How does non-basic pay income in influencing my loan approval? (For employed)

The Calculation

For non-basic pay incomes, basically, it will be distinguished base on its stability and corresponding calculation used will be differ as well.

Implications

The income which paid on a regular basis and in a fixed amount ie. fixed allowances, would be likely to be factored in full while for those which having fluctuation ie. commission, would be factored in a portion, subjected to banks' guideline. (10% ~75%) Sometimes, the percentage which used is just too small and cause the actual income level to be underestimated and the application is rejected.

Type of non-basic pay income earners

Variable income earner (commission based / OT based: ie. insurance agents, property agents)

One of the issue commonly faced by applicants is, they are commission earner and they encounter the situation whereby the proxy income which calculated based on a percentage of their receivable is insufficient to secure a loan approval.

For instance, Mr A is an insurance agent who earn average income of RM 6,000 on a monthly basis and he wish to acquire a mortgage amounted to RM 500,000.00. Consider the tenure that he takes is 30 years, the projected monthly installment is roughly about RM 2,474.00

Base on a simple calculation, commitment over income ratio is roughly 2,474 / 6,000 x 100% = 41.2% which is on the fence, he might stand a chance in acquiring a mortgage. Problem is, as per Bank A's guideline, they are only taking 50% of his commission income in calculation, which resulted the ratio inflated to 82.4% and the application is declined.

One of the way to mitigate the impact of such unfavorable guideline is to provide income documents which can generate a broader view in term of time frame, preferably to be 2 years record to prove the stability of commission income that earned. ie. tax form with receipt payments, bank statements, pay slips. Most of the time, this kind of documents will comfort the officers if the numbers within are positive and stable throughout the time as the banks need to assure that you have sufficient and steady source of income to service the installment in the future and this kind of history will help you.

Allowances earners (ie. government servants, military personnel)

Certain applicants may have their greater portion of income generated from allowances. Such allowances can be factored in full amount provided the amount is paid in fixed and on regular basis.

Bonus earners (ie. banking, sales, corporates)

Applicants who have a big sum of bonus which to be paid once/twice/several times annually will have to furnish a longer record of income documents as well for such bonus to be factored in. If the bonus is promised to be paid in a fixed amount and it is stated within the letter of employment, kindly furnish such document as a proof.

Advices:

Please provide longer record of income documents to the institutions if your income does show the same traits as above. It will help your loan approval.