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Home Financing Guide For Freelancers, Self-Employed and Commission Earners


Proof of income is a key requirement to demonstrate financial stability and competence to any bank. So, what can freelancers, self-employed or commission earners do to avoid the usual stumbling blocks of loan application and improve chances of obtaining loan approvals? Learn more about the important do’s and don’ts here.

Home Financing Guide For Freelancers, Self-Employed and Commission Earners
© skawee | 123RF

It’s tricky for working individuals in the gig economy to navigate home ownership as home loans in Malaysia tend to be more favourably geared toward employed individuals who earn a regular, salaried income.

For those without a fixed income — freelance workers, independent business owners, small traders and entrepreneurs, online sellers, e-hailing drivers, and more — it can be tough to meet the conventional requirements for securing housing loans.

There are ways to increase your chances of increasing loan approvals, but first, it’s important to understand the reasons loan applications are rejected.

iProperty Malaysia reached out to a mortgage specialist from Smart Choice Solution Sdn Bhd, Jonathan Ng, to share their experience from having assisted their clients toward successful home loan applications.

© Jonathan Ng / Smart Choice Solution Sdn Bhd

6 Key Reasons Freelancers, Self-Employed and Commission Earners Face Loan Rejections

Key Reasons Freelancers, Self-Employed and Commission Earners Face Loan Rejections
© fizkes | 123RF

The struggle is real. Banks will always favour job stability, even if your average annual income as a freelancer might surpass the amount you earned as a full-time employee.

As a freelancer or self-employed individual, your income could be based on project basis, and thus, your monthly earnings are inconsistent.

While different banks have different lending criteria, it all boils down to financial risk.

The usual documents required include payslips, EPF statements, bank statements, and a copy of your MyKad.

Yes, payslips and EPF statements are often a problem for freelancers, self-employed and commission earners to provide.

According to Ng, these are the 6 most common reasons why freelancers, self-employed and commission earners face loan rejections. 

1) Income tax submission

The bank could suspect the legality and authenticity of the source of a loan applicant’s account if the applicant doesn’t declare income to the Inland Revenue Board (LHDN).

Another red flag is when you declare income taxes after the due date. If the income tax is submitted after the due date set by LHDN, the bank might suspect that the loan applicant declared income tax just for loan application purposes and suspect their integrity.

2) Volatile income turnover – more than 50%

If the loan applicant earns RM10,000 this month, but only earns RM1,000 the following month, then the applicant’s repayment capability will be questioned.

Ng explained, “If the commission’s difference is volatile, more than 50% in the last 6 months, the applicant can prove that the commissions are relatively stable by giving up to 12 months or the latest 2 years’ commission statement.”  

Volatile income turnover. Untable Income.
© ilixe48 | 123RF

3) Cash transaction business

If the loan applicant’s income is from cash transactions, it’ll be very challenging to verify the legitimacy and authenticity of that income.

4) Income and bank statements that don’t match

If the loan applicant declares a monthly income of RM10,000, but the bank account’s balance is only a few hundred Ringgit every month, then there’ll be doubts on the applicant’s capability to repay the loan.

5) Nature of business

Some businesses such as massage parlours, karaoke lounges, pubs, night clubs, cybercafés, debt collectors, bodyguards, pawnshops, money changers, money lenders, and so on, fall under the non-preferred segments in loan applications.

6) Length of business

If the loan applicant’s business is less than 2 years in operations, the stability of the business will be questioned.

8 Things To Do To Improve Chances of A Loan Approval

Things To Do To Improve Chances of A Loan Approval
© superohmo | 123RF

But don’t despair. Many have gotten loan application approvals as a self-employed individual, freelancer or commissioner earner.

When a bank rejects your loan application, it’s usually because you’ll need to do one, several or all of these:

  • Show more income
  • Reduce loan amount
  • Place a higher down payment
  • Look for a lower-priced property
  • Provide proper and accurate income information
  • Improve credit score

There are also non-standard documents that you could provide the banks when applying for a loan.

If you aren’t aware, banks use a method known as Debt Service Ratio (DSR) to determine your ability to repay the monthly instalments for the amount you’re looking to borrow.

Here are some tips to improve your chances of getting a housing loan if you’re a freelancer, self-employed or commissioner earner.

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1) Financial records  

Ensure that important financial documents, such as income tax documents, bank account statements, and other proof of income, is organised and updated.

If you own a business, register it with Suruhanjaya Syarikat Malaysia (SSM) and keep the registration documents and certificates.

Ng explained, “Income tax is the most important document to increase the chances of loan approval for freelancers, self-employed and commission earners. Just like EPF is the most important document for employees.

“Financial institutions need third-party documents to verify the legality and authenticity of the source of the applicant’s income. Therefore, the income tax and EPF are official documents to verify income.”

Income tax return forms
© serezniy | 123RF

Here’s an example shared by Ng:

Savings: RM250,000

Declared income to LHDN (e.g. Borang B or BE): RM200,000

  • Average monthly income before tax = RM16,667
  • Estimated tax = RM2,908 per month / RM34,900 for the year
    (First RM100,000 = RM10,900, next RM150,000 = 24%). This is a rough calculation that doesn’t take into account of any tax relief.
  • Average monthly income before tax = RM13,759

Current housing loans’ payments: RM13,000 per month
Current DSR = 94.48% without a new loan. The maximum DSR for approvals is usually up to 90%.

If you’ve joint loans, the bank will divide the loan’s instalment by the number of applicants accordingly while calculating their monthly commitment.

Thus, to increase the probability of loan approvals, Ng advised loan applicants to take the following actions:

  1. Use the savings to pay off other commitments to reduce DSR.
  2. Show additional source of income e.g. rental.
  3. Have a joint-applicant to strengthen the application
    If the DSR is too high, the applicant can invite other applicants who’ve low financial commitments, up to a total of 4 applicants, into the application to increase the total DSR.
  4. Refinance or consolidate debt of other commitments to reduce DSR.
  5. Show high net worth e.g. cash, fixed deposit accounts, EPF, property net worth (current market value – current loan outstanding), which adds up to more than RM1,000,000 after deducting total liabilities.

READ: The pros and cons of refinancing your home

2) Check your eligibility via LoanCare

It’s important to check your home loan eligibility before applying to minimise the risk of your loan applications being rejected. You can check with home loan eligibility calculators such as iProperty’s LoanCare.

READ: Discover how you can check your home loan eligibility in 5 quick steps with LoanCare.

3) Current and savings account(s)

If you’ve a business, having a current account makes it easier for you to track your transactions and that could help your application in the eyes of the banks.

If you’re freelancing and not keen on opening a current account, you could open a separate savings account for your income. This makes it easier for you and the banks to see the frequency and average amount of your income.

Withdrawing Malaysian ringgit from an ATM
© rochu2008 | 123RF

4) EPF contribution

Regular contribution to your EPF account helps to strengthen your financial track record to the bank. It demonstrates that your finances are stable enough that you’re able to make contributions to your EPF account. This also tells the banks that you care about your monetary future.

READ: How to use EPF Account 2 money to buy a house?

5) Guarantor with sound financial standing

Having a guarantor with a strong financial background could help with your chances of getting your loan approved. The guarantor should have a good employment, financial record, and a healthy credit score. However, be sure to repay the monthly instalments to the bank promptly, so as not to tarnish your guarantor’s credit record.

6) Have a good credit record

For the bank to know whether you make payments on time, you’d need to have a good credit record. This means that if you have no credit history, the banks aren’t able to assess your repayment behaviour.

You could apply for a credit card, but be sure to be financially responsible for spending and repayments. You can check your credit score via the Central Credit Reference Information System (CCRIS).

You can get your free CCRIS report from Bank Negara Malaysia (BNM).

Have a good credit record
© nicoelnino | 123RF

7) Select banks that have loaned to the self-employed

You could approach banks with more experience in helping those who are self-employed. Keep a lookout for banks that offer flexible repayments and competitive interest rates on mortgage loans, and accept alternative income documents.

If you have healthy savings or fixed deposit accounts with any bank, you could try applying with those banks first. This could improve your chances for a loan approval as the bank might take into account their right to set-off.

This would make you a less risky applicant since the bank has an avenue to retrieve loaned funds if you can’t pay it back.

When asked about the number of loan applications an applicant may submit at the same time, Ng said, “Applicants are good to submit at least 2 to 3 applications. This allows applicants to compare different offers, in terms of the approved loan amount, interest rates, lock-in period, moving cost, terms and conditions in the event of loan defaults, and other special terms and conditions, if any.”

He added that financial institutions might reduce the loan margin if the loan applicant submits more than three applications in a short period of time. This is to avoid scams or bulk purchase investments.

8) Lending scheme for gig workers and freelancers

Lending scheme for gig workers and freelancers
© twinsterphoto | 123RF

There are several housing loan schemes available to assist those without fixed income and/or payslips to obtain financing in Malaysia. Here are some of them:

a. Housing Credit Guarantee Scheme (HCGS)

  • Scheme by SJKP, wholly owned by Minister of Finance Incorporated
  • Purchase of first new residential house or existing house (sub-sale) or auctioned house which are under low or medium or affordable category and to be owner occupied
  • Financing of up to RM400,000.00 (including principal financing amount, MRTT/MRTA, LTHO, solicitor’s fee and valuation fee)
  • Interest rate, as determined by participating financial institutions

b. BSN MyHome (Program Perumahan Rakyat)

  • Financing of low cost or average properties only
  • Financing amount from RM25,000 up to RM300,000
  • Financing margin up to 100% (inclusive of MRTA / MRTT, legal fees, and stamp duty)

c. Skim Rumah Pertamaku (SRP)

  • Loan/financing guaranteed by Cagamas SRP Berhad
  • Helps first-time homebuyers from the M40 and B40 groups
  • Own a home without the need for down payment
  • Open to self-employed individuals or employees
  • Obtain up to 110% loan/financing from participating banks

Prior to submitting your loan applications, it’s always good to check your eligibility with LoanCare, and also seek out mortgage specialists such as Smart Choice Solution Sdn Bhd.


Disclaimer: The information is provided for general information only. Malaysia Sdn Bhd makes no representations or warranties in relation to the information, including but not limited to any representation or warranty as to the fitness for any particular purpose of the information to the fullest extent permitted by law. While every effort has been made to ensure that the information provided in this article is accurate, reliable, and complete as of the time of writing, the information provided in this article should not be relied upon to make any financial, investment, real estate or legal decisions. Additionally, the information should not substitute advice from a trained professional who can take into account your personal facts and circumstances, and we accept no liability if you use the information to form decisions.

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