Mary has a house with a market value of RM550,000. She wants to refinance and get the maximum cash out from the Refinancing but can she do it? Let us calculate her Refinance Home Loan Eligibility.

Mary is a Human Resouce Executive with a company in Cheras, KL. And considering everything that is happening this year, it’s been tough for her financially.

She needs extra cash to cope with the loss of income, so she is thinking of refinancing her house. She is currently staying in the house with her husband and two kids.

Refinance Home Loan Eligibility

THE MAXIMUM REFINANCING LOAN SHE CAN GETS

The house’s current Market Value is RM550,000. And the home loan outstanding balance is RM200,000. With this in mind, she wants to refinance and get maximum cash out, and I have done the calculation.

If the market value RM550,000 and maximum margin 80%, the maximum loan she will get will be RM550,000 x 80%= Rm440,000.

Although the bank maximum loan margin in the range of 80-85%; I use 80%. Just to be safe.

THE MAXIMUM CASH-OUT SHE CAN GETS

Furthermore, to calculate the cash-out portion, you need to take the maximum loan and minus the outstanding loan amount.

Which is,

RM440,000 – RM200,000 = RM240,000

And if everything goes well, she can get RM240,000 cash out.

CLIENT FINANCIAL BACKGROUND

Mary is drawing RM5,000 net income monthly and without any commitment.

And no commitment means there aren’t any loan facilities that appear in the CCRIS report. Her CCRIS report only has one. The house that she is going to refinance.

Also this is great because we rarely see this.

Refinance Home Loan Eligibility

DEBT SERVICE RATIO (DSR)

Next, we need to calculate Mary’s DSR. The DSR will let us knows the commitments she can has under her RM5000 monthly income.

Typically, the bank DSR for RM5000 income is in the range of 70%.

In this case, RM5000 x 70% = RM3500.

And RM3500 is the amount the bank allows for Mary to have total commitments. That includes a new commitment and an existing one.

As long as Mary can keep the total commitments within RM3500, her loan will most probably be okay.

TOTAL COMMITMENTS

Now, let’s calculate Mary’s total commitments. There are two commitments.

One is existing commitments, which Mary doesn’t have.

And secondly, New commitments. The new commitment will be based on her refinance home loan.

For her new commitment – Refinancing, the bank will separate into two installments.

One is to calculate the outstanding home loan installment.

Please refer to the example below.

Outstanding Home Loan: RM200,000

Current Offer Interest rates: 3.50%

Tenure: 30 years

Installment per month RM898

Secondly is to calculate the cash-out portion.

Please refer to the example below.

Cash-out portion : RM240,000

Current Offer Interest rates: 3.50%

Tenure: 10 years

Installment per month RM2373

If you realize the cash-out portion is using 10 Years Tenure instead of 30 Years, do you know why?

Well. Bank Negara imposed to all the banks in Malaysia to control the refinance loan borrowing as Malaysian Household Debt has increased tremendously over the years.

Now from here, we will get the total commitment is RM898+RM2373= RM3271.

DSR : 3271/5000×100=65.42%

RM3271 is within RM3500 & less than DSR 70% guidelines.

That is good!

CONCLUSION

a. Based on our assessment on Mary Refinance Home Loan Eligibility, she has a good profile to apply for refinancing. And her chances of getting approval for her refinancing loan look good.

b. Even though her profile looks good, the bank does evaluate the refinance property, like the property location, property title status, and background. It’s important the refinance property is within the bank guidelines too.

c. One thing Mary deserves to be applauded for is how she manages her finances. Her finances look pretty good by not having any personal loan, credit cards, car loan, et cetera—all the bad debts.

WHAT IF…

What if she is not within the bank guidelines after doing the Refinance Home Loan Eligibility calculation?

I know you guys will want to know this. And I strongly feel some of you might have the answer. But, anyway.

Let me explain.

There are two ways to get loan approval chances higher.

a. Joint loan with your spouse or immediate family.

You need to find someone to join a loan with you. It has to be an immediate family. If not, the bank might not accept it.

That someone must also have less commitment and high income to support your loan together.

b. Support with extra income or other income acceptable by the bank.

You need to find another source of income supported by the bank. You can use rental income, part-time consistent income, or any income.

It would be best to have proof of receiving the income on monthly basis and consistently for more than six months.

So, if you guys are interested to know more about the chances of getting a REFINANCING with the bank, you can reach us here at 012-6946746—we just a phone call away.

And since you guys are here, do check out this related article about refinancing.

HOW TO REFINANCE MY HOUSE?

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