Discover the best housing loan options in Malaysia with our comprehensive guide. Learn about interest rates, eligibility criteria, and key steps to secure your dream home. Navigate the world of home loans confidently with our expert advice

Are you considering buying a house in Malaysia?

Congratulations on taking this exciting step toward homeownership!

However, before you start browsing through property listings, it’s important to understand how to calculate your housing loan in Malaysia

Whether you’re a first-time buyer or looking to refinance your existing loan, our comprehensive guide will walk you through the process step by step.

From understanding the different types of loans available in Malaysia to calculating your monthly installment, we’ve got you covered.

We’ll also explore the factors that can affect your housing loan eligibility and provide tips on how to improve your chances of getting approved. 

With our expert advice and insights, you’ll be equipped with the knowledge to make informed decisions about your housing loan.

So, let’s dive in and unlock the secrets to calculating your housing loan in Malaysia!

Understanding the Different Types of Housing Loans Available

When it comes to housing loans in Malaysia, there are several options available to suit different needs and financial situations.

The most common types of housing loans include conventional loans, Islamic loans, and government schemes like Syarikat Jaminan Kredit Perumahan Berhad (SJKP). 

Conventional loans are offered by banks and financial institutions, while Islamic loans adhere to Shariah principles. Conventional loans are the most popular choice among buyers in Malaysia. 

Government schemes, on the other hand, are designed to assist specific groups of buyers, such as first-time buyers or low-income earners. 

Each type of loan has its own set of requirements and features, so it’s important to understand the differences before making a decision.

These loans typically require a down payment of at least 10% of the property value and have a tenure of up to 35 years. 

Islamic loans, on the other hand, operate on the principle of “rental” rather than “interest.” Instead of paying interest, borrowers pay a “rental” amount to the bank, which is used to purchase the property. 

Government schemes, such as the Syarikat Jaminan Kredit Perumahan Berhad, offer more flexible approval terms to eligible buyers. Understanding the different types of loans available will help you choose the one that best suits your needs and financial situation.

Factors to Consider Before Applying for a Housing Loan In Malaysia

Before applying for a housing loan in Malaysia, there are several factors you need to consider to ensure you’re making the right decision.

First and foremost, you need to assess your financial capability.

Take a close look at your income, expenses, and existing financial commitments to determine how much you can afford to borrow.

It’s important to consider the monthly installment and other costs such as insurance, property taxes, and maintenance fees.

Additionally, take into account any potential changes in your financial situation, such as a job change or starting a family, which may affect your ability to repay the loan.

Another factor to consider is your credit score. Banks in Malaysia rely heavily on credit scores to assess a borrower’s creditworthiness. A good credit score increases your chances of getting approved for a loan and may also result in better interest rates and loan terms.

If you have a low credit score, it’s essential to take steps to improve it before applying for a housing loan. 

Paying off existing debts, ensuring timely payment of bills, and maintaining a low credit utilization ratio can all help improve your credit score over time.

Lastly, consider the loan-to-value ratio (LTV) and the margin of financing (MOF) offered by different banks. The LTV ratio determines the maximum amount you can borrow relative to the property’s value, while the MOF refers to the percentage of the property value that the bank is willing to finance.

A higher LTV and MOF can make it easier to secure a loan, but it’s important to strike a balance to avoid overborrowing and potential financial strain in the future.

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How to Calculate Your Maximum Loan Eligibility

Calculating your maximum loan eligibility is an important step in home buying. It helps you determine the approximate loan amount you can borrow based on your income and financial commitments. 

Banks in Malaysia typically use the Debt Service Ratio (DSR) to assess a borrower’s repayment capacity. 

The DSR is calculated by dividing your total monthly debt obligations (including the housing loan installment) by your monthly income.

To calculate your maximum loan eligibility, start by determining your net income after deducting taxes, EPF contributions, and other statutory deductions. Next, calculate your monthly debt obligations, including any existing loans, credit card payments, and other financial commitments. 

Divide your total monthly debt obligations by your net income and multiply the result by 100 to get your DSR percentage. Most banks in Malaysia have a maximum DSR requirement of 70%, meaning your total debt obligations should not exceed 70% of your net income.

Once you have your DSR percentage, you can use it to calculate your maximum loan eligibility. Multiply your net income by your DSR percentage to get the maximum monthly installment you can afford. 

Finally, multiply the maximum monthly installment by the loan tenure (in months) to determine your maximum loan eligibility. Keep in mind that this is just an estimate, and the final loan amount will depend on other factors, such as the property value and the bank’s lending policies.

Calculating Your Monthly Loan Installment

After determining your maximum loan eligibility, the next step is to calculate your monthly loan installment. The loan installment is the amount you’ll need to repay each month to the bank until the loan is fully paid off. It consists of two components: the principal amount (the amount borrowed) and the interest charged by the bank.

To calculate the monthly loan installment, you can use an online loan calculator or a formula known as the Amortization Formula.

 The formula takes into account the loan amount, interest rate, and loan tenure to calculate the monthly installment. The formula is as follows:

P = [rPV(1 + r)^n] / [(1 + r)^n – 1]


P is the monthly payment

r is the monthly interest rate (annual interest rate / 12 / 100)

PV is the principal amount (loan amount)

n is the number of payments (loan term in months)

For example, if you borrow RM500,000 with an interest rate of 4% per annum and a loan tenure of 30 years (360 months), the calculation would be as follows:

r = 0.04/12 = 0.00333333333 (assuming an annual interest rate of 4%)

PV = 500,000

n = 360 (typical for a 30-year loan)

Plugging in these values, we get:

P = [0.00333333333 * 500000 * (1 + 0.00333333333)^360] / [(1 + 0.00333333333)^360 – 1]


Monthly Installment = (500,000 x 0.04 x (1+0.04)^360) / ((1+0.04)^360-1)

After calculating this, the monthly payment would be approximately RM2,387.08.

Figuring the monthly installment manually can be time-consuming, so using an online loan calculator is recommended. 

Simply input the loan amount, interest rate, and loan tenure, and the calculator will provide you with the monthly installment amount.

This will give you a clear understanding of how much you’ll need to allocate each month toward repaying your housing loan.

Understanding Interest Rates and Loan Tenures

Interest rates and loan tenures are two key factors that can significantly affect the cost of your housing loan in Malaysia. The interest rate determines the amount of interest you’ll need to pay on top of the principal amount, while the loan tenure determines the duration of the loan and the number of monthly installments.

In Malaysia, housing loan interest rates can be either fixed or variable. 

Fixed interest rates remain the same throughout the loan tenure, providing stability and predictability in monthly installments. 

Variable interest rates, on the other hand, are tied to a benchmark rate, such as the Standard Base Rate (SBR), and may fluctuate over time. 

While fixed interest rates offer peace of mind, variable interest rates can save you money if interest rates decrease.

Loan tenures in Malaysia typically range from 5 to 35 years, depending on the borrower’s age and the bank’s lending policies. 

Shorter loan tenures result in higher monthly installments but lower overall interest paid, while longer loan tenures result in lower monthly installments but higher overall interest paid. 

It’s important to strike a balance between affordability and interest cost when choosing the loan tenure. Consider your financial capability, long-term plans, and the impact of interest rates on your overall loan cost.

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Costs and Fees Associated with Housing Loans

When calculating your housing loan, it’s important to take into account the different costs and fees associated with the loan. 

These costs can significantly impact the overall affordability of the loan and should not be overlooked. Some of the common costs and fees include:

  1. Processing Fee: This is a fee charged by the bank for processing your loan application. It is usually a one-time fee of RM200.
  2. Valuation Fee: This fee is charged by a professional valuer to assess the market value of the property. The fee is based on the property value and can range from a few hundred to a few thousand Ringgit.
  3. Legal Fee: This fee covers the cost of engaging a lawyer to handle the legal aspects of the loan agreement. The fee is typically a percentage of the loan amount, ranging from 1.0-1.25%
  4. Stamp Duty: Stamp duty is a tax imposed on loan agreements. The amount varies depending on the loan amount and tenure. The stamp duty rate in Malaysia is 0.5% of the loan amount.
  5. Insurance Premium: Most banks require borrowers to purchase Mortgage Reducing Term Assurance (MRTA) or Mortgage Reducing Term Takaful (MRTT) insurance to protect the borrower in the event of unforeseen circumstances. The insurance premium is usually a one-time payment and can be financed in a loan.

These costs and fees can add up quickly and should be factored into your budget when calculating the affordability of your housing loan. It’s essential to ask the bank for a breakdown of all the costs involved and be prepared to allocate additional funds for these expenses.

Tips for Negotiating the Best Housing Loan Terms

When applying for a housing loan in Malaysia, it’s important to negotiate the best terms possible to ensure you’re getting the most favorable deal. Here are some tips to help you negotiate:

  1. Compare Offers: Before making a decision, compare housing loan offers from different banks. Look at the interest rates, loan tenures, additional costs, and fees to determine the most competitive offer. Don’t hesitate to negotiate with the banks for a better deal.
  2. Improve Your Credit Score: A good credit score can give you leverage when negotiating loan terms. Take steps to improve your credit score before applying for a loan by paying off debts and ensuring timely payment of bills.
  3. Consider Refinancing: If you already have an existing housing loan, consider refinancing to take advantage of lower interest rates or better loan terms. Refinancing can save you money in the long run.
  4. Get Professional Advice: Consider engaging a mortgage consultant or financial advisor to help you navigate the loan application process. These professionals have in-depth knowledge of the market and can provide valuable insights and advice.

Negotiating the best housing loan terms can potentially save you thousands of Ringgit over the loan tenure. 

Don’t be afraid to ask questions, negotiate, and explore different options to ensure you’re getting the most favorable deal.

Preparing Your Documents for a Housing Loan Application

When applying for a housing loan in Malaysia, you’ll need to provide several documents to support your application. These documents are required by the bank to verify your financial position and assess your creditworthiness. 

Here are some standard documents you’ll need to prepare:

  1. Identification Documents: include your MyKad (Malaysian Identification Card) or passport for non-Malaysians.
  2. Income Documents: You’ll need to provide proof of income, such as salary slips, bank statements, EPF statements, or income tax returns. The bank will use these documents to assess your repayment capacity.
  3. Employment Confirmation: If you’re employed, you’ll need to provide a letter of employment or confirmation from your employer stating your position, salary, and length of service.
  4. Business Registration Documents: If you’re self-employed or a business owner, you’ll need to provide business registration documents, such as Form 9, Form 24, and Form 49, as well as financial statements.
  5. Property Documents: If you’ve identified a property to purchase, you’ll need to provide the Sales and Purchase Agreement (SPA) or booking receipt as proof of the property transaction.

It’s important to ensure that all the documents are complete, accurate, and up-to-date. 

Missing or incomplete documents can delay the loan approval process and may even result in loan rejection.

Prepare the necessary documents in advance and consult with the bank if you have any questions or require clarification on the required documents.

Comparing Housing Loan Options from Different Banks

To ensure you’re getting the best housing loan deal in Malaysia, it’s important to compare offers from different banks.

Each bank has its own set of lending policies, interest rates, and loan terms, so it’s worth exploring different options to find the most competitive offer. 

Here are some factors to consider when comparing housing loan options:

  1. Interest Rates: Look at the interest rates offered by different banks. Even a slight difference in interest rates can save you significant money over the loan tenure.
  2. Loan Tenure: Consider the loan tenure offered by different banks. Longer loan tenures may result in lower monthly installments but higher overall interest paid.
  3. Additional Costs and Fees: Compare the additional costs and fees charged by different banks, such as processing fees, valuation fees, legal fees, and stamp duty. These costs can vary significantly and affect the overall affordability of the loan.
  4. Flexibility: Consider the flexibility offered by different banks. Some banks may allow you to make additional repayments or offer flexible loan terms that suit your financial situation.
  5. Customer Service: Evaluate the customer service provided by different banks. A bank with excellent customer service can provide a smoother loan application process and better support throughout the loan tenure.

By comparing housing loan options from different banks, you can make an informed decision and choose the loan that offers the best terms, interest rates, and overall affordability.

Common Mistakes to Avoid When Applying for a Housing Loan

When applying for a housing loan, it’s important to avoid common mistakes that can potentially hinder your loan approval or result in unfavorable loan terms. Here are some mistakes to avoid:

  1. Not Checking Your Credit Score: Your credit score plays a crucial role in your loan application. Before applying for a loan, check your credit score and take steps to improve it if necessary.
  2. Overborrowing: It’s important to borrow within your means and avoid overborrowing. Calculate your maximum loan eligibility and consider your financial capability before deciding on the loan amount.
  3. Not Researching Loan Options: A wide array of loan options are available, each with its own terms, interest rates, and requirements. Make sure to explore different lenders, compare their offerings, and choose a loan that fits your financial needs and circumstances. Going for the first option you encounter can lead to unfavorable terms and conditions.
  4. Ignoring the Fine Print: Many potential borrowers skim over the fine print in their loan agreement, not realizing it may contain crucial information such as penalties for late payments or early repayments, variable interest rates, and other important details. Always read and understand all terms and conditions before signing any agreement.
  5. Failing to Consider Additional Costs: Remember, owning a home is more than just the mortgage payment. There are other ongoing costs such as property taxes, insurance, maintenance, and possibly homeowners association fees. Failure to account for these can strain your budget and make loan repayment challenging.
  6. Neglecting Your Current Financial Status: Your existing debts, monthly expenses, savings, and income all play significant roles in determining your loan eligibility. The bank looks at your debt-to-income ratio to assess your ability to manage payments. Neglecting to provide an accurate picture of your finances can lead to a rejection of your application or higher interest rates.
  7. Changing Jobs Frequently: Banks prefer borrowers with a stable income source. If you’re changing jobs frequently, it might signal instability to banks and affect your loan approval chances negatively. If possible, avoid making major career moves when planning to apply for a housing loan.

Avoiding these common mistakes can increase your chances of securing a housing loan with terms that suit your financial situation and future goals. 

Always remember to take your time, ask questions, and consider professional advice when necessary.

If you want to ensure that you are making the right decisions when it comes to your home loan, we highly recommend working with a reputable mortgage consultant like us.

Don’t hesitate to reach out to us for more information on how we can assist you in finding the best home loan options for your unique needs and financial situation. 

We look forward to hearing from you soon.

Need help making the right choice? 

Contact us today if you have any more questions.

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Before you go, consider reading this article: 

A Comprehensive Guide to Home Loans in Malaysia: Which Option Is Right for You?




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