Buying property – How Much Am I Able To Borrow

How much will you be able to loan from the banks? It is so important that it can decide what type of property you can buy. (Unless you are cash buyer then i nothing say lah). Know your maximum loan affordability first so that you will not waste your time for checking,choosing,signing and getting disappointment at the last moment as the bank does not approve your desired amount of loans. 

Salary does play a major role in deciding the amount of loan you are able to borrow as that will be how easily you can pay back the loan, but there are also more factors that could affect your eligibility for the loans!


Below are the factors listed in an article [How much you can borrow] from www.loanstreet.com.my

1. Your Debt Servicing Ratio (DSR) – DSR is a percentage of the debts you are servicing over the income you earn (DSR= commitment/income). Different banks will have different methods of determining your DSR despite it being based on the same information that you provide. To find out more on your DSR, you can read the article How Much You Can Borrow Based On Your DSR.

2. Risk Profile – Other than your credit records, banks would assess your creditworthiness based on many things which could include your job stability, spending habits and etc. The likelihood of defaulting which is your inability to pay off your debts or service it (pay interest) is an important factor when you’re borrowing a mortgage loan.

3. Value Of The Property – Properties that are on the market can be overpriced and so banks need property valuators to confirm that the property you are applying a loan for is worth the money that you are paying for. This is done because in the event of your default, the banks would still be able to recoup the amount you borrowed by reselling it back into the market.

4. The Maximum Loan-to-Value (LTV) Ratio Or Margin Of Finance You Can Access. – Commonly, 90% LTV ratio can be anticipated on a Malaysian residential mortgage loan. But if you hold more than two existing housing loans then the LTV ratio on the following housing loan is lower and is capped at 70%. Meanwhile, LTV ratios are even lower for foreigners as these are restrictions to those that have less attachments to Malaysia.

5. Age – Loan repayments period is usually up to 35 years from the first day of your loan or until you’ve reached 65/70 years of age (depending on the bank), whichever occurs first. A younger person (e.g. 21-25 years old) might have a higher chance of getting the house loan approved compared to somebody in their 60s.

6. Number Of Dependants – The number of dependants affects your eligibility because they will be spending portions of your income. It will also affect your capabilities to pay off your housing loans. If you’re a husband that has a housewife and five children dependent solely on your salary it may raise a concern with banks.

7. Your Joint Applicant(s) – The housing loan which is supposed to be borne by you and your joint applicant(s), thus banks will access them to judge your joint creditworthiness before approving the loan. Your relationship with the co-applicant may also matter, it is less likely for parents and children or spouses to have disputes compared to other type of relationships such as siblings or friends.

8. Nature Of Business Or Profession – This information will help banks determine whether your have a stable income. People with full time, fixed salary paying jobs are considered as more stable. As opposed to those who own their own business, which is considered less stable as there is no job security and as their income is not fixed.

9. Past Relationships With Banks – Applicants who are loyal customers of the bank they are applying to may have an added advantage. But if you’re not, it’s not a concern as long as you do not have significant conflicts with any of the banks (e.g. CTOS or blacklisted from banks).


Although those factors decides the loan amount that you can borrow, it usually does not include the payment for documentation fees such as S&P agreement signing or stamp duties. Do remember to consider the extra amount of cash you need to prepare when purchasing a house.
If you are not sure of the estimated amount , look here :
[ Buying Property - Legal fees & stamp duties ]
[ Buying Property - Renovation ]

Happy investing and stay informed!

W.

Reasons to get your housing loan rejected

Continuing yesterday's "tips to get your loan approved more easily" , today we are going to look at the reasons why loan application gets rejected. Although there are news saying that it is about 50% of applications of house loans getting rejected , but statistics have shown that in 2016, the Association of Banks in Malaysia actually has a approval rate of 73% on housing loans. This is definitely a good news for every home-buyers. So what makes you get into the other 27% of the majority?

Those applicants that failed to get the loan approve are due to the reasons as below:

• Debt service ratio (DSR) – Knowing the ratio of your debt to income is important and key in getting your loan approved. This is a formula used by banks to evaluate your affordability level. ( Formula : [Total Commitment + New Application] / Net Income ).   This has become the most common rejection reason for housing loan applications.  Different banks have a different DSR cut-off or capping (eg: 60%, 70%, or some even up to 80%).

• Stained credit score – Central Credit Reference Information System ( CCRIS ) report shows the records of the applicants. If the credit score is lower than expected by the lender, high chances are the application will get rejected. It is crucial for you to repay all your other mortgages on time (car loans, student loans, credit card debts) as they will stain your clean record and stay there for at least a year if you ever delayed the payment. 

• Bankruptcy – Once you go into bankruptcy, the record is going to stay in your CTOS permanently. And the lenders will give a frown at your loan application. Most banks are highly alerted once they get to know your "blacklisted" status, even after you are no longer bankrupt.

• Incomplete required documents or submit wrong documents - This is actually the 2nd popular reasons for getting the application rejected. Please check the required documents well and prepare everything. 

• Income insufficiency or instability - If you have been changing jobs in the recent years, there are chances that it could affect your score for the housing loans as they deem you to be unstable enough to repay the mortgage on time.

• Apply loan within the period of employment less than 6 months - same reason as above.

When you are having a large amount of debts or monthly commitments on hand, it is advisable to plan your finance well before you proceed to purchasing a house. Write it down in a proper paperwork so that you can show it to the banks that you are doing a good job in managing and reducing the debts. It boosts their confidence to approve your loan applications.

If it helps, its worth it.Happy investing and stay happy!

W.

Tips to get loan approved... with better chances.

Having your loan rejected after paying for the deposit of the houses will definitely let you have a headache. Not to mention the sophisticated process of refunding and cancelling the houses that you eyed upon. Unless you are a cash buyer, we all rely heavily on the loan approval for our house purchasing.

Some might be confused why their loan is rejected , or only approved with a low margin % of loan. Here are the tips to help you increase your chances of getting the loan approved. (Not guaranteed though but better chances!)

1) Your Affordability
The banks will definitely require you to submit all the documents such as your payslip and monthly commitments as they will use it to evaluate your ability to return the loans. Check your own affordability with your current salary range before you decide to buy the house. You can also look for financial planners to get a better idea of your current financial status.



2) Don't change your job... too often
Believe me, the banks can search for almost everything on your records. If you happen to jump around companies and could not stay on the same place for more than a year, they will be more reluctant to approve your loan. Reason? You might not be able to find a job on time to repay the mortgages.


3) Have a clean credit record
DO NOT BE LATE to pay off your credit card debts or student loans. They will stain your CCRIS record which can be checked by all banking institutions. If you get blacklisted, even after you pay the debts, it needs one whole year to clean your records off the desk.

You can easily get your CCRIS report from Bank Negara Malaysia or online through CCRIS website.


4) Show them your treasure box
Show them copies of your savings, be it from stock investments or fixed deposits. The more the merrier. Income from your side hustles can also be used in this case. This will put confidence to the banks to approve your loan as you have a lower chances of defaulting on the loan.


5) Get your pre-approved loan offer first
It allow the buyers learn the maximum they can borrow and therefore have an idea of their price range before picking any properties. However, all buyers should be careful to estimate their own comfort level with a housing payment rather than immediately aiming for the top of their spending ability.

Also, it gives you a better standing to negotiate on the property prices as you had already proved that you obtained the loan approval and will be able to buy the house anytime you want.

Having the loan rejected after finding your love-house will give you a lot of heartache. Try to have a consultation with the banking institutions first before you start the home-buying process. Gather up the paperwork or recent bank statements to check with them whether the chances of loan approval are high. 

Happy investing and good luck with the applications!

W.