How to cash out property loan in Malaysia?

Need extra cash to start a business, renovate your house, or clear off debts? A cash-out property loan in Malaysia might be the right solution. This financing option allows homeowners to unlock the value of their property by refinancing it and withdrawing the excess cash. In this article, we’ll explain how cash out property loans work in Malaysia, the benefits and requirements, and how to apply for one.

What is a Cash Out Property Loan?

A cash out property loan, also called refinancing with cash-out, means you refinance your current mortgage with a new one bigger than your current loan balance. The extra amount is given to you in cash. This is useful if your property has increased or you have already paid off much of the loan.

Example:

• Your current property loan balance is RM300,000
• Your property market value is RM600,000
• You refinance up to 80% of RM600,000 = RM480,000
• You get RM480,000 – RM300,000 = RM180,000 cash out

Types of Cash Out Property Loan in Malaysia

There are different types of cash out property loans based on your needs and the type of property:

1. Residential Property Refinancing: For landed homes, condos, and apartments.
2. Commercial Property Refinancing: For shophouses and office units.
3. Semi-Flexi/Full-Flexi Packages: Flexible repayment terms.
4. Islamic Cash-Out Refinancing: Based on Shariah-compliant concepts like Bai’ Bithaman Ajil or Murabahah.

Elements of a Cash Out Property Loan in Malaysia

Before you apply, understand the key features involved:

• Margin of Financing: Up to 90% (including MRTA/MLTA), depending on the bank.
• Interest Rate: Between 3.80% to 4.50% p.a.*
• Tenure: Up to 35 years or age 70, whichever comes first.
• Processing Time: Typically 2-3 months.
• Loan Amount: Based on property market value and your income profile.

(*Rate varies by bank and applicant’s credit standing.)

Benefits of Cash Out Property Loan in Malaysia

1. Lump Sum Cash: Use the money for business, debt consolidation, home upgrades, or investment.
2. Lower Interest Rate: Cheaper than personal loans or credit cards.
3. Longer Repayment Period: More manageable monthly payments.
4. Improved Cash Flow: Free up funds without selling your property.

How Much Money Can You Get?

In Malaysia, most banks allow you to refinance up to 80% to 90% of your property’s current market value. The amount of cash you can get depends on the value of your home and how much of the loan you’ve already paid off.

For example, let’s say your property is currently valued at RM500,000. If the bank offers a margin of financing up to 80%, you may be eligible for a loan of RM400,000. If your existing home loan balance is RM250,000, the cash-out amount will be the difference between the new loan and your current loan balance — in this case, that would be RM150,000.

However, it’s important to remember that higher cash out values usually come with more detailed assessments from the bank. Your income, credit history, and debt service ratio (DSR) will all influence the final approved amount.