance properties within 30 kilometres of the Central Business District (CBD) in major Australian cities. This ensures the property is in a prime location and will likely appreciate and generate rental income.
Developer Restrictions
Some banks may only finance properties purchased directly from developers. If you’re considering purchasing a property through other means, such as a private sale or an auction, you may need to confirm with the bank whether it can still offer financing.
Financing from developers generally presents less risk for the bank because the properties are new or under development, reducing the chance of major defects.
Considerations And Limitations
While securing a loan from a Malaysian bank to finance your Australian property is certainly possible, there are several considerations and limitations to keep in mind:
Currency Exchange Risk
One key risk when financing an overseas property is currency exchange fluctuations. If your loan is denominated in AUD, changes in the exchange rate between the Ringgit and the Australian Dollar can impact your monthly repayments.
Some banks, like OCBC, offer foreign currency risk protection products to mitigate this risk, but it’s essential to understand the potential impact on your repayments before proceeding.
Additional Documentation
Applying for an overseas property loan typically requires more documentation than a domestic loan.
Banks may ask for additional documents, such as proof of income, tax returns, and a detailed breakdown of your financial situation. Some banks may also request a copy of the sales and purchase agreement and a property valuation.
Stricter Eligibility Criteria
Due to the added complexities of international property investments, Malaysian banks may apply stricter eligibility criteria for overseas loans than domestic ones.
This means that even if you qualify for a home loan in Malaysia, you may need to meet additional conditions to finance an Australian property. Always check with your bank to confirm their specific requirements.
Conclusion
Securing a loan from a Malaysian bank to finance an Australian property purchase is a feasible option for many investors. With prominent banks like OCBC Malaysia, Maybank, and CIMB offering overseas property financing products, Malaysian investors can tap into the Australian real estate market with relatively favourable loan terms.
However, potential borrowers must carefully consider the key requirements, including Loan-to-Value (LTV) ratios, loan tenures, and eligibility criteria. The loan typically covers up to 70-80% of the property value, and the terms can extend up to 30 years. The loan matures when the borrower turns 70.
Additionally, most banks require a minimum property value of RM1 million and have specific location and developer restrictions, which may limit the properties eligible for financing. The currency exchange risks, additional documentation, and potentially stricter eligibility criteria are important factors before committing to an overseas property loan.
Understanding the specific terms of each bank’s offerings and how they align with your investment goals will help you make an informed decision. While securing a loan from a Malaysian bank to finance an Australian property purchase is achievable, assessing the associated risks, conditions, and financial commitments is important.
By thoroughly researching your options and consulting with the relevant financial institutions, you can ensure that your property investment in Australia is both financially feasible and strategically sound.
Frequently Asked Questions
Can Malaysian Banks Finance Property Purchases In Australia?
Some Malaysian banks, including Australia, may offer loans for overseas property purchases. However, this typically depends on the bank’s policies and the customer’s financial standing.
What Types Of Properties In Australia Can I Finance Through Malaysian Banks?
Malaysian banks generally finance residential properties like houses, apartments, and condominiums. Commercial property loans are less common but may be available in certain cases.
Do Malaysian Banks Require Me To Be A Malaysian Citizen To Apply For A Loan?
Yes, Malaysian banks primarily offer loans to Malaysian citizens or permanent residents. Non-Malaysians may have limited options and may need to meet additional criteria.
What Is The Interest Rate For Financing An Australian Property Through A Malaysian Bank?
Interest rates vary between banks and may be influenced by factors such as the loan amount, tenure, and creditworthiness. Some banks may offer fixed or variable interest rates.
Is It Better To Get Financing From An Australian Or Malaysian Bank?
Financing from an Australian bank may be easier due to familiarity with the local market, but Malaysian banks could offer competitive rates or favourable terms. Comparing both options is advisable.