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How does a financial institution or bank assess my housing loan repayment capacity?

A common criterion is that your monthly loan instalment repayment should not be more than 1/3 of your gross monthly household income.

If you have savings or fixed deposits, they can be used to support your loan application as financial institutions may take them into account in evaluating your eligibility.

Different financial institutions have different criteria in calculating the repayment capacity.

In the case of a floating rate loan, you should also note that your monthly repayment may increase substantially when interest rates go up.

For example, when there is an increase in the Base Lending Rate (BLR), the interest rate on your loan will also go up, and your repayment would be higher.

However, in most cases, financial institutions would allow you to pay the fixed amount of monthly repayment throughout the loan tenure and would make any adjustment caused by the variation in interest rate by increasing or shortening the loan tenure. You should check this out with your financial institution.
Different financial institutions have

different criteria

in calculating the repayment capacity


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Reprinted with permission from BankingInfo (A Consumer Education Programme by Bank Negara Malaysia)


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Knowledge Base ID :   1266
Last Reviewed :   May 22, 2014
Source :   BankingInfo
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