Banks look at income differently depending on how you earn it. In the fourth episode of his mortgage series, Sean asks Rena Choong where salaried employees, commission earners and business owners most often go wrong when they apply.
What mistakes get housing loans rejected for employees, commission earners and the self-employed, and how should each prepare?
“First of all, know which one is your income segment.”
Rena Choong, head of mortgage at FAR Capital, in conversation with Sean
Know which income group you are in, because each is judged on different records: payslips and EPF for employees, commission statements and tax returns for agents, and company accounts and bank statements for business owners. Prepare them months before you buy, and never dress your income up.
Why
Employees: the documents must match
The salary credited to your account should match your payslip, EPF should be paid, and you should be past probation; contracts shorter than six months are hard to finance. A sudden pay rise of around 50% needs a letter explaining it, and banks may call or email HR to check your job.
Bonuses count for less than basic pay
Some banks ignore performance bonuses or count about half, often only from multinationals and only after two years of history. A higher basic salary helps a loan more than a large bonus.
Commission earners need tax returns
Banks want six months of commission statements plus your latest tax return, so new agents who haven't filed one struggle. If income swings by more than about 30% from month to month, some banks count only half of the six-month average.
Business owners are judged by the company
Most banks want the company registered for at least two years, a busy bank account, month-end balances that aren't too low (Rena treats under RM50,000 as low), and invoices for large one-off credits. Declaring losses to cut tax shows up in CTOS and works against you.
What to do
- Keep a monthly file of payslips, bank statements and tax returns, so you can apply when a good deal appears.
- If you are employed, wait until you are confirmed, and get a letter from HR for any big salary increase.
- If you earn commission or run a business, file and pay tax on your full income for at least the last year or two.
- If your income is complicated, ask a mortgage adviser who knows which banks favour your profile.
- Never use arranged employment or inflated payslips to qualify; Rena and Sean call it fraud.
Editorial Note: Summarised from Sean Tan's full episode with Rena Choong. The answer is theirs, not Sean's; the quote is in their own words and the rest is our paraphrase. This is general information, not legal advice for your situation. Figures reflect the recording date, so check current rates and rules before acting on them.
COMMON MISTAKES MADE DURING LOAN APPLICATION (EP4)
Sources & Verification Data
Summarised from Sean's full English captions for episode 4 of his mortgage series with Rena Choong, FAR Capital's head of mortgage (October 2022). The quoted answer is Rena's own words; everything else is paraphrased. Bank practices are as described in 2022. Sean is a customer of FAR Capital, which offers mortgage advice, not its owner.
