Requirement and assessment of each individual banks in determining the eligibility of loan for a particular applicant is indeed differing among each other. Hereby, it provides a fundamental calculation and hints in foreseeing the possibility that you might get a home loan from a bank.
(A) Front End Calculation
New Home Loan Monthly Installment / Net Monthly Income X 100% < 40%
As per the formula, your new loan monthly installment shall not exceed 40% of your net monthly income.
(B) Back End Calculation
Total Monthly Commitment / Net Monthly Income X 100% < 80% (Conservatively, 60%)
As per the formula, your total monthly commitment shall not exceed 80% of your net monthly income. (certain banks allow 100% provided you meet their requirements)
Common commitments as below are classified as part of this calculation: (In fact, all the commitments which shown up in CCRIS will be measured, credit card outstanding might be on selective basis)
(i) Existing Home Loan : Monthly commitment is derived from the number calculated based on 30 yrs tenure and total facility limit approved
(ii) Existing Personal Loan / Overdraft: Monthly commitment is derived from the number calculated based on 5/10/15 yrs tenure, current BLR as interest rate and total outstanding balance
(iii) Credit Card: Monthly commitment is derived from the number calculated based on (i) minimum monthly payment if low utilization, or (ii) 5% of total facility limit if high utilization
(iv) Approved loan which pending disbursement: Will be assumed that the utilization will be started on next month (except for revolving credit)
Based on simple rule of thumb,
if you comply with (A) and (B), you should have no problem in getting a loan.
Breaching (A), comply (B), still have a good chance.
Breaching (B), comply (A), chance is thinner.
Breaching both (A) and (B), chance is almost impossible unless you are able to provide facts and supports which are sufficiently strong to mitigate the impact of the existing commitment on your repayment capability.
Calculation above will be best work for salaried employees and salaried employers while not necessary applicable to self-employed segment which derived their income from enormous sources and experience high fluctuation of monthly income.
The illustration given above is a generalization of gearing calculation which might not account to exact similarity to all the banks' practice. Usage and knowledge is solely for self-assessment rather than providing precise expectation in getting a loan.
No comments:
Post a Comment