Can you afford a RM1 million house on RM3k salary?
The question that remains is whether or not the bank will approve your loan!
Once you know how much loan you can get on your salary, you’ll then have an idea of what type of house you can afford.
Want to find out? Let’s dive in!
How Much Loan Can You Get On Your Salary?
What you should know before buying a house
When you buy a house in Malaysia, you typically start by paying a 10% down payment.
The remaining 90% is covered by a mortgage loan from a bank, which you repay through monthly installments.
Even if you already have applied for affordable home buying programs that waive the 10% down payment for first-time buyers, you’ll still need that 90% mortgage loan.
Home Loans in Malaysia
Keep in mind that each month, when you make your mortgage payment to the bank, it covers both the loan’s principal (the initial amount you borrowed) and the interest.
Banks base their interest rates on the Standard Base Rate (SBR), which is tied to the National Bank’s Overnight Policy Rate (OPR).
In simple terms, if the OPR goes up, so does your mortgage interest.
So, before committing to a home loan, it’s a good idea to compare different banks’ interest rates to save money in the long run!
What Property Can Your Income Afford?
Based on your annual income and ability to service the home loan, you can borrow up to 30% of your gross income as a general guideline.
However, the actual amount you can borrow depends on several factors such as your credit score, existing debts, and the property’s value.
You can also gauge affordability by deducting all monthly loans from 60% of your monthly income. If you end up with a positive figure, that’s your affordable monthly payment for a home loan.
Ultimately, the property you can afford depends on your income and financial situation. It’s important to do your research and speak to a financial advisor to get a clear picture of your options.
It’s also important to remember that your income may change over time. If you expect your income to increase in the future, you can factor that into your decision-making process.
How does the bank approve your home loan?
Ever wondered how banks decide whether to approve your loan application?
When you apply for a bank mortgage, you’ll need to provide documents like your salary slip, bank account details, EPF statement, and income tax certificate.
The bank also checks your credit history through CTOS or CCRIS to assess your financial capability.
Moreover, the bank calculates your Debt-Service Ratio (DSR) to determine if you can afford the monthly payments.
Generally, if your DSR is 0.6 or lower, you stand a good chance of getting approved.
You can calculate your DSR by dividing your total loans by your net income. For example, if your net income is RM3,500 and your total loans amount to RM920, your DSR is 0.26.
Find out how to calculate DSR here.
Keep in mind that each bank may have different DSR requirements based on various factors.
Property prices you can afford with your salary
While buying a house is a significant life goal, it’s essential to choose one that suits your financial capacity.
After calculating your DSR and affordable monthly payment, you can determine how much house you can afford.
For instance, with a 35-year loan term, 90% of the loan amount, and a 4% interest rate, here’s what you could afford with different monthly incomes:
| Monthly Net Income | Affordable Monthly Payment | Maximum House Price |
|---|---|---|
| RM2,000 | RM1,200 | Up to RM300,000 |
| RM2,333 | RM1,400 | Up to RM350,000 |
| RM2,667 | RM1,600 | Up to RM400,000 |
| RM3,000 | RM1,800 | Up to RM450,000 |
| RM3,333 | RM2,000 | Up to RM500,000 |
| RM3,667 | RM2,200 | Up to RM550,000 |
| RM4,000 | RM2,400 | Up to RM600,000 |
| RM4,333 | RM2,600 | Up to RM650,000 |
| RM4,667 | RM2,800 | Up to RM700,000 |
| RM5,000 | RM3,000 | Up to RM750,000 |
| RM5,333 | RM3,200 | Up to RM800,000 |
Remember, these figures are estimates, and the bank’s final decision may vary.
It’d be a waste of your time to go around looking for properties that are beyond your borrowing capability, right?
Luckily, there are plenty of online mortgage calculators available to help you out.
From these calculators, you’ll discover whether you can afford the property you want, or go for a less expensive property or put down a larger down payment.
5 Tips on purchasing your dream property
To calculate how much money you need to prepare when buying a house, you can follow these steps:
1. Determine the down payment amount
The down payment is usually 10% of the total price of the home and must be paid when you sign the Sale and Purchase Agreement (SPA).
2. Calculate your monthly mortgage payment
Use a mortgage calculator to determine your home budget.
This will help you estimate the maximum amount you can borrow based on your monthly income minus any fixed, recurring expenses you’re obligated to pay.
3. Consider homeownership costs
Apart from the mortgage payment, you should also consider other costs such as property taxes, insurance, maintenance, and repairs.
4. Save for a bigger down payment
A larger down payment can make your home more affordable and reduce your monthly repayment.
However, it is important to note that there are other factors to consider such as your credit score, debt service ratio, and spending habits.
Use a home loan calculator to calculate the maximum housing loan amount you can borrow for your loan application.
5. Check what’s available on the market
Start looking for your dream home on property listing websites!
Check out IQI’s listing websites where you can find new projects or subsales.
There’s also a dedicated mortgage calculator underneath the listings to help you calculate the monthly repayments!
Conclusion
Keep in mind that it’s essential to choose a home that aligns with your financial situation to avoid undue financial stress. Happy house hunting!
Sounds like a lot to think about, right? Well, our IQI agents can take that load off of you! Consult with them for your homebuying to relieve yourself of headaches. Leave your details below and an agent will help you!
