What is DSR?

 

What is DSR?

 

Congratulation graduating from Kindergarten, I hope the topic isn’t too intense for you. If you still haven’t fully grasp the concept of mortgage loan ( Housing loan ) I would advise that you revisit the topic that you are still confused or write us an email or inquiries.


We will gladly answer your question to further your understanding! We are a group of amazing Mortgage consultant aka teacher in sharing knowledge that are long held by bank and expert.

In Mid school, you will be exposing more towards financing calculation, figures, understanding your own profile and how to evaluate your own financial profile.

Being a Mortgage consultant (Housing loan consultant) for yourself, wouldn’t it be great? Well, I ain’t saying you can apply loan by yourself just like that, we hope that with understanding on loan financing, you can build a solid profile for your own and know what and what not to do when apply for loan.

Let’s start with our MID SCHOOL lesson with, “what is DSR?”


DSR is debt service ratio

You will come in contact with this term when you deal with mortgage/housing loan. Debt service ratio is the measure of your income strength over your current debt facilities (Housing loan, credit card, personal loan, Overdraft, share margin, term loan, ASB… etc).


Commitments/Income = Debt service ratio (DSR)

It’s a measurement of your financial profile strength by bank, before banks credit department proceed your loan financing, hence it’s a big deal to you and the bank. DSR is the rule of thumb measurement for loan financing eligibility for the new loan financing, and every banks DSR benchmark is different.

Banks DSR range from 50% , 60% , 70% , 75% , 80% , 85% to 90%. Every income group are entitle for different DSR figure, such as:

RM2000-RM3000 for Bank A is 50%, Bank B is 60%.

Rm5000 –Rm10,000 Bank A give 70% DSR, Bank C give 85% DSR.

As you can see, different bank has different DSR according to different segment income group. That’s the reason why for similar borrower profile, Bank A, B or C will provide you with different max loan financing amount and why certain bank will reject your loan for low DSR.

Let me give you an example in calculating DSR based on actual profile:

A
Income:

Net income: RM5000/ month
Net Allowance: RM500/month fixed

Debts:

Car loan: RM1200/month
Housing loan: RM1500/month

Commitment/income RM2700/RM5500 = 50% Debt service ratio (DSR)

Bank A DSR for income >RM3000 is 70%
Bank D DSR for income>RM3000 is 45%

Hence, Bank A will finance you the loan, while bank D will reject due to insufficient income or debt gearing is too high.

What we can do to achieve bank’s target is to play with income and debt, either try to increase income with more supporting income or joint applicant. Reduce the debts by settle debts that almost matured.

Drop your inquiries down below 🙂

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