How Much You Can Borrow Based On Your DSR

Published By Loanstreet -- Oct 28, 2013

Before buying a house, most people want to know how much they can borrow. For a quick answer this skip straight to our Housing Loan Eligibility Calculator. If you want to learn more on how it is calculated, read on for a more detailed guide.

Factors that determine your maximum loan amount

How much a bank can lend to you depends on 4 key factors:

  1. Your Debt Servicing Ratio (DSR)
  2. An individual’s risk profile
  3. Property valuation
  4. The max Loan-to-Value (LTV) ratio / Margin of Finance available to you 

This article covers only the DSR factor, and we will first address some common misconceptions.

Myth #1 – Banks will only lend to you up to 1/3 of your gross income

This is only a recommended guideline for borrowers. In practice, banks use more refined rule sets during credit approval.

Myth #2 – The maximum loan amount you can get from each bank doesn’t vary much

There are enough exceptions to say that credit policies can differ greatly from 1 bank to another. Max borrowing amounts can even differ up to 3x between different banks.

Myth #3 – Banks only lend up to 70% of your DSR

This is only another rule of thumb and not particularly exact.

Debt Servicing Ratio

The DSR is shows how much of a person’s income is used to service debt installments, and is represented as a % 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 only 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 max 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 example bank guidelines:

Income Bank A Max allowable DSR Bank B Max 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)

Knowing Your Maximum Borrowing Eligibility

Unless you are familiar and up to date with the credit guidelines of each bank in Malaysia, it can be very difficult to determine the max home loan amount available to you. This is especially so for businessmen, foreigners, Singaporeans, and Malaysians working overseas.

By making use of our Housing Loan Eligibility Calculator you can find out and understand your maximum borrowing ability for housing loans very quickly. All this is made possible because of Loanstreet’s familiarity with the credit guidelines of banks in Malaysia.

Once you have an idea of how much you can borrow you can search for the best loans available with our Home Loan Comparison tool.

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