In the 1H2020 Property Market Report released by the National Property Information Centre (NAPIC), it is said that the loan approval rate for residential properties is the lowest in 10 years, standing at only 34.1%. Furthermore, the government has cut Overnight Policy Rate (OPR) by an accumulative 125 basis points since March 2019 which means lower borrowing cost, financial institutions are taking more precautions and are more selective in lending. The Central Bank of Malaysia said that the total loan application amount for the purchase of residential property in 1H2020 plunged by 24.1% y-o-y to RM96.45 billion, while total amount of approved loans decreased by 39.1% to RM 32.84 billion, which is the lowest amount in a decade.
If you are a property buyer who is hoping to secure a loan to finance your investment, this may not be such a good news. What are the ways you can increase your chances to obtain an approval for a housing loan? Here, we share five simple tips you can follow.
1. Submit the right documents
Make sure you submit all your income-related properties in order to show that you are capable of repaying your loan. If you have multiple sources of income such as from rental and your full-time job, do attach them in the application form. To further strengthen your income, you can also submit your bank statements which shows there is income coming in with the same amount matching your payslip. Make sure the application form is also filled up correctly such as your house address, employer’s details, identity card with your picture, additional referrals will go a long way.
2. Have a healthy credit and track record
The bank can trace your credit report via your CCRIS report where they can see information such as your outstanding credit, application for credit and special attention accounts. You can obtain your CCRIS report online or request from the financial institution itself. Thus, always make sure you pay off your outstanding debts promptly. Banks also use the CTOS report where information from you are compiled across different channels such as the Malaysian Department of Insolvency (MDI), Registrar of Societies (ROS), Companies Commission of Malaysia (CCM) where they can trace information such as whether anyone has taken legal action against you, your holdings in incorporated companies and etc.
3. Understanding your Debt-Service Ratio (DSR)
Banks use DSR to determine whether or not you can afford the loan that you’re applying for. Start reducing your large debts so that you have an ideal DSR range. To determine whether or not you can afford the loan that you’re applying for. All your monthly commitments are traceable via the Central Credit Reference Information System (CCRIS) report. Even study loans like the National Higher Education Fund Corp or PTPTN are captured.
4. Have a good employment record
A good employment record gives more confidence to the banks and shows that you are able to pay your loan. The banks can also see that you have a healthy EPF contribution and continuity of your employment and how long you’ve worked with an employer is an important factor in the approval process.
5. Have at least one credit record with any banks
Having a credit record shows that you are a good paymaster if you service your loans on time. If you have no records at all, it is difficult for the bank to know whether you are paying your loans on time as there are no past records for them to refer to. A tip would also include utilising one of the banking facilities of the bank you are applying for a loan from such as a fixed deposit account or savings account to instil a higher confidence level in your lender.
[Image source: Business photo created by jcomp]
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