DSR Explained: How Malaysian Banks Decide How Much You Can Borrow

Your DSR (debt service ratio) is the share of your monthly income that goes to paying debts, including the home loan you’re applying for. It is one of the main checks banks use to decide how much to lend you. Bank Negara Malaysia does not publish one DSR number that every bank must use. Each bank sets its own limit, which is why two banks can offer the same person very different amounts.

How DSR is worked out

DSR = your monthly debt repayments ÷ your monthly income × 100

The repayments include the new home loan. The income is net (after deductions), not gross (before). Bank Negara Malaysia (BNM) expects banks to check that your income after statutory deductions, such as tax and EPF, can cover your debts, your daily needs and your other commitments. So your gross salary is not the figure that counts.

Which debts count

Banks see your existing loans in CCRIS, Bank Negara’s central credit record. It lists things like:

• other home loans
• car loans (hire purchase)
• personal loans
• credit cards

Credit cards catch people out. Under BNM’s rules the minimum monthly payment is at least 5% of what you owe, so a RM10,000 balance means a minimum payment of at least RM500 a month. Ask the bank how it counts your cards. For other repayments, such as a PTPTN study loan, ask the bank whether it counts them.

A worked example

That is well under the 70% guide our calculator uses. Now look at how much the bank’s own limit matters. With the same income and debts, a bank that allows 70% could lend up to about RM1,044,000 on those terms. A bank that stops at 60% could lend about RM859,000. That’s a gap of about RM185,000 that comes from the bank’s rule, not from anything about you.

Try your own numbers in our DSR calculator and loan calculator.

Two limits that can stop you before DSR does

Your third home loan. Under a rule BNM set in November 2010, a borrower’s third home loan is capped at 70% of the property value. The first and second are left to each bank. So if the rule still applies, a low DSR won’t take a third home loan past 70%. Ask your bank.

The 35-year loan length. BNM has said 35 years is enough for, say, a 25-year-old to finish paying by 60. A longer loan lowers the monthly instalment, and so your DSR, but you pay more interest in total. On the example above, the interest over 35 years comes to about RM364,000.

Ways to bring your DSR down

• Pay down a credit card balance before you apply.
• Settle a small personal loan or a car loan that is close to finishing.
• Look at a smaller unit or a cheaper tower.
• Apply with a co-borrower (someone who takes the loan with you), if their income and debts help rather than hurt.

What to ask the bank

• What DSR limit do you use for someone on my income?
• Do you count my full credit card limit, or only what I owe?
• Do you count my PTPTN or other study loan?
• Is this my first, second or third home loan in your records?
• Will the loan length you offer finish before I retire?

This is a general guide, not financial advice. Check your own case with your bank.