Most wannabe house owners don’t know about debt servicing, iProperty finds

Malaysians may want to be proud homeowners but it seems that many still lack the knowhow on securing a mortgage. 

Property portal iProperty.com.my has found that more than 50% of its users are still unfamiliar with terms such as the debt servicing ratio (DSR), an important calculation used by banks to determine a borrower’s ability to repay a loan.

“We have a lot of young people who are just starting out their careers and even for those aged 30 and above who seem to have little awareness and education on the home loan application process, which ultimately means that it’s a challenge for a lot of Malaysians  to get a home,” iProperty general manager David Mawer said at a media luncheon in Kuala Lumpur on Dec 5. 

According to iProperty’s findings, only 43% of its users are familiar with DSR or on the mechanics of securing a loan, he added. 

“The concept of DSR is new to many people. Often, they do not understand that each bank has its own DSR benchmark. The DSR shows how much of a person’s income is used to service debt instalments and is represented as a percentage,” Mawer said. 

The downside of not understanding such terms is having loan applications being rejected, he said, adding that such delays might discourage hopefuls from purchasing homes. 

Earlier this year, iProperty polled users over their familiarity with home loans. It found that the B40 and M40 (bottom and middle income) groups found it difficult to secure mortgages.

According to 2016 figures, a B40 household earns an average of RM3,000 a month while an M40 household earns an average of RM6,275 a month. 

Bank Negara Malaysia (BNM) found that as of June this year housing loan approval rates came in at 74.6%. The approval rate for houses under RM300,00 was around 70%. Half of the loans approved this year were for new homebuyers. 

But the central bank noted that 80% of the mortgage rejections were because of high housing prices where a unit cost more than three times the applicant’s yearly income ratio. 

Other reasons for rejected loan applications included an unfavourable credit score and the lack of repayment capabilities, added BNM.

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