When you apply for a home loan in Malaysia, banks don’t just look at your salary. They want to know how much of your income is already tied up in other debts. That’s where your Debt-to-Income Ratio (DTI), also known locally as the Debt Service Ratio (DSR), comes in.
This guide will walk you through what DTI means, how to calculate it step by step, and what the numbers tell you about your loan eligibility.
What is Debt-to-Income Ratio (DTI)?
The Debt-to-Income Ratio measures the percentage of your monthly income that goes towards paying debts. Banks in Malaysia use it to check if you can handle a new housing loan without being overburdened.
Your debts may include:
- Car loan instalments
- Personal loans
- PTPTN repayments
- Credit card minimum payments
- Other housing or personal loans
👉 The lower your DTI, the better your chances of loan approval.
DTI vs DSR in Malaysia
You may hear both DSR (Debt Service Ratio) and DTI (Debt-to-Income Ratio) used by banks and property experts. They essentially refer to the same concept — how much of your income is used for debt repayments.
Some banks calculate DSR based on net income (after EPF, SOCSO, and tax deductions), while others use gross income (before deductions). Always check which method your bank applies.
How to Calculate Your DTI (Step by Step)
The formula is simple:
DTI (%) = (Total Monthly Debt Obligations ÷ Monthly Income) × 100
Step 1: Add up your monthly debts
Include loan instalments and minimum payments. Example:
- Car loan: RM900
- Personal loan: RM500
- Credit card minimum: RM300
Total debt = RM1,700
Step 2: Find your monthly income
Say your monthly income is RM6,000.
Step 3: Apply the formula
DTI = (1,700 ÷ 6,000) × 100 = 28.3%
This means 28.3% of your income is used to service debt.
What is a Good DTI for Home Loans in Malaysia?
Every bank has its own threshold, but here’s a general guide:
| DTI / DSR Range | Loan Approval Chances |
|---|---|
| Below 40% | Strong chance, considered healthy |
| 40–60% | Risky, depends on bank policy and credit score |
| Above 60% | High risk, likely rejection |
Some banks may allow higher ratios if your income is above RM10,000 per month, but staying below 40% is ideal.
How DTI Affects Loan Affordability
Your DTI not only decides whether the loan is approved but also how much you can borrow. A high ratio means the bank will either reduce your loan amount or reject your application.
👉 Use our Debt-to-Income Ratio Calculator to instantly check your ratio.
👉 To see the maximum loan you can realistically afford, try the Loan Affordability Calculator.
Tips to Improve Your DTI Before Applying
If your DTI is too high, here are some practical steps:
- Pay down credit card balances or small loans first.
- Refinance existing debts to lower your monthly instalments.
- Avoid taking new loans before applying for a mortgage.
- Show additional income (allowances, bonuses, side business) if allowed by your bank.
Even a small reduction in your debt can bring your DTI into the “safe” range.
FAQs: Debt-to-Income Ratio in Malaysia
1. What DTI do Malaysian banks accept?
Most banks prefer below 40%, but some accept up to 60% for high-income earners.
2. Does PTPTN count in DTI?
Yes, monthly PTPTN repayments are included in your debt commitments.
3. Should I use net or gross income?
It depends on the bank — many use net income after EPF, SOCSO, and tax deductions.
4. Is DSR the same as DTI?
Yes, they are often used interchangeably in Malaysia.
5. How can I calculate my eligibility quickly?
Use the Home Loan Eligibility Calculator to check if you qualify.
Fredrick is the creator behind houseloancalculatormalaysia.online, dedicated to helping Malaysians easily understand and calculate their home loan payments. With a focus on accuracy and simplicity, Fredrick develops reliable tools and clear guides to empower users to make informed financial decisions. His goal is to provide trustworthy, user-friendly resources that save time and reduce confusion in the complex world of home loans.