1. Find out what’s the bank’s DSR percentage beforehand
First, go and check your credit score via CCRIS (the Central Credit Reference information System), to see whether you’ve kept it healthy or not. This system is in place to tell the banks how good or bad you are at paying back your loans, via tracking your repayment record for the last 12 months.
That’s not the only thing you have to do okay, you also need to find out your DSR (Debt to Service Ratio) which is a calculation of your commitments against your monthly income. What many fail to realise is that there’s no one-size-fits-all percentage for every bank in Malaysia. Most will just submit a loan application to multiple banks hoping that there’s ONE bank that will accept them.
This isn’t wise at all, as should you receive just one rejection, the other banks will be aware of it through CCRIS. Your CCRIS not only displays your credit behaviour for the past year but also the history of any loan rejection(s) you might have. Basically, if you mess up, you wait another 12 months to wipe your CCRIS record clean before you can apply for a new loan.
Go and get researching on some of the banks’ DSR by asking loan officers, or your friends/family who’ve previously had a successful mortgage application from your target bank(s). From there, and with your calculated DSR in hand, you can narrow your search down to the banks which will provide you with the highest chance of approval.
2. You still need complete and accurate documentation, no excuses!
Being a freelancer is probably the biggest dream come true for many people – no demanding boss, flexi work hours, staying in pajamas the whole day. There’s just one catch: you won’t be getting a stable and consistent stream of income, and that’s going to make the bank people very nervous.
At the end of the day, the banks would require solid proof of your financial capabilities (gotta pay them back y’know!) and will still request for you to produce the following documentation:
- Latest EA form: Declare all your income and pay your taxes on time.
- Latest 3 months payslip or 6 months commission statement: Get a part-time job at a stable company, preferably a reputable one. Ensure that you are getting the minimum income required that will help supplement your main (albeit unstable, in the bank’s eyes) income stream.
- Latest EPF statements: Make your own monthly EPF contributions, sourced from the income generated via your personal business. This will help build your profile as a responsible and credible paymaster and banks will look favourably on the consistent pattern which paints a stable lifestyle.
- Bank statement: Maintain a healthy financial portfolio and do not rack up any credit card debt. It is a big plus for you to open a fixed deposit account with your target bank to increase your chances and back your borrowing position.
3. Now, did you apply for a home loan refinancing?
Before BNM (Bank Negara Malaysia) made a revision to their lending rules in 2014, homeowners could refinance their properties up to 90% of its value, with a maximum repayment tenure of 35 years. They could use that cashed-out money for other forms of investment. When the revision rolled around, one of the changes made was to cap the tenure for personal financing at 10 years.
“But how lah can this affect my mortgage application?” you ask. Well, let’s say you have an existing home loan of RM300,000 with Bank A and want to refinance RM400,000 to Bank B. The additional RM100,000 in the loan will be considered as personal financing, hence the maximum 10-year tenure applies here.
Bank B will calculate your DSR using the 10-year period instead of a conventional home loan’s tenure of 35 years, resulting in a much higher DSR than the one you expected. Don’t be surprised ya if you’re presented with a rejection letter; after all, your current credit score was insufficient to qualify for the bank’s minimum DSR requirement!
4. Calm yourself, and try exploring other financing options
We get it, you’re pretty pissed off that after all your hard work, your dreams of owning your first property just got pushed further away. Staying frustrated isn’t gonna help, doing something to change your standing is the better option. And there are other ways which you can get your financing from.
In light of the weak economy and high home loan rejection rates, the Association of Banks Malaysia (ABM) via a media statement in July 2017, recommended aspiring first-time homebuyers to find out more about specific loan products introduced by banks for various Government schemes.
Some of these include the Syarikat Jaminan Kredit Perumahan Berhad’s (SJKP) Housing Guarantee Scheme; schemes for selected affordable housing projects such as Rumah SelangorKu and RumahWIP; My First Home Scheme (SRP) as well as the PR1MA Special End Financing Scheme. Rent-to-own schemes, which fall under the PR1MA housing initiative, are also available.
There’s one final alternative: Loanstreet’s Comprehensive Home Loan Eligibility Report tool, which is free of charge to use! That whole tedious process of running around to all the banks, calculating your DSR, submitting pile of documents after pile of documents? Taken care of with this tool, which will help you determine your loan eligibility across 15 banks in just a few minutes! You’re welcome, and good luck!