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House Loan For First Time Home Buyer

Posted by Brilliant Property on June 7, 2022

The monthly home loan repayment covers a portion of the initial capital (the principal amount), as well as the accrued interest. As long as you make your repayments every month, your home loan balance will gradually decrease every month. Generally, the loan tenure is dependent on your age – the younger you are, the longer your loan tenure. In Malaysia, the maximum loan tenure is 35 years, or until the borrower turns 70 years old (whichever comes earlier).

It’s important to note that the initial home loan repayments will primarily be used to pay down the interest on your home loan. If you plan to sell your property in the first few years, you’ll find that the amount you owe the bank won’t have decreased significantly.

When it comes to buying a property, taking out a mortgage loan is the best option. It’s something that even the wealthy do! Before closing the sale, there are some upfront charges that must be addressed, therefore a housing loan will come in handy.

A ten percent down payment on the property, SPA fees, stamp duty, legal expenses, and other costs are among them.

To move forward with your housing loan application and take another step toward owning your dream home, you’ll need to gather and submit some basic paperwork to the bank to demonstrate that you’re financially secure and capable of making the repayments.

For an employee, the paperwork is quite straightforward. However, certain considerations must be made in order to ensure a smooth and simple application procedure.

It also helps to reduce the number of inquiries asked by banks, so make sure you’ve covered all of your bases!

1) A pay stub

1a) Reimbursements

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The first piece of proof you’ll need to present the bank is a payslip, which shows how much money you make in a month.

The majority of employees are paid a basic salary, which is typically a nett value of RM3,000. They would also have a stipend in the form of a fixed or variable amount on occasion.

a set amount of money

Allowance for Variation

You will get paid on a monthly basis and will receive the same amount each month.

You will be paid on a monthly basis and will receive a different amount each month.

Travel, cellphone, and other allowances are examples.

Overtime is one type of allowance.

For instance, if you spend RM500 every month on travel.

For instance, RM1,000 in January, RM5,000 in February, and RM7,000 in March.

In layman’s terms, a variable allowance is one that is paid based on the amount of time it takes to complete a task, such as pro-rated overtime hours.

The amount varies from month to month, and in some cases, the allowance is not provided at all. When it comes to your pay stub, consistency is the most important factor for banks to consider.

The more stable your income is, even if it is changeable, the more likely the banks are to consider you for a loan.

The term “consistency” refers to the amount earned each month and how much it varies.

If your allowance is RM1,000 in January, RM5,000 in February, and RM7,000 in March, for example, there is a fluctuation from the lowest (RM1,000) to the greatest (RM7,000) (RM7,000). That’s a sevenfold difference!

When one’s variable salary fluctuates so much, the bank is likely to overlook or disregard such income.

Most banks will only accept a specific percentage of the average amount on your payslip (50 percent to 80 percent), though this varies depending on the bank’s policies.

So, what constitutes an appropriate variable income? A monthly income that is constant with little variation, say between RM3,000 and RM5,000.

That’s usually more acceptable, but some banks may still ignore consistency, so it’s all up to the individual bank’s policies.

In the case of variable income, you’ll need to prepare paystubs from the previous six months so that the banks can calculate your average pay as accurately as feasible. The more consistent you are, the better off you will be!

1b) Subtractions

Monthly deductions such as EPF, SOCSO, and PCB will be visible on your payslip (if your income has reached a taxable amount).

All of these deductions are required by Malaysian labour law, and the banks will do due diligence by double-checking them!

When no EPF or SOCSO deductions have been reported, problems occur. All employers are required by law to pay EPF contributions on behalf of their employees.

It’s nearly the same for SOCSO, but banks will want confirmation on non-SOCSO or EIS donations.

Deductions from bank loans paid in instalments, as well as salary reductions, may appear on your payslip.

In this instance, the instalment amount will be deducted from your monthly paycheck as a commitment, resulting in a lower nett pay. As an example,

RM3,500 nett monthly remuneration in the beginning

The monthly instalment is RM900.

RM3,500 – RM900 = RM2,600 per month is the current nett monthly compensation.

It may appear to be a setback because your take-home pay has decreased, but it isn’t! You avoid the stress of perhaps forgetting to make repayments and instead amassing debt by having the amount deducted automatically from your monthly earnings.

The bank, on the other hand, will not know if the loan amount withdrawn from your pay is the same loan based on your CCRIS report.

As a result, they may compute it again based on the same promise, which means you’ll be paying twice as much and risking financial ruin!

Keep the original agreement with your bank to establish that this facility is a salary deduction to keep yourself out of this uncomfortable scenario.

To avoid being double-charged, you can only verify that this salary deduction and the CCRIS facility are the same with the agreement.

Another item to keep in mind is that not all wage deductions, including loans from non-financial institutions, will appear on your CCRIS report.

Your CCRIS report, however, is utilised as a standard to measure your financial health, so be sure it’s in good shape.

2) Contribution to the EPF

Banks will usually evaluate the proportion of deduction when it comes to Employees Provident Fund (EPF) contributions.

Contributions were fixed at 11 percent until late 2020, when it was announced that they would be cut to 9 percent starting in 2021.

For both employee and employer contributions, all employers must adhere to the minimum proportion of EPF.

If the percentage of deduction is not constant, the banks will very certainly need to seek clarification.

So, how can you make sure your EPF is paid on time and correctly? Simple! You may look up your EPF contributions on the internet.

Companies sometimes fall delayed on EPF payments, fail to pay, or pay wrong amounts. So make sure you’ve cleared issues up ahead of time, as they might be a stumbling block for loan applicants.

Aside from that, it’s also useful to know how much of your money goes toward your EPF! It’s normally calculated using your basic income, but it’s subject to additional factors like as bonuses or commissions.

3) Bank account statements

One of the most significant papers that banks will examine is bank statements. Our salaries are deposited directly into our bank accounts by our companies for the majority of us.

But what if you’re paid in a different way, such as by check, cash, or from a third party?

party/company? Here are a few pointers to help you explore these payment options!

Credited by the business (traditional method): Make sure the total matches your pay stub. If there are any discrepancies, talk to HR or Accounts right away and make the necessary changes before submitting your loan application to the bank.

Cash: Avoid it at all costs because it’s the most unreliable source of income for most banks today, and most don’t consider cash payment to be a salary.

Keep a copy of your cheques as proof in case you need it. Make sure the crediting amount is precisely the same as the amount shown on your payslip, down to the penny! Always make an effort to deposit money into the same account. If you don’t, you’ll have to produce multiple bank statements to reflect the cheque crediting, which can be time-consuming.

A third-party firm: This is most common in small businesses, when the company may use the employer’s personal account (usually a sole proprietor). The problem is that proving that this person is the owner of the company will cause problems with your loan application.

A bank statement indicates the name of the crediting account holder, so be sure it shows your employer’s correct, registered name and not something different.

It’s also possible that you’ll be hired by Firm A yet receive your monthly compensation from Company B, the parent company, in large corporations like groups of companies.

Although technically correct, the bank may not see it that way because the names on the statement disagree.

In that case, request a letter from your HR department to clarify the situation, or present your company’s website as confirmation that the two companies are part of the same group.

Allowances, commissions, and claims that may or may not be paid in conjunction with your monthly income but in a separate payment should also be considered.

The same rule applies: make sure you get a copy of the evidence of payment in the form of a voucher or a slip from the company.

The proof of payment must specify exactly what the payment is for, with values that match your bank statement exactly.

Even if you’re paid bi-weekly, if you follow all of the above guidelines and keep your financial records completely transparent, you should have no problems.

4) A copy of your identification card

Last but not least, you’ll need a duplicate of your identification card! Make sure you have a good snapshot of the front and back with your current information. It’s usually a good idea to have an additional copy on hand, so make two copies just in case.

If you want to qualify for a home loan and eventually acquire your ideal home, you’ll need these essential paperwork.

If you’re self-employed and manage your own business, or if freelancing and gig economy jobs are your main source of income, you may need to provide a separate set of paperwork when applying for a home loan.

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