Everything You Should Know About Commercial Property Loans

Ambriel
Aug 22, 2022
3 min read

Updated: Aug 23, 2022

Entry level of commercial property is higher than a residential property as it always requires a high cost. So, before purchasing a commercial property, you should know this:

Maximum Loan
Loan-To-Value Ratio
Commercial Property Loans
Documents Needed When Apply For Loan
Steps on Applying Loan

Maximum Loan

The maximum loan that can be obtained for commercial properties is only 85% under personal name.

Loan-To-Value Ratio

As of Q3 2019, a commercial property buyer can continue to get between 80% – 85% loan margin for your first, second or third commercial property purchases (without limit).

Commercial Property Loans

This loan is applicable to only commercial properties. Below is the list of properties that can be financed by commercial property loan:

SoVo / SoFo units
Retail shop lot / Shop house
Office
Commercial land
Agricultural land
Factory

Documents Needed When Apply For Loan

Sdn Bhd Company

When purchasing a property under the company will require different documents, list as below:

Form 24 & 49
Latest Profit & Loss statement
Memorandum of Article
Company Profile
Form 9
12 Months Bank Statement
Latest Audited Report

For those who are running a business under Sole Proprietorship or Partnership, they will need to provide the additional documents as below:

Form A and Form D
Name Card

Steps on Applying Loan

First, the applicant needs to submit their loan application to their desired banks (e.g. Cimb Bank, Maybank, City Bank, etc); preferably the banks with the best interest rates; and wait for their Letter of Offer.
You need to wait at least a week while Obtaining the Letter of Offer
Upon receiving the Letter of Offer, purchasers will need to be familiar with the below terms:

1. Type Of Loan

Different banks offer different loans for commercial properties.

The basis of commercial property loans are however similar to residential property loans, with fixed interest rates or flexi interest rates.

2. Amount Of Loan

Purchasers should double check the loan amount to find out how much the bank is willing to finance them, once the Letter of Offer is received.

3. Description Of Property

In this part, the description of the property will be stated here. The details will be stated clearly, in terms of property type, size, land area, and etc.

4. Duration

The maximum duration for repaying the loan also will be stated here. While the latter enjoys a maximum loan tenure of 35 years, the former has a maximum tenure of only 25 years. The number of years will be stated within the Letter of Offer.

5. Processing Fee

A commercial property loan also requires a processing fee. The charges will be stated within the Letter of Offer. Normally, the amount is not significantly big.

6. Monthly Service Charge

Another fee that borrowers will need to bear are the monthly service charges. These charges are also stated within the Letter of Offer. The charges are usually minimal, for instance, RM 10.

7. Prevailing Interest And Repayment

Stated clearly in the Letter of Offer will be the repayment schedule and the interest rates that the customer will have to pay.

8. Installments

The installments, calculated based on the loan amount, – which are the monthly repayments to the bank – will be stated within the Letter of Offer.

9. Security Documents

The security documents that can be required by the bank for a commercial property loan may include any documents pertaining to the security of the loan and banking facilities.

It may also include the Letter of Offer, and the agreement entered into between the bank and any security party or stakeholders.

10. Prepayments

When the borrower makes an excess payment, it is called prepayment. The interest rate can either be lessened, have no effect at all, or have the loan settled early, depending on the type of loan that you are taking.

The above terms are among some of the most commonly used terms in a Letter of Offer.