How much home loan can I afford in Malaysia?

Understanding how much home loan you can afford is the most important first step for any prospective Malaysian homebuyer. This guide will walk you through the key factors banks use to assess your eligibility and give you practical tools to calculate your affordability.

What is the Debt Service Ratio (DSR)?

The Debt Service Ratio, or DSR, is the primary metric banks in Malaysia use. It’s a simple percentage that shows how much of your monthly income goes toward paying off all your debts. A lower DSR is always better because it signals to the bank that you have plenty of room to take on a new loan.

How to calculate your DSR:

DSR=NetMonthlyIncomeTotalMonthlyCommitments​×100%

• Total Monthly Commitments include payments for your car loan, PTPTN, personal loans, and credit card debt.
• Net Monthly Income is your take-home pay after statutory deductions like EPF, SOCSO, and income tax.

Example 1: Calculating Your DSR

• Net Monthly Income: RM 5,000
• Existing Commitments:
  • Car Loan: RM 800
  • PTPTN Loan: RM 250
  • Credit Card Minimum: RM 150
• Total Commitments: RM 1,200

DSR=RM5,000RM1,200​×100%=24%

A DSR of 24% is excellent and makes you a low-risk borrower. Most banks prefer a DSR below 60–70%, but this can vary based on your income bracket.

What Other Factors Do Banks Consider?

Beyond your DSR, banks look at a few other key areas to build a complete picture of your financial health.

• Credit History (CCRIS & CTOS): Banks will check your credit reports to see if you have a history of paying your debts on time. A clean CCRIS report (no late payments) and a healthy CTOS score are crucial for loan approval.
• Down Payment: You’ll typically need to have at least 10% of the property’s price saved up as a down payment. The bank will finance the remaining 90%.
• Employment Stability: Banks prefer borrowers with a consistent, verifiable income. They usually require 3-6 months of payslips and bank statements.
• Property Value: The bank will conduct a valuation of the property to ensure the loan amount requested is fair and aligns with the market value.

How to Use a Home Loan Calculator

While a DSR calculation gives you a good starting point, using a home loan eligibility calculator is the most accurate way to estimate your maximum loan amount. These tools factor in all the variables and provide a personalized result.

Example 2: Using a Calculator

• Inputs:
  • Net Monthly Income: RM 6,000
  • Total Monthly Commitments (excluding new loan): RM 1,500
  • Desired Loan Tenure: 35 years
  • Interest Rate (Estimated): 4.0%
• Output: The calculator estimates you can afford a maximum loan of approximately RM 580,000. This translates to a monthly installment of around RM 2,750, keeping your total DSR below the typical bank threshold.

Frequently Asked Questions (FAQ

• How can I improve my DSR?The best way to improve your DSR is to pay off existing debts. Settle your credit card balances, personal loans, or PTPTN to free up more of your monthly income. This shows banks you have more capacity to manage a new home loan.
• What if my DSR is too high?If your DSR is high, you can try to reduce your loan tenure or increase your down payment. A larger down payment means you need to borrow less, lowering your monthly installment and DSR.
• Can I get a loan with a bad CCRIS record?It’s very difficult to get a loan with a poor CCRIS record. Banks view late or missed payments as a major risk. Your best bet is to clear all your arrears and maintain a perfect payment history for at least 12 months before reapplying.
• Why is my loan amount different from what the calculator says?Online calculators provide an estimate, not a guarantee. The final amount depends on the bank’s specific lending policies, the property’s valuation, and your complete financial profile at the time of application.
• Can a co-borrower help me get a higher loan?Yes, adding a co-borrower (like a spouse or family member) combines your incomes and commitments, often resulting in a lower combined DSR. This can significantly increase your maximum loan amount and chances of approval.