1. Be Mindful Of The All Seeing Eye
You should know that all our financial transactions are under the watchful eye of CCRIS. For the uninitiated with CCRIS, do read up about it here. For startes, start clearing all your credit lines by the 14th of every month. You want to have a clear record when CCRIS updates are carried out on the 15th of every month. Understanding how CCRIS works will help you make better actions to ‘beautify’ your credit score which sort of works like a report card, but only for banks.
2. Nothing Personal, Just Business
If you happen to be running a small/medium sized company, this tip is for you. Many are confused on applying for a loan under their company or personal name. Here is an example you can analyze from.
Example:
Adrian is the director of a small company. His holds 51% of shares in the company and pays himself a salary of RM10K a month. Adrian also wishes to splash on a property in TTDI that is going for RM1million.
A.Assuming the company generates an average of RM100k per month in business revenue and Adrian opts to apply for a housing loan under corporate entity.
Monthly Income = Business Revenue*Industry Income Factor*Share Holding of Director
= RM100k*10%*0.51
Recognized Monthly Income By Banks = RM5100
B.If Adrian choose to apply the housing loan under individual entity,
Monthly Income = Director Fees/Salary = RM10k
Recognized Monthly Income By Banks = RM10k
As per the example above, the recognized income by the bank differs greatly from scenario A and scenario B. Of course the benefits of buying property under your company entity has its benefits too. So tailor this to your current outlook to see which option fits you best.
3. Legit Documentations
Own a few properties and collecting rent? That’s great because a bank recognizes rental income.
What’s not great is that when you’re running on an expired agreement or worse still, with no documentation at all.
If you’re looking to better your credit score, be sure to have a valid tenancy agreement to show.
Also, don’t go rushing out to stamp all those documents in a day. Instead, start staggering them now to avoid looking suspicious to banks.
4. Start Blowing Your Own Trumpet
Flashing your stash of cash on the roads of petaling street may not be the wisest thing to do. You generally want to keep a low profile in public or risk attracting the wrong crowd to your party.
This philosophy however does not apply when it comes to loan applications to banks.
Income generating investments like your Fixed Deposit should be declared as banks can recognize it as a booster to your portfolio.
5. Two (or more) Is Better Than One
One the instrumental guidelines that banks rely on during credit checks is calculation of your debt-servicing ratio (DSR). We have talked about it before; so do read up on what DSR really is.
Your DSR is limited by your income and expenditure.
To improve your DSR score, consider applying for a home loan under a joint application to give your DSR a better chance. Do note that there are of course T&C’s to this along with your pros and cons. So do weigh your options carefully before treading the (dotted) line.
6. Don’t Put All Your Eggs In One Basket
We have discussed a little bit on DSR and how it affects you in one of the points above. That being said, you should also know that different banks hold a different DSR threshold.
Simply put, you might not strike it with Bank A but there is a chance that you might with Bank B.
So, apply to as many banks as you can to improve your chances. Sounds like a hassle? No worries, use our Home Loan comparison tool to compare and apply with multiple banks in one application. Better yet, you could probably do all that in under 15 minutes.
7. Asset As A Friend
If you applied for a loan but was told that your DSR has exceeded the 90% mark, there might still be hope. Certain banks in Malaysia offers an alternative evaluation method based on your assets.
It is known as asset based lending (ABL). To be eligible for this, you will have to show proof of ownership on assets that amounts to above RM1million.
These assets can be your debt free property (Note: Only 70% of market price of the debt free property will be taken as the asset value), fixed deposits, stock investments and other assets. They must amount to a minimum of RM1million after the deduction of 2 years of monthly installments for the current property loan that you are applying for with the inclusion of all unsecured loans.
Conclusion
Loan approval rates are at a low, property purchase are seeing a downtrend and people looking for a home to purchase are struggling with prices and finding it increasingly hard to secure a loan. While what we share has no guarantees, we want you to be in the best position possible to buy that home of yours. Besides, it’s just good practice to employ wise financial habits. On the note of good practices, do remember to use our Home Loan Comparison and Personal Loan Comparison tools to apply a loan. It’s free, convenient and saves you a whole lot of time.
