Many didn’t realised that we can actually find out how much we need to earn in order to buy property in Malaysia. In fact, how much salary to buy a house in Malaysia anyway?
This is going to be the most straightforward article that I’ve ever written. The reason is because it involves calculations. The question of How Much Salary To Buy a House in Malaysia is not about how much you are making every month, but rather how much you can get financing from the banks based on your monthly income. Many people confused about this.
Listen to my commentary on this topic at Anchor.fm
Let’s cut the chase and find out the secret how investors always be able to get loan! Almost every single submission, they’ll get approval. The answer is to do with calculations. If you followed these steps correctly, I can assure you that you will have 80% chances to get your financing approved from the banks. And be sure to listen to my podcast as I will be sharing how to find the right investment property.
Consider to invest in property via REIT if you are unable to get loan. Read more about REITs here.
This is how you calculate for your loan eligibility:
Note: An actual calculation from the bank will differ but won’t be far off. Your GOAL is to get a range of loan sum based on your net income.
Say for example Alex is earning gross income of RM6,800 per month.
Step 1 – Deduct EPF and PCB (Income Tax) by 20%
RM6,800 x 0.8 = RM5,440
This is the net income after Alex earn after deducting EPF, PCB, Socco etc. He is left with RM5,440 to spend per month.
Step 2 – Deduct Living Expenses by 30%
RM5,440 x 0.7 = RM3,808
Living expenses typically round up about 30% from our net income. Things to spend for example food, fuel, mobile phone, entertainment etc.
Step 3 – Deduct Any Commitment
In this case, Alex has a MyVi (Super car that beats any car on the road!). He is paying instalment RM576 per month. At the same time, Alex has personal insurance of RM200. He has no property or anything else. So his monthly commitment is RM776.
RM3,808 – RM776 = RM3,032
Step 4 – Deduct Anything Else
This is the step where Alex needs to deduct in order to get final Disposable Income. For this, Alex allocate RM1,000 as savings and RM500 to pay his parents.
RM3,032 – RM1,500 = RM1,532
Alex has RM1,532 disposable income every month. He can now utilise this money to do whatever he deem fit. e.g. investment.
Step 5 – Amount of Loan (Potential)
Alex decided invest in a property this year. He will use his disposable income to get a loan.
The formula to get an indication on how much loan Alex can borrow from the banks based on his disposable income is:
RM1,532 x 200 = RM306,400
The amount of loan that Alex is able to afford is about RM300k +/-. The factor of 200 is actually an average constant of loan vs instalment over the loan tenure.
Conclusion
Of course you can’t rely on the formula above to decide how much loan you can get to be exact. But it serves as a quick indication on how much you can borrow. We will never know how much we can actually borrow from the bank as all banks have their own assessment criteria. Do take note that the calculation above did not take account into your credit card limit of 5%. If you have more credit cards, then the loan amount to be approved will be slightly lower.
