When you’re planning to buy a home in Malaysia, one of the most important factors banks will consider is your Debt-to-Service Ratio (DSR). It plays a crucial role in determining your home loan eligibility, the amount you can borrow, and whether your loan application gets approved.

In this article, we’ll explain what DSR is, how it’s calculated, how it affects your home loan, and tips to improve it so you can make informed decisions before applying for a mortgage.

1. What is DSR?

DSR (Debt-To-Service Ratio) is a financial metric that measures the portion of your monthly income used to repay debts. It tells the bank how much of your income is already committed and whether you can afford new loan repayments, especially for a housing loan.

If your DSR is too high, it means you may be financially stretched and less likely to get loan approval.

2. How is DSR Calculated?

The general formula is:

DSR (%) = (Total Monthly Debt Commitments ÷ Net Monthly Income) × 100

Total Monthly Debt Commitments include:

• Car loans
• Personal loans
• Student loans (e.g. PTPTN)
• Credit card minimum payments
• Any other fixed monthly repayments
• The proposed new home loan installment

Net Monthly Income means your salary after deductions such as income tax, EPF, SOCSO, and other mandatory contributions.

📌 Note: Some banks use Gross Income instead, and may include other income like fixed allowances or rental income. Policies vary across banks.

DSR Calculation Example for First-Time Home Buyer

a) Profile

• Name: Aina
• Age: 28
• Employment: Executive at a private company
• Net Monthly Income: RM4,500 (after EPF & tax deductions)

b) Existing Monthly Debt Commitments

c) Target Property

• Property Price: RM400,000
• Down Payment: 10% (RM40,000)
• Loan Amount: RM360,000
• Tenure: 35 years
• Estimated Monthly Mortgage (at 4% interest): ~RM1,500

d) New DSR Calculation

Total Commitments (including new mortgage):
RM950 (existing) + RM1,500 (housing loan) = RM2,450

DSR = (RM2,450 ÷ RM4,500) × 100 = 54.4%

Conclusion

She is likely eligible for the loan, provided her credit record (CTOS/CCRIS) is clean and other criteria are met.

Aina’s DSR is 54.4%, which is within the 60–70% range accepted by most banks.

3. Why is DSR Important for Home Loan Approval?

Banks use DSR to determine:

• Whether you’re eligible for a loan
• How much you can borrow
• Whether you’re high risk or low risk

Here’s how DSR affects your mortgage journey:

If your DSR is above the bank’s threshold, they may:

• Reject your application
• Approve a lower loan amount
• Ask you to apply with a joint applicant

Example DSR Calculation

Let’s say your net monthly income is RM5,000, and your total monthly debt (including your proposed housing loan) is RM3,000.

DSR = (RM3,000 ÷ RM5,000) × 100 = 60%

If the bank’s limit is 70%, you are likely to get approved. But if your total commitment exceeds RM3,500 (70%), you may face rejection unless adjustments are made.

4. Why Do DSR Limits Vary by Bank?

Each bank has its own DSR threshold and income recognition method, for example:

• Standard Chartered uses Gross Income, while Maybank and RHB use Net Income.
• Some banks recognize 100% of rental income or foreign income, others only partially.
• A bank may accept 70% DSR for high-income earners, but only 40% for low-income applicants.

That’s why your loan could be rejected by one bank, but accepted by another.

5. How to Improve Your DSR

Improving your DSR increases your chances of loan approval and may allow you to borrow more. Here’s how:

1. Pay Off Existing Debts – Settle small loans or credit card balances.
2. Increase Your Income – Consider adding side income or a rental income stream.
3. Choose a Cheaper Property – Lower mortgage payments = lower DSR.
4. Extend Your Loan Tenure – A longer term reduces monthly installments.
5. Apply Jointly – Combine income with a spouse or family member.
6. Make a Bigger Down Payment – Borrow less and reduce monthly payments.

6. How the Hire Purchase (Amendment) Act 2026 Could Lower Your Car Loan Burden, and Your DSR

Here’s something many first-time buyers overlook: your car loan is one of the biggest items in your DSR (remember Aina’s RM600 monthly car commitment in the example above). In Malaysia, car loans are a form of hire purchase financing, and the rules governing them changed significantly on 1 June 2026, when the Hire Purchase (Amendment) Act 2026 came into force.

For anyone planning to buy a home, this matters because the new law changes how your car loan interest is calculated and, crucially, how much you’ll still owe if you decide to settle it early to bring your DSR down.

a. What changed?

• Goodbye flat rate and the “Rule of 78.”
  Previously, a large share of your early installments went toward interest rather than the principal. That meant settling a car loan early often left you with an outstanding balance much higher than expected.
• Reducing Balance Method and Effective Interest Rate
  Interest is now calculated on your current outstanding balance, so early settlement is fairer and more transparent; what you owe better reflects the actual cost of the financing.
• Digital convenience
  Electronic signatures and document submissions are now allowed, speeding up the process.
• Stronger fraud protection
  Lenders must now run two identity due diligence checks before approving financing.

b. Why this matters for your home loan

If your DSR is sitting just above a bank’s comfort zone, paying down or settling a car loan is one of the fastest ways to lower it. Under the old system, early settlement could be discouragingly expensive.

Under the reformed framework, you’re more likely to see a payoff figure that genuinely reflects what’s left, making “pay off existing debts” (Tip #1 above) a more rewarding move than before.

A few practical notes: 11 financial institutions and hire purchase providers were ready to offer financing under the new rules from day one, while others have a transition window until 31 March 2027 to fully adopt the framework.

A second phase of implementation is expected around September 2026. If you’re taking out a new car loan soon, confirm with your lender which framework applies before you sign.

7. Final Tips Before Applying for a Home Loan

• Always calculate your DSR first to know your borrowing power.
• Check multiple banks—loan approval chances can vary widely.
• Maintain a clean CCRIS/CTOS report. While not part of DSR, it still influences approval.

TL;DR

Your DSR is key to unlocking your dream home in Malaysia. A lower DSR means greater financial flexibility, a higher chance of loan approval, and a potentially larger loan amount. Understanding and managing your DSR before you apply could be the difference between rejection and home ownership.

Let our expert agents at IQI Global help you calculate your DSR and get the best loan options.
Fill in your details below and we’ll match you with a certified property expert who can guide you for free!

Continue reading:

• RM1Million Home With RM3K Salary? Find Out How Much Home Loan You Can Get With Your Salary!
• What can you do if your home loan is rejected?
• Real Estate 101: Navigating Home Financing through Loan-to-Value

The post What is Debt-To-Service Ratio (DSR) in Malaysia & How It Affects Your Home Loan appeared first on IQI Blog.

Version: CN, BM

Recently, Malaysia has been hit repeatedly by floods during the year-end monsoon season also known as La Niña, causing massive damage to homes, infrastructure, and livelihoods.

As floodwaters rise, entire neighbourhoods can be submerged, houses may collapse or be rendered uninhabitable, and thousands of homeowners face devastating losses.

Now imagine this: a natural disaster strikes your home, and it collapses or becomes irreparable. In the midst of the chaos, a pressing question arises: do you still have to pay your home loan?

Many people assume that if their property is destroyed, the loan obligation disappears, but the reality is far more complex.

In this article, we’ll explore what happens to your home loan after a natural disaster, whether insurance or relief can help, and what steps you should take to protect yourself financially.

Key Takeaways:

• Even if a property is destroyed by floods or other natural disasters, borrowers are still legally required to continue loan repayments.

• But MRTA or MLTA can help cover outstanding loans if your house is damaged or you face unexpected hardship.

• While MRTA/MLTA protects the loan, homeowners insurance safeguards the property itself against risks like floods, fires, or landslides.

• Understanding your insurance coverage and disaster preparedness can help reduce financial stress in case of unexpected home damage.

The Answer to Your Question

So, if my house collapses, do I still have to pay my home loan?

The short answer is yes, most losses will be borne by the homeowner themselves.

However, the long answer is it also depends on your insurance policy as certain insurance company may offer some emergency relief.

So, if your house collapsed, it does not mean that you have to give up on your new home entirely. In most case, the project will continue and your home will be rebuilt.

In other cases, you might feel uneasy about living there due to safety concerns. So, what do you need to know about before ending all housing contract?

Step 1: Understanding Home Loan Obligations After a Natural Disaster

After signing the Sales & Purchase Agreement (SPA), the home is legally yours, and you’re committed to making payments. This makes terminating the contract challenging, even if the condo collapses.

Standard SPA does not automatically allow cancellation in such cases, but if the developer agrees, both parties can enter a termination and settlement agreement.

Though it may come with penalties or conditions outlined in your SPA.

Furthermore, ending your SPA only cuts ties with the developer, not the bank. The bank only acts as your financier thus it does not cancel your housing loan which you still have to repay what you owe.

This means you could lose the condo but still be stuck paying for it.

Step 2: Understanding The Types of Insurance

These are three common types of home insurance bought by Malaysians.

Understanding the types of insurances is essential for homeowners to ensure they are fully covered in the event of unexpected circumstances.

1. Mortgage Level Term Assurance (MLTA)

MLTA offers life insurance with added security, savings, and potential returns.

If the borrower is no longer around, the insurance company pays off the remaining mortgage debt, allowing dependents to stay in the property without financial worry.

2. Mortgage Reducing Term Assurance (MRTA)

MRTA is an insurance plan that decreases over time to cover the outstanding home loan. It protects the bank in case of the borrower’s death or total permanent disability (TPD).

If the loan isn’t fully settled, the bank may still seek payment from the family.

Here’s a quick difference:

3. Fire Insurance

Fire insurance covers the property. It compensates for damages caused by fire, water damage, and other specific circumstances.

For certain insurance companies, they may offer coverage for natural disasters, including earthquakes.

Comparison between MRTA, MLTA, and Fire Insurance

Step 3: Types of Compensation

As mentioned above, you have the legal duty to fulfill your responsibilities stated in that contract.

However, you can get compensation from the developer if they did not fulfill their responsibilities instead. In this case, breaching the contract in terms of:

1. Negligence: The developer’s carelessness such as poor selection of contractors and materials, was the reason the condo collapsed in the first place.
2. Issued Stop Work Order: The developer issued no construction work can be carried out for the time being.
3. The developer has no progress of work in 6 months or more.

Why We Need Home Insurance in Malaysia

In Malaysia, natural disasters such as floods, landslides, and storms are becoming more frequent, and these can cause serious damage to your property.

Without home insurance, you would still need to continue paying your monthly instalments to the bank even if your house is unlivable. This can put a huge financial burden on you and your family.

Home insurance, on the other hand, ensures that you are financially protected — it can cover the cost of repairs, rebuilding, or even help clear your outstanding loan, depending on the type of coverage you choose.

Simply put, home insurance provides peace of mind, knowing that both your property and your family’s financial future are safeguarded against unexpected events.

How Can We Minimize the Impact of Natural Disasters on Our Homes?

1. Ensure Proper Foundation: Have a solid and well-engineered foundation to support the structure of your home and invest in professional assessments before construction to avoid issues later on.
2. Regular Maintenance: Conduct regular checks on your home, particularly for structural weaknesses, cracks in the walls, roof, or foundation.
3. Choosing Experienced Developers and Contractors: Work with reputable and experienced builders who adhere to local building codes and safety standards.
4. Proper Drainage Systems: Ensure your home has a well-designed drainage system to prevent water accumulation around the foundation as it can weaken the structure over time.
5. Monitor Soil Movement: Pay attention to soil erosion or shifting, especially if your home is built on unstable ground.

In conclusion, while purchasing a home can be a good investment, these proactive measures will help safeguard your home and ensure you’re better equipped to handle unexpected challenges.

Secondly, it’s crucial to maintain a reasonable level of financial leverage and ensure your housing expenses do not exceed 30% of your monthly income.

In case of unforeseen events like a house collapse, being financially prepared with sufficient savings can prevent unnecessary reliance on friends or family.

Always prioritize your financial stability and keep a safety net for emergencies.

Frequently Asked Questions (FAQs)

Are you dealing with the aftermath of a natural disaster or looking for an expert to handle your home inquiries? Let our trained professionals guide you through the process.

I

Continue Reading:

1. Malaysia’s Flood: 6 Steps To Remember When Cleaning Up Your Property
2. What are the differences between MRTA and MLTA in 2024?
3. A Beginners Guide to Buying Home Insurance in Malaysia

The post Natural Disasters in Malaysia: Do I Still Need to Pay My Home Loan? appeared first on IQI Blog.

If you’re planning to buy a home in Malaysia, Loan-to-Value (LTV) is one of the most important terms you’ll come across. Whether you’re a first-time buyer or looking to invest in property, knowing how much banks are willing to lend compared to the property’s value can help you plan smarter.

What Is LTV?

LTV stands for Loan-to-Value, and it’s a percentage that shows how much of the property price the bank will finance. The rest is your responsibility—usually paid as a down payment.

Loan-to-Value Formula:

LTV Limits in Malaysia

• First & Second Homes: Up to 90% LTV
• Third Home Onwards: Maximum 70% LTV (per Bank Negara’s policy to curb speculation)

The more homes you own, the lower your allowable LTV, meaning you’ll need to pay more upfront.

Why LTV Matters

LTV doesn’t just affect how much you can borrow—it also affects your interest rate, loan approval, and whether you’ll need mortgage insurance.

Lower LTV (e.g., 70–80%):

• Seen as lower risk by banks
• Can qualify for better interest rates
• Often doesn’t require insurance

Higher LTV (e.g., 90% or more):

• Higher risk for banks
• May come with higher interest rates
• May require insurance or stricter approval conditions

What About DSR (Debt Service Ratio)?

While LTV measures how much you can borrow based on property value, DSR (Debt-Service Ratio) measures how much you can borrow based on your income and existing commitments.

DSR Formula:

Banks use this to ensure you won’t be overwhelmed by debt after your loan is approved.

Aisha’s Story: A Simple LTV + DSR Example

Aisha found her dream apartment for RM500,000. With a 90% LTV, she could borrow RM450,000. But the bank also looked at her DSR:

• Monthly income: RM10,000
• Other debt (car loan + personal loan): RM3,000
• DSR = (3,000 ÷ 10,000) × 100 = 30%

The bank allowed a 50% max DSR, so she had 20% (RM2,000) room left for her home loan.

Result? Although LTV allowed a RM450,000 loan, her DSR only supported about RM400,000 in monthly repayments—so she adjusted her budget.

Which Banks in Malaysia Offer the Best Terms?

• Maybank: Great for tools and DSR/LTV calculators online
• Public Bank: Known for low-interest rates and stable lending practices
• CIMB, RHB, and Hong Leong: Often offer seasonal promos and flexible packages

💬 Tip: Compare rates and LTV policies from at least 3 banks. Also check whether you’re eligible for first-time homebuyer incentives.

How to Improve Your Approval Odds

Before applying for a home loan:

Summary: LTV at a Glance

Tips to Improve Your LTV & Loan Outcome

• Boost your down payment — lower LTV = better interest rate.
• Reduce debts — improves both your DSR & loan approval chances.
• Keep an eye on CLTV — especially if you plan a second mortgage or home equity line.
• Compare lenders— Maybank and Public Bank frequently have flexible LTV/DSR calculators, while promos from CIMB, RHB, and Hong Leong may offer attractive rates.

Looking for advice or help on your home loan application? We want to hear from you by submitting your info down below, our agent will guide you step by step!

Continue reading:

• What is Debt-To-Service Ratio (DSR) in Malaysia & How It Affects Your Home Loan
• What can you do if your home loan is rejected?
• Is purchasing a home during the COVID-19 crisis the right decision?

The post What Is Loan-to-Value (LTV) and How It Affects Home Loans in Malaysia appeared first on IQI Blog.

Version: CN

CCRIS and CTOS. These terms may be daunting to you, especially when you’re about to take out a loan.

Plus, what do credit scores mean, and how do you get a good score?

In this article, we’ll explore what they are and why they matter, especially for future homeowners.

Let’s dive into making these financial concepts simple and clear!

What is CCRIS, and what is CTOS?

In Malaysia, the primary credit reports are obtained from CCRIS and the CTOS.

CCRIS, managed by Bank Negara Malaysia, is a digital database containing an individual’s credit information, including any outstanding loan amounts from the past 12 months.

CTOS, operated by a private company, maintains the complete credit history of an individual or company, unlike the 12-month duration of a CCRIS report.

CCRIS (Central Credit Reference Information System)

Operated by Bank Negara Malaysia (BNM), CCRIS shows you your credit history over the past 12 months.

It’s not just about your timely repayments; it’s about your discipline in managing various financial responsibilities, including personal loans, mortgages, and credit cards.

Sample CCRIS Report (Courtesy Bank Negara Malaysia)

Key Points:

• Provides a factual report on your credit payment history.
• Records all your credit applications, approved or not.
• Free of charge and accessible via BNM or eCCRIS.

How to obtain your CCRIS report?

You can get a free copy of your CCRIS report from Bank Negara by visiting their main office or branches in Kuala Lumpur, bringing your MyKad and identity documents.

Alternatively, you can download the CCRIS request form online, fill it out, and submit it with supporting documents through mail, fax, or email.

CTOS (Credit Tip-Off Service)

CTOS is a private agency producing credit reports that include your credit history, business interests, legal matters in addition to the information found in CCRIS.

Sample CTOS Report (Source: CTOS Credit)

Key Points:

• Produces a credit score ranging from 300 to 850.
• Comprehensive credit reports that include legal history and business affiliations.
• Basic report is free, a more detailed MyCTOS Score Report is available for RM26.50

 How to obtain your CTOS report?

After registering on the CTOS website or mobile app, individuals or companies in Malaysia can easily obtain their free and basic CTOS report online.

Differences between CCRIS and CTOS

While both CCRIS and CTOS provide credit reporting, understanding their differences is key in managing your credit health.

How to download CCRIS & CTOS report in Malaysia?

Before applying for a home loan, it’s wise to check your credit score first by downloading the credit reports.

Here’s how:

• CCRIS: You can obtain your CCRIS report for free by visiting BNM’s Customer Service Centre or via the eCCRIS website. Learn more here!
• CTOS: Register on the CTOS website and choose from their range of products.

Is CCRIS and CTOS report free?

• CCRIS: Currently, the CCRIS Report is free of charge from Bank Negara Malaysia or obtained via eCCRIS.
• CTOS: They offer a basic report for free, with more detailed reports available for a fee (RM 25.90).

Why do banks need both my CCRIS and CTOS reports?

The reports you give to the banks for your home loan application should make them confident in your financial skills.

These reports influence your credit score, helping the bank see you as someone who consistently pays monthly dues and manages debts responsibly.

This increases the chances of getting your home loan approved.

What is a Credit Score?

In simple terms, your credit score in Malaysia is a reflection of your financial health.

It’s a score given by credit reporting agencies, primarily CCRIS and CTOS, based on your credit history, repayment behaviors, and existing debts.

This score plays a crucial role when you apply for any financial product, especially home loans.

Why Does Your Credit Score Matter?

When you’re ready to take the leap into homeownership, your credit score becomes your financial passport.

Financial institutions will check this score to determine your creditworthiness.

What’s a good and bad credit score?

High Credit Scores (generally 700 and above)

Reflect responsible credit management, leading to easier loan approvals, and possibly lower interest rates.

Low Credit Scores (below 700)

Might signal to lenders that you’re a risky borrower, potentially resulting in loan application rejections or higher interest rates.

Will PTPTN loan affect credit score?

In Malaysia, PTPTN loan repayment starts six months after the financing period ends. This gives borrowers time to find a job before beginning repayments. Making timely payments on your PTPTN student loan can enhance your credit history.

For instance, if you don’t pay back your PTPTN loan and it reflects on your CTOS or CCRIS report, it could lead to rejection of your car or housing loan application by the bank.

When the bank sees a history of not paying a previous loan, they may doubt your ability to repay a new one promptly.

So yes, the PTPTN loan can impact your credit score and affect the approval rate of future loans.

Tips To Improve Your Credit Score

Embarking on the path to homeownership means ensuring your credit score shines. Here are actionable steps to boost your credit health:

1. Pay on time

Consistently pay your loans and credit card bills on time.

2. Manage your credit usage

Try not to use more than 30-50% of your credit limit.

3. Don’t apply for too many loans

Multiple applications within a short period can raise red flags.

4. Check your reports properly

Review your credit reports for errors and have them corrected.

5. Build a credit history

Responsibly using a credit card or servicing a small loan can build a positive credit history if you’re starting from scratch.

Conclusion

Understanding your credit score is the first step towards responsible homeownership in Malaysia.

By maintaining good financial habits, monitoring your credit report, and understanding the role of CCRIS and CTOS, you’re investing in your financial future.

Taking the first step towards home investment can be tricky. But you don’t have to worry! Consult with one of our real estate professionals. Fill in the form below and we can help you!

Read more:

4 Easy Steps to Avoid (and Fix) Bad Credit Score in Malaysia

CCRIS: What is it & how to get the report?

The post What is CCRIS, CTOS and Credit Score? 9 Key Things You Need To Know appeared first on IQI Blog.

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!

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:

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!

The post RM1Million Home With RM3K Salary? Find Out How Much Home Loan You Can Get With Your Salary! appeared first on IQI Blog.

Let’s set the situation: you found your dream home, you’ve gotten all your finances in order, and what’s more, your dream house is well within your budget! You fill up the necessary forms, hand them to the bank and then weeks later, you find out that your loan request has been rejected.

When that happens, the first thing you ask yourself is why. Why did the loan request get rejected? You’re left wondering, what went wrong?

In this article, firstly, we are going to explore the reasons why a loan may be rejected; and secondly, what you can do to prevent it from happening again.

First let’s take a look at:

Why did your loan get rejected?

1. You don’t have a steady job/income

Banks will look at whether an applicant has an unstable employment history or whether they have a stable source of income when they consider a loan application. The reason being that, to a bank, a stable job and/or a source of income, means you will be able to keep up with your monthly payments.  If you have a tendency to change jobs every six months or you don’t receive a regular income, it raises red flags to a bank. This can be especially problematic for freelancers or self-employed individuals.

2. You might have applied to the wrong bank

Different banks have different requirements and criteria for the approval of a loan application. This is on top of sticking to rules set by Bank Negara Malaysia. This could be anything from their minimum age requirement and not having enough income, to the cost of the property itself.

3. You have too many loan commitments

If you already have a significant number of loan(s)/debts that you are yet to pay off, like student loans, car loans, credit card debt, or personal loans, then banks are unlikely to give you a housing loan. While different banks have different DSR caps, you should try to make sure that your DSR does not exceed 65%-70% of your net salary. If you really need a loan, then consider taking a longer tenure to reduce the amount you need to pay monthly.

4. Your credit score isn’t good

Banks tend to look at your CTOS and CCRIS reports, so that they can trace any late or overdue payments and your outstanding balance for the month. Through this, bank officials are able to evaluate your credit risk and gauge whether you are a reliable borrower and how likely it is that you will repay your loan. So, if your credit score is low, it decreases your chances of getting a home loan approved.

5. You don’t have any credit record

We found out what happens if your credit score is low, but what if you don’t have a credit record at all? Some of us don’t like to have a credit card or other financial commitments, due to the fear of overspending. While it is a good thing in its own way, it does not help you when you are applying for a home loan.

Why? Unfortunately, without past payment records, the bank won’t be able to determine whether you will pay back your dues on time. Banks look at people without a credit score as a poor credit risk!

The best way to solve this issue is to consider credit facilities such as credit cards, just so that you can start building your credit history. You can also consider using other financial facilities such as opening a savings or fixed deposit account, in order to increase the bank’s confidence in you.

6. You didn’t submit the right documents

When applying for a loan, it is vital that you submit the right documents with the right details. So make sure that the application is done properly, to avoid any unnecessary hassle.

Double check your application form and submit all the required documents to the bank’s representative.

Some of the documents you will need to submit include:

• A copy of your NRIC or Passport.
• Income documents such as salary payslips, salary crediting bank statements, commission statements, appointment letter, EA form and so on.
• A complete and accurate application form.

So what should you do next?

1. Look at your credit report and determine any pitfalls

Get your CCRIS and/or CTOS report and look through it with a fine toothcomb. Even if you happen to have a good credit core, there may be other factors that might skew your report, such as past loan rejections. This can be especially bad for those who tend to submit loan applications to multiple banks. It’s best if you wait about 3-6 months before applying for another loan.

You should also concentrate on clearing up any other debt you might have such as credit card debt or other loans you have under your name.

2. Ask the bank

The best way to solve a question is by asking it. If your loan application is rejected by a bank, you can ask them for the reason(s) why they rejected it. This way you will know what needs to be rectified and you can do better next time you apply for your loan.

3. Fix any minor errors

Sometimes banks will reject loan applications because of minor errors such as wrong information on a form, unclear copies of your NRIC or Passport, faulty or wrong signature and so on. If that is the case, take the simple steps to correct them.

4. Find a bank with a DSR that matches yours

One very common reason for banks to reject a loan approval is that the applicant’s DSR (Debt to Service ratio) is higher than the bank’s maximum allowable DSR. Every bank has its own guidelines for acceptable DSR.  If your DSR is the problem, don’t worry, you can take steps to improve your DSR like, reducing your current debts or consolidating your unsecured loans and credit card bills.

5. Prepare at least 6 months’ worth of documentation

Whether you are a salaried employee, a freelancer or an entrepreneur, be scrupulous in your record keeping of financial information. This will be extremely helpful when the bank asks you for proof of financial capability.

It would be best for you to keep records of the last 6 months’ documentation of the following:

• EA Form/Form BE/Form B
• Salary slip/proof of income
• EPF statements
• Bank account statements

6. Stay updated on Bank Negara Malaysia’s latest borrowing regulations

Bank Negara Malaysia (BNM) has many borrowing regulations that all banks in Malaysia must follow. The most significant of BNM’s revisions happened in 2014. Do your own research and be sure to familiarise yourself with the necessary information on BNM’s rules of borrowing. It will be a big help when you apply for your loan.

7. Re-apply

Once you have all of your affairs in order, you are free to re-apply for your home loan. We recommend enlisting the help of a real estate agent or negotiator. They are trained professionals who have dedicated their careers into understanding the ins and outs of the real estate and the property market. They will be more than happy to help you with your home loan application and guide you through the entire process.

Want more advice on home loan applications?  Talk to us, us a message at hello@iqiglobal.com or give us a call at 012-299-6155 or 037-450-6655.

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