5 tips employees secure Housing Loan
You should know, banks are the ultimate buyer at our property market and not “us” the consumer. They finance 100%-90% of the housing purchasing cost and we only took out 10%-0% of our capital to own the house.
Banks throughout 2011-early 2015 has been financing huge amount supplies of under-construction projects, it is all purely cash outflow and their capital investment has not been recovered yet, because we have not started repaying the bank their capital and interest.
Too much cash has been poured into the market by the banks and the market outlook is in stalemate, hence bank are tightening their guideline which means they are more selective with applicants.
They will select loan applicants with best background, best debt service ratio and best personal financial portfolios, profiles and assets etc. So, normal working class group applying for loan will be a challenged as their income is fixed. To purchase more properties they will need a salary raise or joint borrower(s). This group is not as flexible as business owner that can tweak and arrange their income portfolio with ease.
So, here I am sharing with you 5 tips to strengthen up your personal financing profile. So when bank purview your documents, they will open heartedly hug you, kiss you and accept you into their family.
1. Validate every income received from employer
I come across a lot of employees who are working under sdn bhd or sole proprietors where employers pay cash to their employees, instead of normal SOP crediting salary into employees’ accounts via company current accounts.
Because Bank would never look at income that are without a legitimate source. (It is still possible but banker needs to put a lot of efforts in explaining and convincing the credit approval department)
Here is what you should do:
-Make sure all income receivables (Gross-salary, OT, commission, Allowance and Bonus are credited by the company to your account)
-Make sure the income receivable tally with pay slips and bank credited amount.
-Make sure your employer credit 11% of your gross salary and 13%-16% (or higher) of employer contribution to your EPF account
2. Be responsible and Pay Your Tax!
Providing BE income tax document to apply loan is one of a way and the best way. You just need to provide banker your income tax form BE and proofs of tax being paid (Baki cukai kena dibayar) or letter proving that tax has been overpaid (lebihan cukai dibayar), then you can apply loan with the stipulated income in the tax form and supporting evidence. (Certain banks will only look at tax income document only)
-Bear in mind, every RM1000 income you declared. You are entitled for RM100,000-RM200,000 of loan from the bank (depends on bank’s guidelines).
-To make things easier, for people who wants to entitle for higher property loan, just declare higher tax bracket income (make sure it is legitimate). Even though you have over declared, LHDN would never disturb you because you are giving them extra cash $_$. *Would you argue with people who pay you more?*
well this is debatable, as no one would love paying more tax to the government, though it’s a trade off.
3. Debts and commitments
People had this doctrine believe that if I have no debt, the better position I will be in the eyes of the bank. Sadly, this never rings right to the bank.
Your debts and commitments are shown in CCRIS (Central Credit Reference Information System). At first stage, bank will evaluate your CCRIS before determining whether to proceed your loan application or decline your loan :’(
(read more of CCRIS here CCRIS )
CCRIS is system that shows our debt payment record. Before bank financing you any cash, they would need to know you as a person first, hence CCRIS is your personality written in the system itself. When we have debt payment record, bank will only understand who we are and decide whether they are confident to borrow you cash.
-Easiest way is to at least take an unsecured loan such as credit card and use it for more than 6 months or more. So that bank can know us and assess us.
-You have to allow bank to evaluate your payment pattern, so only will they have confidence to finance you cash
4. Debt service ratio
We always heard this sentence “Sorry sir, your loan is rejected because of high DSR! Who the fuuu is DSR??!!!”
Debts service ratio, it is calculated based on your
(Monthly debts commitment + new installment) / Net income= DSR%
Each bank has its own DSR threshold, some banks with big appetite will recognize 70% of your net income, some 80% and some 85%. Your profile is the same but different DSR recognition by different banks. Hence, that is why some banks will reject your loan but some other banks would accept your loan.
Debt and commitments:
a)Hire Purchase loan
c)Credit card outstanding
-Before your loan application, reduce your commitment on credit card. Try reduce as much outstanding debt you have before end of the month eg.”October 31” and apply your loan by next month eg “November”. CCRIS record will update data every end of the month and would only be reflected on the 10-15th of the following month)
– Try to limit your credit card usage to below 70%. Credit card utilization of less than 80% would be rendered by banks as a thrift spender and it would more appealing to the banks
-If you have too much debt commitment, try settle it off before applying. (Consult a mortgage consultant before making any decision)
– Never ever ever x100 default any of your debt repayments. One time default is alright but consecutively 3 months, it will be terrible. You will need to settle the loan or wait another 12months for the default record to disappear, before applying for loan
5. Last but not least, seek for a quality mortgage consultant.
Loan application is not just about finding a banker, providing them the documents according to banks guideline, then key in data and submit, 3-7days receive loan letter offer to sign.
Most of the time, mortgage application is not as easy as it seems. Mortgage consultant need to do lots of homework and due diligence
Seek mortgage consultants who are able to:
– Pre-assess your loan qualification
– Who ask a lot of question regarding your personal finance, nature of purchasing property, nature of your business, nature of your DSR. The more you disclose to them the more knowledge they had in terms of helping you securing loan.
– Consultants who are passionate in helping you. Sometimes they need to write 1 long essay in order to explain your conditions to improve your chances of loan approval
– Who keep you updated from time to time, this is the quality of service where it shows that they are eager to help you and do their best to secure your loan.
– Who doesn’t over-promise. Over-promise is fatal.
– Who could answer all your inquiries and being honest if they are not sure about it.
– Who take all available documents from you (to reduce any trouble and delay), assess and provide you the best solutions
– Who have multiple banks in hand, because different banks have different policies. They will understand your profile and select a sure win bank for you.
How to calculate my loan eligibility?
—-Gross income (Gross salary + ( 3 months Commission / 3) + Allowance + OT) – EPF – Sosco – Tax =Net income
Net income – Hire purchase – Housing loan – Credit card – Personal loan – PTPTN = Loan income
Loan income >RM3000 * 70% (varies across all banks)
Loan income <Rm3000 *70% (varies across all banks)
= Loan borrowing capability
Loan borrowing capability *200= New loan amount (estimation)
Debts installment calculations (estimation, varies across all banks)
*Housing loan/PTPTN financed amount ( 5.85% / 30 years loan tenure)
*Credit card total outstanding (5%)
*Personal loan (Amount *1.63%/108 months)
*Hire purchase (Amount *1.245/84 months)
*ASB (amount *5.8%/100/12months)
With the above calculations, you can roughly estimate your eligible loan amount.
*It is better to consult a mortgage consultant to calculate for you*
I have never contributed to EPF and I have never paid income taxes, can I still apply loan?
— Technically Yes.
— Certain banks will need you to show EPF, certain banks have less restrictions in terms of documents. When you apply for loan as an employee, bank will look at few income documentation.
Payslips + bank statement
Pay slips+ EPF
Tax (Borang Be)
Answer is Yes.
If you don’t have EPF or income tax slips, bank will tally and look at your pay slips + bank statements instead. You need to consult your mortgage consultant to inform you on the banks that allow the above mentioned documentation set.
Bear in mind, when you have never paid any income tax and you are applying for a 1 million loan…… Please pay your tax the next period available season.
Why my DSR is below 70%, but my loan rejected?
—Well this comes with different factors as following facts:
1) The property is nearby high extension cable, hill slope, oxidation aka shit pond, facing a traffic intersection (T-junction), close proximity to cemetery/ grave yard and etc… bank would not finance such properties
2) Your credit card limit utilization is above 80%. Bank will be cautious when someone fully utilize their credit card. Even if the bank approves your loan, margin would be reduced.
3) You do not possess a satisfactory risk profile (young –below 21 years old – but earning a high income, low education level, inconsistent income for the past 6-12 months, new employment, working oversea where income is not verifiable, poor repayment records, blacklisted due to unsatisfactory utility bill repayments such as TM Net, PTPTN, medical bill guarantorship, telephone bills etc)
Drop any comment below for inquiries 🙂