Know your DSR and CCRIS before owning your dream home
When applying for a home loan, banks assess several factors to determine your eligibility, and two key financial metrics come into play: Debt Service Ratio (DSR) and CCRIS records. One major factor that influences both is the Margin of Financing (MOF)—the percentage of a property’s price that the bank is willing to finance.
MOF is determined based on factors such as creditworthiness, income stability, and loan tenure. Banks typically offer 90% MOF for first-time homebuyers but may evaluate this for subsequent purchases or high-risk borrowers.
Let’s look at DSR!
Debt Service Ratio (DSR) the key financial metric that banks and lenders use to determine whether you can afford to take on more debt based on your income. It helps assess your financial health when applying for loans such as mortgages, car loans, or personal loans.
DSR understanding
Mr A earns RM10,000 per month and has the following debt commitment of RM3,000 for home loan, RM1,000 for car loan, RM500 on credit card payment, therefore with a monthly debt of RM4,500.
So does it look healthy? DSR is at 45% based on RM4,500 / RM10,000. So what does it mean? 45% of his monthly income is for repayment of debts.
Most banks in Malaysia allow a DSR of 60-70% or lower. Any above this range are at a high risk level and will be difficult to get new loans. A healthy range will be below 30% and not hitting 50% and banks will consider this range acceptable.
What’s my CCRIS?
What is the CCRIS system? It stands for Central Credit Reference Information System. managed by Bank Negara Malaysia (BNM) that collects credit-related information from financial institutions and provides a credit report on an individual’s or company’s borrowing and repayment history. Lenders such as banks use CCRIS reports to assess loan eligibility before approving financing.
Think of CCRIS as your "Financial Report Card" ; it records all past and existing credit facilities, including missed or late payments from your loans up to your credit card payments.
A good CCRIS score standing, means like an A+ received in school and the bank loves you. If you have late payments here and there then it's missing homework and considered a red flag. Adding on if you have over leverage and hold too much debt and overdue payment, your loan application will be tough to go through.
Therefore, to increase your approval chances be always aware and on track of your financial habits and repayments. If you are a Malaysian you can register for an eCCRIS free report on your current standing, just visit https://www.bnm.gov.my/ccris.
Remember that only the individual is allowed to register for the eCCRIS report for himself/herself and is required to pay RM1.00. This is to ensure the identity of new users to be confirmed digitally through your own bank account. The RM1.00 is refunded fully to you after 2 days.
Understanding the relationship between MOF, DSR, and CCRIS can help you secure better financing and make smarter property investment decisions. If you have set your eyes on a property, contact a real estate agent from PropNex Malaysia for assistance and click on the link http://propnex.psee.ly/S7CQ6
