Mortgages in Malaysia
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Mortgages in Malaysia
The conditions for foreigners arranging mortgages in Malaysia are normally very favourable, and the allocation of mortgages to foreigners tends to be seen as a very positive thing by financing institutions responsible for the mortgages. Due to this, there are many different banks offering many different mortgage products for foreign investment in real estate in Malaysia.
Additionally, as well as the normal mortgage options available in western countries, some banks in Malaysia offer mortgages which have been carefully thought through to comply with Islamic banking practices.
According to Islamic law, the collection and payment of interest (usury) is prohibited. Islamic law also prohibits investment in businesses which are Haram (“forbidden”, the opposite to the “approved” or Halal). Examples of such businesses are those dealing in alcohol, pork or which deal in gossip or pornography.
The halal mortgages are increasingly preferred by non-Islamic home buyers, which initially surprised the banks providing the service. The competitive pricing makes the halal mortgages which are operated less like a loan and more like a lease more attractive to clients than the traditional interest-based mortgages.
Already since 2005, many western banks, not content to leave the Islamic market to large Islamic banks like Malaysia’s Bank Islam are competing for the Islamic banking business. At least two traditionally western banks now offer Islamic halal mortgage products in Malaysia. Traditionally, when loans are involved, the process is somewhat different to the more common western perception of a Mortgage.
One of the options in Islamic banking is called “Bai muajjal” which literally means a credit sale. The bank makes a contract with the buyer to earn a profit on the purchase price and allows the buyer to pay the price at a later date either in a lump sum or in instalments. The price and the profit must be clearly stipulated.
There are numerous different options in Islamic banking, and some may be more suitable to your needs than traditional western banking procedures, we recommend you discuss the matter with a financial advisor to determine which the best option would be to suit your needs.
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