31/03/2024
*8 Things That You Must Know To Qualify Bigger Loan*
First of all, increase your income. If you have good salary adjustments every year, that will help. If you have bonuses, that will also help. Let the clients know about these things.
*1. Increments and Bonuses*
It is important to note, though, that there is a difference between Contractual Bonus and Variable Bonus. An example Contractual bonus is the 13 month or 14 month bonuses. Those can be counted in a high percentage. Variable bonuses can also help you qualify for a bigger loan, but banks will general factor in a discount due to the fact that it is variable.
*2. Reduce or Fully settled Small Loans*
Another way is to reduce your commitments. When you swipe a card, try not to swipe too many cards before you apply for a loan, or try not to buy expensive items using your credit card before you borrow. If you have small loans, for example, try to settle the full loan so you can free yourself up. Otherwise, these things, even small loans, will still be taken as credit which will affect you.
There are also people who already have two existing housing loans and are looking to buy a third one. Obviously, for the third one, they only have 70% margin. What you can do is, you can just sell your second property first. Then, when you apply for a new loan, then you are still entitled to 90%.
Bear in mind that banks will require a lot of information and will look at certain legal documents to determine that your sale is legitimate. This is not just working form. It is not like that. Banks will want to see your Sale and Purchase Agreement and get it stamped.
Some banks will also want to look whether you have bank in 10% deposits. They will look at what you save. Some banks actually ask for letters of discharge from bank, which means this will only come in much later, probably three or four months, down the road it depends on the banks. So, these are the ways that can help you reduce your commitments up front.
*3. Rent Your Property*
People who have rentals should also know upfront because rentals can be increased. A rental generally is not a hundred percent, but it depends from bank to bank. It can range from 50% to 80%. That can still help.
That is why people who buy properties to keep and rent, in the long term actually can borrow more loans because of the fact that rental helps them. So, that is one of the possibilities.
*4. Co-Borrower*
Another way to qualify for a bigger loan is to have a Co-borrower. A co-borrower is a joint borrower. You get somebody else to be joint-borrower for your loan. For instance, if you alone are not enough to justify a loan because of your commitments, then you should bring in a co-borrower. Of course, the co-borrower has to be qualified for the loan as well. Some banks will go to the extent of checking your relationships and stuff like that, but generally, this can be done.
*5. Guarantor*
You can also have a Guarantor. A Guarantor is not a co-borrower, he is a guarantor to the person’s loan. Let’s say the loan is only with one person, but because of his high DSR, he can bring in another person to be a guarantor of his loan. Note that a guarantor will not become a borrower.
Also bear in mind that the guarantor’s relationship with the borrower is important. Normally, they only allow people who are immediate families, siblings, or sometimes, the spouse.
*6. High Net Worth*
One more thing that would help in getting a bigger loan is to have a high net worth. We are talking about at least RM 1 million and preferably if the person has more than 3% of this in cash. That’s the general guideline.
You may not have the full, highest margin of financing, but this allows the person to actually get maybe another 30%. To determine if the person has a high net worth, the bank will not just look at the person’s cash, but also things like EPF, investments, unit trust. Massive properties that are not under a loan also become consideration.
*7. Extended Loan*
Another instrument that can help you is the Extended loan. An example of this is a renovation loan. This only applies for some banks, though. There are also loans that are upon request basis, which means you can use the money however you want to use it.
A renovation loan, on the other hand, means the bank will only release the money when you show your invoices or receipts. With an Entry Cost Financing, we are referring to legal fees, stamp duty, and renovation fees. Some banks actually allow you to finance that as well.
Of course, in the end, you should be a good Paymaster in order to qualify for a bigger loan.
*8. Refinance*
To refinance is another way of qualifying. Let’s say, right now, you have two housing loans and you want to buy a new property. So, your new property only qualifies you for 70%. You still need to fork up 40% cash for downpayment, right?
Before you buy a new house, what you can do is refinance your second housing loan first. When you refinance, you’ll end up with still just two housing loans, meaning you still qualify for up to 90%.
When you refinance, you can use the money for your next property’s downpayment. The next property, when you apply for a loan, if you are entitled to 70%, then, effectively, you are getting 400% financing.
Like I said earlier, you can sell existing properties and sell some small outstanding loans. There’s no point for these things to be sitting there as an obstacle for you.
