Salary Increments and Bonuses
Increasing your income can significantly improve your chances of qualifying for a larger loan. Regular salary increments and bonuses are beneficial. However, it’s crucial to understand the difference between Contractual and Variable Bonuses. Contractual bonuses, such as the 13th or 14th month bonuses, are considered more stable and hence, banks may count them in full. On the other hand, variable bonuses are subject to a discount by banks due to their unpredictable nature.
Minimise Small Loans
Reducing your financial commitments can also help. Avoid swiping too many credit cards or making large purchases on your credit card before applying for a loan. If you have small loans, consider settling them in full to free up your credit. For those with multiple housing loans, consider selling off one property before applying for another loan. This way, you can still be entitled to a higher margin of financing.
Rent Out Your Property
If you own rental properties, this can be factored into your income. Rental income can increase your borrowing capacity, although it’s typically discounted by banks to between 50% and 80%.
That’s why individuals who invest in properties for long-term rental purposes often find themselves in a favorable position to secure additional loans. The rental income serves as a significant advantage, enabling them to leverage their existing properties for further financial growth.
Co-Borrower
Having a co-borrower can increase the loan amount you qualify for. If your income alone is insufficient, you can bring in a co-borrower. However, the co-borrower must also qualify for the loan.
Guarantor
A guarantor can also help you qualify for a larger loan. A guarantor is not a co-borrower but a person who guarantees the loan. The relationship between the guarantor and the borrower is important, and usually, only immediate family members, siblings, or spouses are allowed.
High Net Worth
Having a high net worth, preferably at least RM 1 million with more than 3% in cash, can increase your borrowing capacity. Banks will consider not just your cash but also your EPF, investments, unit trusts, and properties without a loan.
While obtaining the maximum margin of financing might not always be feasible, this approach can still potentially unlock an additional 30% financing capacity. Assessing an individual’s high net worth involves more than just their liquid cash reserves; banks also take into account assets like EPF contributions, investments, unit trusts, and significant properties owned outright.
Extended Loan
Certain types of loans, such as renovation loans, can help you qualify for a larger loan. Some banks allow you to finance entry costs such as legal fees, stamp duty, and renovation fees.
A renovation loan operates on the premise that the bank disburses funds upon presentation of invoices or receipts. Conversely, Entry Cost Financing encompasses legal fees, stamp duty, and renovation expenses, which some banks may offer financing for. Ultimately, demonstrating a history of timely payments is crucial to qualifying for larger loans.
Refinancing
Refinancing presents an alternative avenue for qualification. Consider a scenario where you possess two existing housing loans and intend to purchase a new property, which qualifies you for only 70% financing. This necessitates a 40% cash down payment.
Prior to acquiring the new property, strategize by refinancing your second housing loan. Through refinancing, you maintain two housing loans but potentially increase your financing eligibility to 90%.
By utilising the funds obtained through refinancing for the down payment of your next property, you effectively augment your financing capabilities. Thus, when applying for a loan for the subsequent property and securing a 70% entitlement, you effectively attain a 400% financing arrangement.
