SS-02-11,12,13,13A,15 Skypod Square Puchong Jaya South

Home Loan Eligibility Calculator

This calculator estimates the maximum housing loan amount based on your annual income and ability to service the loan. As a general guideline, in Malaysia you can borrow up to 30% of your gross income. However, the banks can be flexible with this in some cases.


What Is An Affordability Calculator?

Found your dream home, but not sure if you can afford it? Unless you’re a financial expert or a math whiz, computing the home price that is within your means can be a hassle. But worry no more as we have created a user-friendly housing loan calculator known as the Home Loan Eligibility and Affordability Calculator.

Not the one you’re looking for? Check out other free calculators we have:

  • Home Loan Pre-Approval – A conditional approval recognition for your home loan given by PrestoDreamHome. It gives you an indication that you should be approved for a home loan up to a certain amount. It means you can potentially be approved for a home loan by our panel banks in Malaysia once certain conditions are met. It’s 99.9% accurate!
  • Home Loan Calculator – A simple calculator created to help homebuyers determine how much money they would have to pay monthly and how long it would take to fully pay the loan.
  • Home Loan Refinancing Calculator – This is a simple housing loan calculator that estimates how much you can save on your monthly housing loan instalments if you refinance your property.

Just input the required info, like your gross annual income, and you can determine the maximum amount you can borrow and your monthly repayments.

However, the maximum housing loan amount is not the sole basis that determines if a home is truly affordable. If you want to know more, continue reading.

When do we consider a home as affordable?

According to the Demographia International Housing Affordability Survey, a residential property is considered affordable if its price is only equivalent up to three times your annual household income.

However, this multiple is far too ideal, as home prices in major cities and urban areas across Malaysia are higher than that. For instance, average home prices in Kuala Lumpur in 2019 was 6.88 times the median household income. The multiples in Penang (6.32), Selangor (5.10), and Johor (4.51) were also elevated. Please note that multiples of 4.1 to 5.0 are considered as “Seriously Unaffordable”, while 5.1 and above are deemed “Severely Unaffordable”.

But for each specific family, a better way of determining whether you can afford a home is to use a household income ratio. According to Bank Negara Malaysia (BNM), a residential property is within your means if the monthly repayment for your housing loan doesn’t exceed 30% of your gross monthly income. This calculation is based from the central bank’s Housing Cost Burden Approach that assumes a loan tenure of 35 years.

Also, if not more than 30% of your monthly household income will be used to service the monthly housing loan instalment, banks will likely approve your loan application.

However, financial experts are urging people to first set aside a contingency fund worth six months of your income. The purpose of this is for emergencies like sickness or accidents. This fund can also pay for your monthly housing loan instalments in the event you find yourself jobless. Otherwise, you would have to default on your housing loan, and then the bank will have the right to foreclose your property, leaving you homeless.

Homebuyers are also advised to save money for the downpayment for the home, typically about 10% to 20% of the property’s value. This is because financial institutions will only lend you 80% to 90% of the home’s price (loan-to-value), hence you need to pay this in cash.

The Home Loan Eligibility and Affordability Calculator estimates the maximum housing loan amount you can borrow based on your annual income and ability to service the loan.

This calculator is easy to use. You only need to enter these numbers:

  1. Gross Annual Income (RM): If you earn a nett (after deducting EPF (KWSP) and income taxes) of RM5,000 a month, your Gross Annual Income is RM60,000 (RM5,000 x 12).
  2. Loan term: Select the duration of the loan you plan to take.
  3. Interest rate (%): Input the interest rate that will be charged on the loan you plan to apply for.
  4. Maximum Percentage of Income to be spent on loan (%): The general rule of thumb in Malaysia is that you can borrow up to 30% of your monthly income. If you want to spend less due to multiple monthly commitments, input a lower percentage.
  5. Monthly Debt Obligations (RM): This is where you key in your monthly expenses, such as your car loans, student loans, and other miscellaneous fixed monthly costs.

Click ‘Calculate’ and you will see your Calculation Result.

  1. Maximum monthly mortgage payment: This is how much home loan you would need to pay each month, at most.
  2. Maximum loan amount: This is the maximum amount of housing loan that you can apply for.

To determine what is affordable for you and your family, determine first the maximum monthly mortgage payment and maximum loan amount you can comfortably pay. Again, to make it easier for you, just use our Home Loan Eligibility and Affordability Calculator.

You only need to input data, like your gross annual income. If you’re employed by the government or a company and are receiving a fixed monthly income, the bank will take into account your full annual income. But if your monthly income varies due to the nature of your work (i.e. odd-job worker, freelancer, commission-based income), the bank will reduce your annual income due to fluctuations and uncertainty.

For example, pretend you’re a property agent who earned RM100,000 in 2018 from commissions. If you want to take out a housing loan, the lender (banks or financial institutions) may apply 30% reduction on your income and your loan amount will only be based on RM70,000

In our Home Loan Eligibility and Affordability Calculator, you also need to input the loan term or tenure (how long you will be repaying the loan) and interest rate. As of July 2019, the Base Rate (BR) of housing loans in Malaysia were hovering around 3% - 4%.

You also need to set the maximum percentage of your income that will go to repaying the housing loan. Typically, financial institutions in Malaysia will only lend to you if the monthly loan instalment doesn’t exceed 30% of your household income per month.

So assuming you want to loan RM500,000 with an interest rate of 5% that is payable in 35 years. For that loan, the monthly loan instalment amounts to RM2,525. Given the 30% rule, your monthly gross household income should be RM8,417 (RM101,000 annual income).

However, this scenario doesn’t yet take into account your existing monthly financial obligations, which the lender will ask you to disclose, such as car loans, personal debt, credit cards, and student loans.

Nonetheless, as long as your monthly debt obligations and all other household expenses (excluding home loan repayment) doesn’t exceed 70% and the remaining 30% can be used to service the housing loan, then there’s a good chance to obtain a loan from a bank.

Overall, if you meet the below three requirements, then that home is affordable for you:

  1. 10 to 20% cash down payment based on property price
  2. 30% monthly mortgage servicing ratio
  3. Zero, low or manageable monthly debt obligations

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