Personal Finance Term
Margin of Finance / Loan-to-Value
The percentage of a property's value that a bank will lend you. A 90% margin of finance means you borrow 90% and must pay the remaining 10% as a down payment.
Margin of finance (the lender's term) and loan-to-value ratio (the risk term) describe the same thing from opposite ends. In Malaysia, banks set their own margin for first and second home loans (many lend up to 90% for a first home), while BNM's November 2010 measure capped financing for a borrower's third house loan at 70% to cool speculation (we have not confirmed its current form) — meaning a larger cash down payment for a third property. The bank lends against the lower of the purchase price or its own valuation, so if the valuation comes in under the sale price, you must top up the difference in cash.
A lower LTV (bigger down payment) means smaller monthly repayments and less interest over the loan's life, while a higher LTV preserves your cash but increases the loan and may require mortgage cover such as MRTA. Remember that the down payment is only part of your upfront cash — stamp duty, legal fees, and valuation costs are on top, and these generally cannot be financed into the loan.