Income Calculation

 

Income Calculation

 

There’s always confusion on how does bank calculate my income for loan eligibility? Does the bank calculate based on our net income or gross income? What other income does bank include in their calculation?

This isn’t rocket science, all this confusing riddle will be solved once and for all from this topic to the next 3 topic, as I will cover how to calculate your loan eligibility by yourself, like a pro 😉

Whatever income receivable by us through legit ways can include into bank calculation as below:

Income

1. Gross income

2. Allowance

3. Over time (OT)

4. Bonus (Performance, Contractual)

5. Commission

Supporting income

6. Fixed Deposit

7. ASB dividends

8. Shares/Unit trust Dividends

9. Rental Income

10. Side income from part-time job

All the above include into income calculation and boost our loan eligibility from 1 to 10, given that there’s receivable evidence of the income, no hanky panky stream of income.

 

1. Gross income


This is by far the most basic income you will get as an employee. Gross income is the income you receive monthly from your job before deduction of tax, sosco and Epf. Why didn’t I focus on net income instead of gross income? Well, gross income will make a much simpler example than Net income, not to cause any confusion here.

When bank categorized your DSR benchmark, they will look at how much gross income (Basic salary) you receive from the company. Let’s put an example from this pay slip above, XXX earning RM3500 from ABC kedai runcit every month fixed.

Now let’s say XXX wanted to buy:

RM400,000 property

90% loan (RM360,000 Loan amount)

35 years loan tenure

4.5% interest rate

Bank’s debt calculation on this mortgage loan (housing loan) is RM2123.8 installment /month

Bank ABC DSR guideline for RM3000-RM5000 categorized into DSR 75%.

Hence the Net income RM2775 * 75% = RM2081.25

Bank will use RM2081.25 income, calculating whether you are eligible for this new mortgage loan (housing loan).

As you can see, xxx aren’t eligible for this loan because his income is too low RM2081.25 < RM2123.8

Hence, bank will reject his loan if there isn’t any supporting income to boost the income.

 

2. Allowance

Allowance income gives benefits to the employees to cover their costs such as Food, transport, petrol and etc etc.

Usually allowance will show in the pay-slips. Allowance are eligible include into bank loan income DSR calculation.

However, most of the bank will take only 80% of the allowance income eligible for income calculation.

Gross income Rm3500

Allowance Rm1000

Gross Income Rm3500 + Allowance RM800 (1000*80%)

Total income is RM4300.

Total net income is RM3680.68 (RM4300 – SOSCO,EPF,TAX RM619)

Lets take RM3000 – RM5000 = 75% DSR

Hence Rm4300 qualify for 75% DSR calculation

RM3680.60 * 75% = RM2760.45 for loan financing eligibility

 

3.Over time (OT)


Overtime calculated as 80% income computation too

 

4.Bonus (Performance, Contractual)



Well, now you know that your bonus included as income!

Bonus has 2 type, performance and contractual bonus.

Performance bonus

– It’s bonus that receive yearly based on company performance. Hence every year the amount are differ. Bank likes consistency, performance bonus to them isn’t consistent, hence bank will request 2 year performance bonus total amount, 80% computation eligibility and divided by 24 months to be computed into income calculation and only will take 80% of the amount, same as allowance.

Example

Year 2015 – Rm10,000 bonus

Year 2016 – Rm12,000 bonus

Total is Rm22,000 * 80% = RM17,600


RM17,600 / 24months = RM733


RM733 will be included as income computation

Contractual bonus

– This bonus is a fixed bonus contractually promised by the company to the employee. Bank will take latest bonus average of 12 months as income computation

Example

year 2016 – RM10,000 bonus

RM10,000 / 12 = Rm833

Hence Rm833 will be included into the income computation.

 

5. Commission


Certain profession like doing sales will receive commission as their income. Does commission included as income and how does bank calculates it?

Yes, commission do include as income computation by bank.

As commission received amount is irregular every month based on sales figure, hence bank will calculate average 6 months of the commission and take 80%.

Example 1:

Commission income for 6 months

August 2016 – Rm1000

September 2016 – RM500

October 2016 – RM200

November 2016 – RM300

December 2016 – RM300

January 2017 – RM100

Hence total commission is RM2400/6 = RM400

RM400 * 80% = RM320

Rm320 will be eligible add into income computation!

Example 2:

August 2016 – Rm1000

September 2016 – Rm1000

October 2016 – Rm1000

November 2016 – Rm1000

December 2016 – Rm1000

January 2017 – Rm1000

If the commission is consistent, bank will take 100% of the amount which is RM1000

RM1000 will be inclusive in the income computation

There’s some bank that computate differently, they will calculate deviation of the commission in 6 months. If the deviation is more than 20%, the DSR will be 50% if less than 20% deviation, DSR will be 80%. Hence there’s bank use different mechanism in calculating commission income!

6. Fixed Deposit


If you have fixed deposit in the bank, it can be used as income.

Example:

Rm500,000 FIXED DEPOSIT in bank A.

Bank will calculate 3% as income computation divide by 12 months.

( Rm500,000 * 3% ) / 12 = RM1250

Rm1250 will be used as income computation

You will need to show bank e-statement of the fixed deposit or certificate to prove existence of the fixed deposit.

 

7. ASB dividends

Bumiputera will have the luxury of owning Amanah saham. The dividends from ASB inclusive into income computation.

Example:

RM200,000 ASB principal amount

Bank will calculate as below:

(Rm200,000 / 12months)* 7.7% interest = RM1283

RM1283 will be inclusive in income computation.

The interest figure used are different by each bank, hence there’s always a slight different.

You need to give the bank ASB statement stating the dividends to justify existence of this income.

 

8. Shares/Unit trust Dividends


Shares or unit trust that you have invested, the dividends that you receive included as income.

Example:

100lot in TRX stocks

Yield Rm500 DIVIDEND annually.

Hence bank calculation,

(Rm500 / 12) * 80% = RM33

Rm33 will be inclusive as income for bank computation

You need to provide the bank with shares statement stating the dividends to justify existence of this income.

 

9. Rental Income


Rental income collected when tenant pay you for rental service staying in your property.

Rental income can be justified if you give below justification:

– Stamped tenancy agreement

– 3-6 months bank statements of rental credit

Bank will calculate 80%-100% of the Rental income

Example:

Rental Rm1000/month

Bank will consider RM1000 * 80% = RM800

Rm800 as income computation.

 

10. Side income from part-time job

We are talking about freelance job, part-time job.

In order for the income justifiable, when you have 2-3 jobs.

Part time job you would need to provide the salary slips and the bank statements with the income credited for at least 3 months record

If you have any inquiries, do drop a commend below 🙂

2 thoughts on “Income Calculation

  1. Would income earned from grab/uber be considered as other income that is acceptable by Bank.

    If yes, earning from grab is divided into bank and cash, how to justify the cash side as part of ‘other income – grab ‘

    1. Hi

      1. Grab uber income are valid to apply for loan, however, chances of approval really dependable on profile and subjective individual credit officer purview.

      2. For cash part, you can tally with grab/uber receipts. Hence, every cash receivable will be tally with the receipts. Your case will be stronger If your total deposit amount in 1 go, tally your total receipts add on all together for cash pay.

      Cheers

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