Written by: Sr. KC Law, Principal & Valuer at Action Real Estate & Valuers
Getting your housing loan approved? Here are some pointers to note
Before looking through property portals and going for property viewings, it is of utmost importance to pre-qualify yourself before getting a housing loan.
Ever wondered how much is the bank willing to loan to you?
In this day and age, it is getting increasingly difficult to get a housing mortgage approved due to the tightening of lending policies by Bank Negara.
Why? you may ask, our debt to income ratio is as high as 146%! Meaning to say, for every RM 1 salary, you have a RM 1.46 debt!
There were countless of times I have seen genuinely interested buyers not being able to purchase their dream home simply because their housing loan application was rejected by the bank.
It can be quite frustrating and disappointing, after finding the perfect home and later being told that you cannot purchase it.
Therefore, you may want to make a trip to your bank to consult a mortgage banker. The information in this article should not replace the consultation you have with your banker.
P/S: Always engage a qualified, legal, certified real estate negotiator. Do you know how to spot an illegal real estate negotiator? Find out Are you Dealing With A Certified Real Estate Negotiator
Bankers will typically look at 3 things before granting approval of your loan:
1. Credit Tip Off System (CTOS)
This is a privately owned credit agency. Basically, this system records if you have been blacklisted before.
The CTOS report indicates a CTOS Score, which is an easy to understand 3-digit number on how good your credit health is and how likely you’ll be approved for your next loan.
The higher the score, the better.
Did you know that you can check your own CTOS status online at www.ctoscredit.com.my for free?
2. Central Credit Reference Information System (CCRIS)
This system is owned and managed by Bank Negara Malaysia.
The information that CCRIS show are:- total loan amount, frequency of repayment, outstanding loan amount, types of facilities (credit card, car loans etc) and in which bank, whether or not you are single or a joint borrower.
An ‘0’ indicates that the person is up to date with his repayment. If the system shows ‘1,2,3..’, actually means that the person has defaulted repayment, the number indicates the number of months he has defaulted repayment.
Banks are only keen to lend to good paymasters, that means paymasters who are timely at paying their installments and consistent.
Thankfully, this system only show the latest 12 months record.
So if you had always been a defaulter, you can redeem yourself and start paying your installments on time and consistently.
You may check your CCRIS by going to a BNM branch with your IC, there will be a kiosk where you can get a print out of your CCRIS.
Alternatively, you can go to www.mycreditinto.com.my where you can check your credit status and CCRIS for a small fee.
3. Debt Service Ratio (DSR)
DSR shows how much of a person’s income is used to service debt installments and it is calculated by this simple formula Debt/Net Income x 100%.
Based on this calculation, the banks will then be able to tell how much more loan you are able to handle.
You can also work this out on your own, by collating all your income, expenses and commitments and plugging it into that same formula, although the banks will have a more complex algorithm by which they follow; calculating it on your own will help you to understand your chances of loan approval and gauge your ability to afford a particular monthly installment.
Many buyers don’t take this seriously, and when they are faced with cash flow issues, they are at high risk of defaulting their installments.
The DSR cap between banks can vary, and typically depend on your salary range.
Your DSR may qualify you for a loan at one bank but fail at another.
If you fail to obtain a loan at a bank, try another bank.
Different banks look at different aspects with different weightages. In any case, always reduce debts, increase income!
This is part of a series of articles we will be releasing, on “Guide To Buy A Property in Malaysia”. Stay tuned for the whole series of blog posts to get the complete picture!
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About the Author
Sr. KC Law is a Registered Valuer, Estate Agent and Property Manager with The Board of Valuers, Appraisers, Estate Agents and Property Managers (BOVEAP) of Malaysia. KC Law is also an electronic engineer registered with the Board of Engineer Malaysia (BEM) and received his engineering training from Tunku Abdul Rahman College Malaysia and later at Hatfield Polytechnic United Kingdom. In the 1990’s he was involved with the digital transformation of Telecommunication infrastructure for Maxis and Telekom Malaysia. His passion for Real Estate in the 2000s led him to practice as a real estate negotiator in Ace Realty and later valuation and property management in Rahim & Co International. Several years later he founded Action Real Estate and Action Valuers & Property Consultants. His areas of expertise are in Real Estate Agency, Property Valuation, Property Management and Business Valuation. He is Member of The International Association of Certified Valuation Specialists of Canada, Member of Royal Institution of Surveyor Malaysia and Member of Malaysia Institute of Estate Agents.