A common mistake that too many property buyers are often making is to overestimate their own “bankability” and ending up with a rejected loan and a broken dream! The above, unfortunately, has been happening since long and not only in Malaysia. Many countries around the world have and are experiencing high housing loan rejections due to numerous factors.
In this article we will analyze together the main reason for a mortgage to be “rejected” and see whether there might be any viable solutions or, at least, understand the root of each cause and, consequently, finding a tool to counter a possible denial from banks.
The First Pandemic Loan-Approval-Killer-Partner
With the covid-19 pandemic having infected more than 110 million infections and 2.5 million deaths and, kneeled the world’s economies as never happened before, it is quite clear that the pandemic has most probably be the major cause of housing loan rejections, at least since March 2020
Of course, loan rejections have happened not because of the pandemic itself but due to the “economic downturns” triggered by the Great Lockdown!
In Malaysia, after the six months loan moratorium, households were still in such tight cashflow that the government and Bank Negara Malaysia had to request all banks to consider a possible further extension of the “loan repayment holiday”.
Banks started looking at loans restructuring for the worst cases.Putting ourselves in the shoes of a bank, would we easily approve loan applications in such a market situation and with still very clouded skies and stormy financial and economic growth weather? Of course not!
The Second Pandemic Loan-Approval-Killer-Partner
As far as the first loan-killer drive comes from the banking sector, also the second, somehow, is linked to the money institutions as it comes from Valuers.
Every time an individual applies for a housing loan, banks appoint a valuation firm to give them a “certified” value of the property. In “bull run” times valuers are quite optimistic and positive; this generates realistic but uptrend valuations.
Developers are also approaching valuers to have a pre-empanelment official valuation of their planned selling on per square foot basis. As above, the market condition, sentiment and outlook are heavily affecting the valuers’ mood and, at the end of the day the certification of “current market value”.
Within reasonable ups and downs the above has been regulating the market pretty well with both side of the equation being satisfied about the outcome RM/psf.
Since March 2020, though, the Malaysian property market, already plagued by overwhelming numbers of overhang and unsold residential units, has fallen in a down moving spiral boosted by the impossibility of generating reliable outlook scenarios.
Third and last Loan-Approval-Killer-Partner
For the last of our “most wanted” list of Loan-Approval-Killers, we do not need to do any extended research, this insidious killer is right here inside us, it is called ego and/or being afraid to ask!
Very often it has been happening that, even during “bull run” property market situations, property buyers were complaining about housing loan rejections and so did several developers! Unfortunately, the most normal cause of a loan reject is generated by us.
Too often, property buyers, once placed the booking for their dream home, are directly taking care of applying for the related housing loan without taking care of few essential and “loan-application-saving” tips normally given in public talks or countless article.
Let’s go through the fundamental together and, hopefully, this will help some of you in avoiding these mistakes.
Get ready to apply for a housing loan
1. When a property buyer, be it for investment or own use, decide that the moment has come to buy the desired unit, the first thing that should be taken care of is to have a “bankable” profile.
Banks are rating all clients in terms of punctual payment of dues (this nowadays includes, besides loans and credit cards, also PTPTN as study loan utility bills and recently even management fees). In other words, let’s make sure the outcome of our financial IC, called CCRIS, is perfect.
2. Banks are also looking at how the saving or current account is handled. A client receiving RM7,000 as pay-slip every month on the 28 and, withdrawing RM6,800 on the first/second day of the next month is looked at with some question marks.
If a person has had “disturbing matters” with a bank such as the closing of the account or previous bad record for extended non repayment of loans or credit card cancelled, it is extremely important to have all the copies of the settlement and a “release letter” normally issued by the bank.
3. Recent refinancing or restructuring of loans are also often looked at with a suspicious eye by the bank system. Always better to get good advice by independent sources on this matter.All the above, plus few more details which are different from bank to bank, will allow our property buyer to get ready for a “winning loan application”.
Do not shoot all your bullets at once!
The following is, by far, the worst mistake that most loan applicants are committing. Being very honest I also did it, thinking that “Oh I know for sure how to get my loan approved!”.
Many years ago, I did, while completing the booking for the purchase of a residential unit, prepare and apply contemporaneously to most of the available banks thinking, either one will approve and, I’ll get a stronger negotiating power!
Silly me, the final result, was a total failure with all banks but one rejecting and, the only one approving was the most expensive in terms of interest!
The morale of the above, do not shoot all bullets at once, much better go for one by one while understanding what the possible reason of rejection was and, doing whatever possible to find a remedy.
The best option available: use experts at zero cost!
Every challenge has a way to be won or, there is always a solution. With this in mind, ProSales has been recently partnering with a super team of experts on housing loan to ease this difficult part of the property buying journey.
For the full original article by Dr Daniele Gambero, visit Prosales.tech