Home Loan Eligibility
We will give you analysis which banks have better chance of approval based on the information above, and advise how to improve the chances of getting loan approval.
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Factors that determine your maximum loan amount
How much a bank can lend to you depends on four key factors:
- Your Debt Servicing Ratio (DSR)
- An individual’s risk profile / Scoring
- Property valuation
- The maximum Loan-to-Value (LTV) ratio / Margin of Finance available to you
Debt Servicing Ratio
The DSR is meant to show how much of a person’s income is used to service debt installments, and is represented as a percentage (%) of income. It is derived from 2 main components:
DSR = Commitment / Income
Between different banks, there can be major differences in the final DSR amount that is calculated. This is because every bank has their respective calculation methods for income and commitment recognition.
Example 1: Standard Chartered Bank may base their calculations on Gross Income, while RHB and Maybank may base it on Net Income.
Example 2: CIMB and HSBC may recognize 100% of rental income, while Public Bank and OCBC may only recognize 80%.
Example 3: RHB recognizes only 45% of foreign derived income, while Hong Leong considers 100% of it.
It is not unheard of that when different banks calculate the DSR for the same person, there can be DSR differences of up to 20%! But the differences do not stop there.
Once the DSR has been determined, every bank will have their respective guidelines for the maximum allowable DSR threshold. It is typically determined by income level, but may also be affected by net worth and even things as arbitrary as qualifications and age. Some examples of bank guidelines:
| Income | Bank A maximum allowable DSR | Bank B maximum allowable DSR |
|---|---|---|
| < RM3000 | 60% of Net Income | 60% of Net Income (+10% if professional) |
| < RM6000 | 70% of Net Income | 70% of Net Income (+10% if professional) |
| < RM10,000 | 75% of Net Income | 80% of Net Income (+10% if professional) |
| > RM10,000 | 80% of Net Income | 90% of Net Income (+10% if professional) |
With the information above, we will help access your case and advise best banks to submit to, in order to increase chances of approving.
Other tools or reference which may be relevant to you.
- Home Loan Calculator (how much monthly installment)
- Rental Yield Calculator
- Real Property Gain Tax
- Stamp Duty
- Legal Fees