Despite what many people think, applying for a house loan can be an easy and seamless process if you’ve prepared all the necessary documents. We’ve made it even easier for you by summarising the essentials of the loan application.
At some point in a person’s life, he’s likely uttered “I’m ready to own my first home!”. If this happens to be you right now, then congratulations! As a first-time homebuyer, you probably have a lot of questions on your mind.
Among the typical points to ponder on include: What’s the housing loan interest rate in Malaysia? Is the loan application complicated? Is home loan eligibility the same for an employed and self-employed person?
This article will focus on the housing loan application process for an employed or salaried person (full-time job). The requirements for the self-employed will be explored in a separate article. We will try to cover the basics of the housing loan process in Malaysia, starting with one of the most important for you to prepare – the documents for housing application!
READ: (Part 2) Housing loan checklist: 4 documents you need to prepare if you’re a self-employed person
What are the documents required for a housing loan?
If you’re someone who’s under regular employment, the process of applying for a house loan is relatively easier compared to someone self-employed or a freelancer in Malaysia. For starters, there are not as many documents involved. However, here is the loan documentation checklist that you need to prepare to ensure a smooth loan application process:
1. Payslips
Your payslip is one of the most important documents in proving your home loan eligibility. If you only earn a basic salary, you will usually only need to provide 3 months of salary slips. The salary slips should include your basic pay and your fixed allowances such as mobile and parking allowances.
Commission-earners on the other hand will usually need to provide 6 months of salary slips to prove their financial worthiness, as their variable income will fluctuate. Examples of variable income include overtime, commission, incentives, bonuses and other forms of variable income.
What banks wish to see in your salary slips is not just the stability of your income, but also the date of payments to ensure that you are regularly paid.
In terms of housing loan applications, banks are more likely to approve those with more consistent incomes. Hence if your salary has high fluctuations from month to month, it is less likely for your mortgage loan application to get approved.
2. EPF statements
Next on the list of documents that you’ll need to submit is your latest Employees Provident Fund’s (EPF) statement. The EPF statement shows your employer’s and your monthly contribution to the fund.
Until late 2020, employee EPF contributions were fixed at 11% per month. But beginning in 2021, the rate was reduced to 9% to ease the public’s cash flow difficulties during the COVID-19 pandemic. However, beginning in 2022, the rates were restored to 11%.
An EPF statement is a great way to prove the level and stability of your income, as aside from higher income tax payments, higher EPF contributions will also prove your ability to service your loans.
In order to increase your EPF contributions aside from the usual employee and employer contributions, you can also perform self-contribution. To do this, you can simply register for an i-Akaun on the EPF website. Once your account is created, you can log in to perform self-contributions, check your latest EPF Account 1 and Account 2 balance, and check your latest contributions.
Your EPF statements will allow you to check the accuracy of contributions made by your company and yourself. Be sure to have everything sorted out before you submit your loan application.
3. Bank statements
Providing the banks with your banking statements is essential in proving your credit and financial worthiness. They will usually ask you for a minimum of 3 months’ banking statements, equivalent to a quarter of a year, to scrutinise your spending habits and patterns. They will use the data provided to analyse if you will be a good paymaster when it comes to servicing your loans.
Another reason for the banks requesting a minimum of 3 months’ banking statements is also to ensure that your income source is legitimate. This process is to reduce the chances of money laundering, and also to ensure that you have a healthy amount of savings to service the loan in case of crisis.
Aside from that, your bank statement is often proof that you are indeed being paid your salary. There are cases when your salary is being paid under a different company name (for example, the name of a parent company). In this scenario, be sure to ask your HR for a letter to clarify the matter. You can also submit your company’s website as proof that these two companies are under the same group of companies.
There also might be a scenario where the payments for your allowances, commissions, and claims are separate from your monthly salary. Make sure the company issues you with a copy of proof of payment in the form of a voucher or slip.
In the past, the only way to obtain your banking statements was to walk into the bank. However, now you only need to download a digital copy of your banking statements. All you need to do is log in to your bank’s website and register for an e-statement. Once you have registered for an e-statement, you can download it at any time on the go. Should you have issues registering for your e-statement, simply call up the bank’s customer care line for assistance.
4. Copy of MyKad
This really shouldn’t come as a surprise. A copy of your MyKad (IC) is required for almost any loan application as a Malaysian citizen. Make sure the particulars have been updated, and the copy includes clear images of MyKad’s front and back.
READ: BSN MyHome (Program Perumahan Rakyat) 2021: Everything you need to know
How to apply for a housing loan in Malaysia?
Before you apply for a housing loan, you will first need to ask yourself 5 important questions before purchasing your new property. After that, you will need to decide on a mortgage range with monthly repayments you can afford. Thereafter, you can figure out the maximum house loan amount you can borrow based on your income and existing debts. You can do this by using our housing loan calculator Malaysia.
If it is your first time applying for a housing loan, you should also read our guide for first-timers applying for a mortgage loan in Malaysia.
After you are well and truly informed about your property purchasing decision, the next step is determining the type of home loan that best fits your unique financial needs.
In Malaysia, there are five common home loans, each with different benefits. For a detailed explanation of all the loan types that you can avail yourself of in Malaysia, read the complete guide to basic term loan, semi flexi loan, full flexi loan. Otherwise, below is a summarised version of each of the loan types you can find in Malaysia:
- Basic Term Loan
Not as flexible as other loans. You won’t be able to reduce the loan period — and subsequently, the loan interest — by making advance payments.
- Semi-Flexi Loan
You can use any extra cash you have to pay more in a certain month. This not only reduces the period of your loan but also the overall housing loan interest rate.
- Full-Flexi Loan
Similar to Semi-Flexi Loans, but with the added benefit of being able to withdraw any advance payments at any time with no extra charges.
- Islamic Home Loan
Works based on interest-free transactions and follows the Murabaha/ Murabahah concept under Shariah Principles.
- Fixed-Rate Loan Physical home loan submission
This has a fixed interest rate throughout the whole loan tenure.
For a more detailed guide, be sure to check our article Housing loan: How to apply as a first-time homebuyer in Malaysia.
Applying for a home loan in Malaysia is as easy as walking into the bank and asking to speak to an agent. The agent will walk you through the entire process of documents that you will need, and the submission process. But before you visit them, make sure you have your booking fee receipt from the developer. Should you be making your purchase from an individual, you will be able to get the receipt from their lawyer.
Tip: With your booking receipt, you can approach several different banks to see which one gives you the best deal in terms of interest rates.
Since the COVID-19 pandemic happened, banks have adapted to conducting their business online. This includes enabling customers to apply for and get their home loan approval online. Some of the major banks in Malaysia such as Maybank and RHB now have a one-click application for home loans on their website or official app. So all you need to do is visit the bank that you wish to apply for a loan from, search for their home loan page and click on ‘Apply Now’.
After that, you only need to follow the instructions and upload the requested documents. If you are unsure of whether your selected bank has an online home loan application function, simply call them up to check with them. Should they not support online applications, you will need to walk into the closest branch.
The home loan approval process in Malaysia
We’re pretty sure you’re curious to know how long does it take for a house loan to be approved in Malaysia? Well, on average, it’s about one to two weeks for your loan documentation application process to be approved from the time you supply full documentation.
If the bank is concerned about your ability to repay or another aspect of your application, they may request additional documents from you. This will further delay the home loan approval process.
If your application gets rejected, you’ll have to wait 3 – 6 months before submitting another application. There are many reasons that your loan application could be rejected, and you can read 9 Reasons why banks reject your home loan and what are the 4 common mistakes Malaysians make when applying for a home loan/financing to get more details.
Housing loan interest rate in Malaysia
The Base Rate will affect the Base Lending Rate, which will in turn affect your interest rates. Due to the hike of 0.5% in Overnight Policy Rates (OPR) in September 2022, your latest interest rates will also be affected. For an in-depth understanding, read the complete guide to the latest SBR, BR, BLR & Effective Lending Rates for banks in Malaysia. Aside from the BR and BLR, your housing loan interest rate will also depend on the type of home loan that you apply
With Islamic Loans, instead of interest rates (Riba), there are profit rates. The bank buys something on the borrower’s behalf and sells it back to the borrower at a profit. The idea behind this is financial justice, intending to create a balance for the net profit or loss between the lender and the beneficiary.
Purchasing a property is a long-term game, hence you should ensure that you get the best home loan. To do so, you should compare all the home loans across the 15 banks in Malaysia. You can do it easily with the apps available online, and at the same time get an estimated amount of your maximum home loan affordability as well.
We advise you to shop around for the best home loan deals on offer. But by having all the necessary documents needed for a home loan application in Malaysia ready, you can apply straight after you’ve found the one that fits you the most! If you’re on the fence about which bank will approve your application, there are a lot of housing loan calculators in Malaysia to help you find out your home loan eligibility.
At iProperty.com.my, we have LoanCare, a home loan eligibility indicator to calculate and compare your options with up to 17 banks! Why wait? Make smarter decisions now!
READ: Freehold vs Leasehold title in Malaysia: What property buyers should know
Edited by G.Zizan