Due to covid, was retrenched since last year.... but i do have alternative income from rental of about RM 5K per mth(with tenancy agreement).... but not too sure if banks allow ppl like me to take a housing loan of about 500K to buy a new house for investment?

Contacted a few bankers.... but all don't layan me.... straight up say our bank don't accept client like u! ok lor.... i'll ask around....
Got 1 ask me to join name.... no lar.... this is my prop why wanna join name.... then got 1 banker say i need assets and cash of 1 mil to apply loan... lol

So anyone can advise on how to go about it to apply housing loan using rental as my mthly income?

Is your agreement stamped?
Normally they allow 80% of rental as income but maybe your dsr even with the rental is too high.
Therefore you get rejected cause of high risk cause of no job and high dsr

if i bank owner. i reject too.

Has rental property's loan finish paid?
else in the eye of the bank, it is no considered as your disposable fund.

Why want to take another debt risk with no salary? Genuinely curious.

curious too, probably so call investment

I don't think banks will approve in this case.

If current one is paid up, refinance it.

Take the cash to increase the downpayment on the new property.

However, make sure you know the risks though. Your current rental income may not be consistent. Your next prop may not be cashflow positive until a few months after completion.

It can be used as secondary income, not primary. You still need to have a primary source of income

If the property now is still with outstanding loan, bank will assume the rental will goes toward loan repayment.

How then can the banks consider that rental is enough for another property without you working now ?

those bankers nvr did ask about if its fully paid.... but since u asked....Yes, its fully paid.... total 2 properties.
So technically it should be considered a mthly income... no?

This post has been edited by Afterburner1.0: Aug 16 2021, 12:55 PM

those properties fully paid off.... and i do not have any other housing loan....still consider high risks?

Can if:

1) you have stamped tenancy agreements.
2) rentals paid through bank (statements to proof source of income match tenancy agreements)
3) 6 month (at least) to 1 year of bank statements.
4) banks prefer you have setup property investment company rather than individual but is not totally cannot.

Part 4, im not a prop tycoon... no point setting up a prop investment comp.... unless i got 50 props under me....
Mind sharing which bank accept the above criteria....

In bank eye maybe rental market is shit now since your tenant can balik kampung anytime

not tycoon only need to setup property investment company. it shows the commitment to the banks that yr rental income is long terms not just for this difficult period.
to setup a company cost around 2.5k or less if you buy off the shelf company names + handling fees.

try not so popular banks your luck is much higher.

Can apply if u got SSM more then 2 yr rental can be counted as income. Pre covid time if u got job yr income also need to + 5k from the rental income they say u don't qualify cos no job .
Now some bank are mentally retard dy ask u put FD 300k to borrow 100k with high interest rate , pre covid if bank know I got alot cash they willing to give huge loan with low interest ( personal loan ), few banker told me this.

they no need to ask one, they can check from their end side.
perhaps it is about liquidity issues.

i thought this market is already dead

Can this 300k be uplifted anytime after the loan is disbursed or stuck there until you finish paying the loan?

Depends how much you want to loan from recognised market value. I knew few associates that took loan from Public Bank although they are just some roadside sellers buying properties to the tune of 4Mil, but loan about 60%

This post has been edited by recyka: Aug 16 2021, 05:38 PM

If your rental have included in income tax then should be yes

Possible, not cannot. Cos it's an income and as you said your props are not financed. Only that you're in a high risk category, subject to approval je.

Stuck

If they have 300k to be stuck in the bank, why would they need to borrow 100k from the bank

I am not sure of your reasons in wanting to buy the property but if you can wait after securing a job, your application will be made easier. By then, I believe many bankers would want your business

Banks risk appetite towards their loan borrower changes with time depending on the "security' offered.

The rental market is very volatile now. Many tenants are out of job or have their salary reduced and businesses suffered losses to continue paying rent.

Giving out a loan is not an issue because is secured through a charge on the property. In the event there is a default, bank can proceed to auction it

Many banks are now worried that once the moratorium ends, many properties will go under the hammer.

Unless borrower can convinced the banks other than auction, how can they recover the loan in a default in an easier way without further action with bankruptcy

This post has been edited by mini orchard: Aug 16 2021, 02:55 PM

Sorry to say answer is no if your source of income is rental income only. From bank perspective rental income are not reliable because there is risk of your tenant might fail to pay their rental and when this occur you will have no income to repay the loan.

All type of income is a risk to banks. One can lose his job like TS due to retrenchment or business closes down due to incapable of keeping it forward financially.

For a 500k property, if borrower wants only 250k loan, is doable. If 450k and if borrower can have second income like a joint borrower's income name is also doable.

So is all about mix and match.

Banks dont earn interest when money is sitting in the safe.....is cost to them. As fast as the bank wants to lend, it must also be prudent.

This post has been edited by mini orchard: Aug 16 2021, 03:37 PM

Yes that why alot sale staff say very stupid . A bank is doing this and interest rate 10.X% lagi topkek , they ask staff to push this deal topkek

Advice from the expert:

Banks look into regular income first then only consider the auxiliary income. some banks take 80%, some banks take 50% from the rentals as income. some banks apply a capping on the rental incomes with reference to the regular income, like a maximum of 50% of regular income )

1) Income derived from only rentals?
likely fail. (i wouldn't say 100% but 99% sure it will fail, unless you are declaring the incomes from an investment holding company where you draw a regular salary/ director fee from each month)

2) banks prefer employed personnel rather than business person. EPF contributors will be considered first

In conclusion, very slim chance.. btw, if you have sufficient financial muscles, try applying for the loan as a High Net Worth person, you may get a green lane.

Is not stupid.

Many wanna be borrowers have no credit history and banks are reluctant to lend them money. They need to start from somewhere.....hawkers, 'self employed' etc.

They cannot be buying a 2mil house with cash.

Illegal money launders convert their money this way or buy over loss making companies to make their 'money' legal.

Simply put it this way .... they are borrowing or buying into credit worthiness assessment.

This post has been edited by mini orchard: Aug 16 2021, 05:05 PM

Banks will lend to anyone without high risk and good credit score. Doesnt matter employed or in business.

Is of no use to keep excess money in the safe.

Similar, customers only place money in banks they 'see' is safe.

This post has been edited by mini orchard: Aug 16 2021, 05:40 PM

Self employed all use income tax filing to get loan. Bank got AML la

Not all self employed file taxes.

Eg...

Open fd 5k, apply credit card limit 5k.

Accountants are engage for a reason.

This post has been edited by mini orchard: Aug 16 2021, 05:30 PM

yes and no. depends on banks. in general, if you are a business person, go to hxb. if you take the same profile to other banks you might be considered differently. you can try if you dont believe it. DSR and scoring all different.

I am one with 3 banks.

Of course all have their own scoring criterias.

This post has been edited by mini orchard: Aug 16 2021, 05:47 PM

erm.. i am not too sure about your previous comment, sir. But, being in the position and being in the business for more than 10 years, I am sharing my insights to the TS.

I did not say a business person cannot get a loan, I was pointing out the fact that the employeds are preferred to the self-employeds, according to the bank book.

And congrats on getting your loans, you can be the next loan guru now

Firstly thanks for your compliments.

Why do banks create a business loan department in the first place ?

Bills of Exhange ..... Letter of Guarantee, Trust Receipts, Overdrafts etc are all business loans ! for Sdn Bhd and Sole Prop


This post has been edited by mini orchard: Aug 16 2021, 06:00 PM

Banks have different distribution channels.

Individual financing and business financing are 2 diff things.

TS is referring to a housing loan, which is normally under an individual name.

Your business loan is further split into different segments and serves different purposes, such as Corporate financing, SMEs, to name a few. Your ODs, LGs, Working Capitals etc are for businesses. Is there any relation to TS's housing loan?

No doubt, SME channels and Mortgage Lending Channels both also offer property financing. But there is a clear distinction on which channel to go for, say business as owner or individual as owner?

You can use your business income to derive as your personal income but you cannot use your company to be the chargor for your individual loan.

If sole prop but got contribute EPF and draw monthly salary can be considered?

If an applicant can prove income, why the banks need to have preference ?

How do banks or you then classified a business person ?

A sole prop can also contribute to epf and that makes him also an 'employee'. What about estate agents, insurance agents etc who contribute to epf ?

Will the bank give less preference because he is a business person ?

Or is it that income is 2nd consideration during loan application now

This post has been edited by mini orchard: Aug 16 2021, 07:45 PM

100% gone case TS

End of thread

500k property as investment? What's the expected rental yield?

Sole proprietor must have 2 years of income tax filing with tax payments (sorry, if u r tax waivers). Salary paid by a company solely owned by oneself will not be considered

Risk appetite. There is a group of a actuaries running the numbers

Depends on your income docs(borang b for business, be for employed) If you contribute to epf you can see the contributing party’s name at the back, which means which company is contributing to your employee provident fund.

To the bank, a lot of criteria is considered in approving your loan. Businesses tend to be riskier than employed. Age, education bg, nature of work, nature of business, position at work, income(capacity), character and even on the property level: location, feasibility factor, liquidity factor, age of building, developer reputations all played a part.

Income has never been a matter PROVIDED that the source of income is justifiable and meet the bank’s risk appetite.

Business can have 3 mil income in year 2019 and making a net 1 mil loss in 2020 (reference: bus transport industry)

To make it short, is the same criteria for an employed or self employed borrower.

There is no sufficient data to state that there are more self employed that defaulted on loans and vice versa. On face value, the self employed are.

If employers cannot make it, so are his employees.

This post has been edited by mini orchard: Aug 17 2021, 11:39 AM

Based on all ur comments got me thinking about these 2 scenarios for discussion sake:

A. Employed
- Attached to a company
- Some need to serve 2 or 3 mths notice if terminated or retrenched/ some 1 week if not confirmed in his/ her position.
- Earning gross salary of rm5K per mth. (got EPF, got LHDN)
- Only got a 3 yrs car loan to pay.
- Got 1 property fully paid.
- Age:30

B. Not Employed but has rental as monthly income
- Not attached to any company currently coz was retrenched last year.
- Tenants need to serve 2 or 3 mths notice if termination of tenancy agreement.
- Earning gross rental income of rm5K per mth. (No EPF, No LHDN)
- Only got a 3 yrs car loan to pay.
- Got 3 properties fully paid.
- Age:40

Objective here is to apply for a housing loan of 500K for 30 yrs to buy another property.

As per the above scenario, i think its illogical for banks to prefer the employed VS the not employed but has rental as mtly income, kinda obvious which one has a stronger financial background .... so what do u all think?

No right or wrong answer, just wanna learn from this because many of us dream of retiring early with many properties to collect rental from.... so how do these "retirees" manage to get bank loan just from collecting rental? Whats the threshold of their rental that will open a bank's eyes? rm10K per mth?
These "retirees" can't be all buying cash.....

Also its a known fact that some banks prefer self employed or free lancers to employed..... so which banks are for "retirees" friendly? (retirees here means these ppl are deriving their mthly income from rental of their properties, they maybe just 40+ yrs)

Honestly is difficult to give just 1 answer to your question.

You have to approach many banks through different officers. Some are more experience to handle yout situations. The juniors will just say no.

You can also approach the branches manager.

As mentioned earlier, is about mix and match on what the bank can offer and what you can compromise.

You can also refinance 2 properties for 1 loan.

Using the phone wont solve the problem. You need to be on the ground with all your supporting documents.

https://loanstreet.com.my/learning-centre/a...e-self-employed

This post has been edited by mini orchard: Aug 17 2021, 11:41 AM

can we refinance a land though? usually heard refinance a house. say the land is fully paid already. can refinance and take money which is a % of the land value?

You are entitled to your view and logic.

There is data and it is more than sufficient. Just that you do not have access to.

True that if employers couldn’t make it, employees would be affected. But if a company go bankrupt, I can move to another company while the bosses have to close down the biz

Can

Sorry to pop your bubbles. Banks look at the stability of your income. And banks play by the book because loan approvals are subject to audits.

Logically speaking, if I were a bank I would pick B. But in reality, you NEED paper work. You can try deviation approval WITH income tax statements. Go get your taxes done.

Bosses can always go back to be employees. Is not the end of the world where it stops when a company closes down.

Ya right. Hence this is the bank’s logic in imposing a stricter guideline on business owners. I think I over disclosed bank’s secret liow

On contrary to most feedback here, i think there is a different way to look at it.

Let say your current salary eligible for 300k loan and you already have a mortgage of 300k of a condo. Renting out the property @ RM2000 to cover your monthly installment.

And now want to buy another property with mortgage of another 300k (inclusive your current one is RM600k), technically the bank will reject you.

But if you can show proof of your Tenancy Agreement, you may be able to get the additional 300k mortgage loan for your second property.

Renting a property out is technically considered a source of income.

This post has been edited by p4n6: Aug 17 2021, 09:17 PM

Even if RM5k rental become net income, after deducting income tax, it will be lower than RM5k nett.

I think it's a matter of monthly loan repayment amount rather than rental not eligible as supporting documents for loan approval. Banks usually want to keep it to a certain percentage of your income.

cannot bro, income from investment or rental they dont want layan

You need regular income AND rental income for any rental income to be considered as your supporting income

For past records banks can always check CCRIS, to determine if he or her a bad pay master or is currently burden with other debts .... so many of the feedback here say a person need to have a steady income to get a HOusing loan.

My curiousity here is why banks do not take rental income with tenancy agreement as a stable income, can further back up with bank in statement as well for past 1 yr as proof its a real deal.... if they do not recognised rental income of rm5K per mth for a 500K loan then what is the threshold? RM8K rental income? Why do they discriminate a rental income from a employee.... both can be terminated by giving notices. Any diff?

From past records which is clean, zero credit card debt (all settled in full every mth), serving no other loan and with just a car loan of 3 yrs ( still serving got about 2 yrs left) this is still not eligible enuf for banks? if yes, why? any bankers can explain? whats the logic behind? really wanna know how u all "discriminate" ur potential customers.... lets reveal the logic behind.... and learn together....

This post has been edited by Afterburner1.0: Aug 20 2021, 10:14 AM

Do you pay or declare taxes for the rental?

U dun have primary income... so bank won't layan, unless u have huge cash reserve put in bank.

I have explained many times and in many ways. But they still prefer to interpret it in their own ways

Bank needs to mitigate the risk... it's a challenging time now, can't blame them..

you borrow housing loan 30 years....

your rental income can consistent 30 years?

logic tell you not.

During the great ol’ days, post subprime crisis trauma (2009-ish to 2012/13). U just need to pledge your geran, and bank can grant a 60% loan and no 70%LTV imposed on 3rd housing loan.

That makes the public think that Banks work that way all the time. Which is untrue

Let’s be honest , who pay taxes on rental in Malaysia ? After all the allowed deduction it’s prob very little left to pay …

RM5k net profit or not yet deduct maintenance, tax, repair etc? In fact, RM5k is low to acquire 2nd loan.

Also unlike salary which has record, if tenant left half way, bank wouldn't know so dang risky.

This post has been edited by TrialGone: Aug 22 2021, 09:47 AM

Paying taxes is to make the money earned legal. So many ahlongs would like to pay taxes if given a choice.

Would the bank know a borrower has lost his job half way ?

The jobless can find another job and so is landlord another tenant.

Income from Job is a lot stable than rental. Rental is a lot less stable either they left halfway or defer/cannot pay at all. Also there is no documentation proof unlike income via EPF. It's also based based on statistic.

Anyway just the info I head from loan officer since I also curious about it when I ask loan for house anyway. And TS testimony seems to be in line with I heard.

This post has been edited by TrialGone: Aug 22 2021, 10:27 AM

All property investment companies would have closed shop and go into manufacturing.

This post has been edited by mini orchard: Aug 22 2021, 10:32 AM

I beg to differ. Its actually the other way round. You pay taxes on the money you earned legally. You don't pay it to make it legal, that's money laundering. Hence why your second statement about AhLong actually contradicts your first. If taxes are created to make money earned legal, why is AhLong not allowed to pay taxes on their illegal money?

Also, you are looking at this issue from a very simple lense. You are making a simple comparison between a person who can find a new job after losing one vs a landlord who can also find replacement tenant. That's a single lense view.

We always talk about bank risk appetite, that appetite is derived from a number of factors not just 1 factor.

Age, income, or even health all contributes to that calculation. Hence, the key word is PROBABILITY.

Using your example above, What is the probability that a person, at a age of xx years, who loses a job at that age, aren't able to find a replacement job, vs what is the probability of that landlord at the age of xx years, relying solely on rental income, to find a replacement tenant? Bear in mind, if a landlord relies solely on rental income, most likely he or she is at advanced age, and also whether the property is fully owned or mortgaged.. Etc

Again, this is just very basic view. The calculations are more complex and comprehensive depending on what risk factors the bank apply.

This post has been edited by adrianteo: Aug 22 2021, 10:40 AM

On what basis is the statement ?

I do. After deducting all costs I still have to pay taxes for 80% of my rental income.

I already know most people avoid paying taxes but somehow I'm still disappointed to read this.

I am giving an example which may or may not be accurate. The key here is looking at the risk profile of every individuals and the market.

There might be individuals who are very successful at their early years, fully owning all their properties and retire early by relying solely on rental income. Then again, how many of these individuals are in the market vs how many of individuals who are actually, say, relying on owning heavily leveraged properties? Would the particular bank want to set a general policy to accept young successful applicants when they know in the market, it consist of generally normal individuals as opposed to high net worth individuals.

Again, all these are risk factors that the bank set themselves. Its all about probability. And that's the reason why normal home loans are targeted to normal borrowers whereas you have banks dedicating private banking or High net worth customers seperately.

If you have no primary income, the RM5K rental income isn't nett income. You still have to pay your living expenses from the rent so banks will take that into account.

That should be the correct statement.

There is a saying ....

Accountant can never be businessman and vice versa.

This post has been edited by mini orchard: Aug 22 2021, 11:05 AM

Those are different lah.

Different in what ?

And just to add on, it's not about risk assessments. It's also about the strategy the bank is embarking. For example, they may have a vision on just targeting specific customer segments. So those risk factors and ultimately risk appetite are tweak to be aligned to those customer sectors.

There are so many banks to submit an application. If the final aim is to get the loan, paying a slightly higher interest shouldnt be a concern.

Credit leasing companies are major lenders to higher risk borrowers.

This post has been edited by mini orchard: Aug 22 2021, 11:14 AM

Unfortunately that's not going to happen if the market is small and the bank has no interest in their strategy to carve out additional space to cater to these customers. Again, bank is the best in calculating their profits. They would have calculated the opportunity costs of not accepting these customers if they know their numbers are low in the market and deemed acceptable to lose this business. While you are willing to pay slightly higher interest, the bank is not going to spend additional costs (operational cost, risk acceptance) in order to earn that marginal extra interest from a small pool of people in the market (back to their strategy)

Even if they want to accept, that will fall under their private or high networth banking divisions which will have a different playing field. That too, every banks have different interpretation of what is a high networth to them.

This post has been edited by adrianteo: Aug 22 2021, 11:23 AM

Are you referring to all banks ?

I'm referring to banks in general. These are all part of business strategy. For example, If Malaysia market is deemed not big enough or the market only consist large type of customers segments which they want to target and they prefer not to venture into certain small customer segments, then yes, you won't be able to get your loan approved.

Likewise, there may be some banks that may want to target these customers knowing that these customers are not being targeted. Again, I don't know what's the availability in Malaysia now. If you find that your applications are not being accepted by any of the major banks, then the most likely reason is because you are the type of customer segments they are willing to forgo even if you are willing to pay higher interest rate.

My point is, while risk profile is important, theres also element of business strategy. You may be willing to pay high interest to compensate your risk profile, banks may still be unwilling to accept your business because you are just not their target customers.

Thats the reality.

This post has been edited by adrianteo: Aug 22 2021, 11:30 AM

If you dont know this, I dont know why you even komenting here.

Then there can always be exceptions.

If you cannot explain your statement, dont make one.

There will be. Hence why I said you should apply all banks and IF the results you get are all the same I. E. Banks don't accept, it only means that there is a gap in the market and no one is catering to this customer segment.

Then again, is this customer segment big enough in the market to warrant someone to be willing to target them?

So yeah, there will always be exceptions. But it doesnt mean there will always be a solution. Even if there is, it doesn't mean its profitable enough for anyone to enter the market.

That's why I said this is the reality. Its not just about your risk profile and your willingness to pay more interest.

That is why there will always be loan sharks because banks will always have the type of customers that they are willing to forgo, for whatever reasons, and loan sharks are picking up these gaps in the market.

That was my advise to TS in the begining post.

My logic tells me u can have consistent rental income for 30 yrs no issue …. That’s one of the reason why ppl buy property to put up for rent n take a loan of 30 yrs ….

Mind sharing ur total gross rental income that ur earning per mth ? Since u pay taxes …. Ur a rare diamond in the haystack …

Times have changed, nowadays ppl in their late 30s or early 40s alredi become a landlord with a few houses under their belt …. Those r the ones that wanted to retire early in life … not working for money but let money work for them …. Then again, what’s the definition of a high net worth individual ? Owning 5 houses all fully paid but don’t a permanent job but collecting rental ? Any bankers willing to share ?

Sadly the mindset of bankers have not change still very old fashion n assume that one must be old in age or retired to be collecting rental.

Need to be more open n don’t judge based on ur own assumptions ….. high net worth individuals also need to loan money to make money ….

The fact that you called up a few bankers.... and you said they don't layan you.... already proved rental income is not usable to apply loan.

rental agreement is as supplementary income only...now banks only take 50% or even 40% if they did not outright dismissed it.....letsay RM 5K per month then only 2.5k is taken into consideration as ur supplementary income.

but no steady income whther salary or business?? cannot la broooo

hence why one banker needs the assets and 1 mil cash as Collateral bruv

now lelong case for banks are at all time high...they must be crazy to loan out 500k to unemployed mang...thats the risk management that the bank have to do

better allocate some small sum u can loose as a backup business