(This article is Part 3 of the ‘Mortgage Loan Application and The Documents You Need’ series. Click here to read Part 1 [Regular Employment] and Part 2 [Self-Employed]).
One thing’s for sure: We all want to own a home one day. To have a safe sanctuary that’s all yours and you can retreat to whenever you want, it’s practically every person’s goal!
When it comes to submitting your housing loan application, there are some standard documents to prepare based on whether you’re an employee or a business owner. The next big question is, though, what if you’re neither?
If you’re neither an employee (regular employment) nor a business owner (self-employed), you can be categorised as someone who works on their own, despite not having a registered company.
In other words, a small entrepreneur or freelancer. This category also includes those who have a side income or part-time income that serves as an add-on to their primary income.
Recent years have seen an increase in these types of jobs, and as long as your documentation is complete and acceptable, the banks will accept it too as a source of income.
Wondering if your job falls under this type of category? Here are just a few examples:
- Hawkers, daily wage workers, online traders
- Gig economy workers (Grab, Foodpanda, Lalamove)
- IT and software engineers, digital designers
- Personal tutors, freelance accountants
- Event organisers, photographers
- Lease of machinery/equipment
- Freelance beauticians
Basically, if you’re not employed under a company or organisation, you may have non-standard documents or no documents at all for housing loan applications.
Does that make it harder to apply for one? Not at all! Here are the documents you can prepare to prove your income and financial health.
1) Business registration
The first document to prepare would be your business registration but wait, we hear you! Why do you need it? After all, your business is small, and you have no plans of expanding anytime soon…
That’s precisely it. Many think that a company registration is not required because a) the business is small, b) it may not stick around for long, or c) you don’t even need it. That perception is incorrect.
For starters, your business may be small today but tomorrow, it might hit a goldmine and hit sky-high profits!
Exactly how long the business has been operating is also crucial, and should be registered when it’s first established.
This is because it would be more difficult to justify that it’s been around for five years when on record, it was only registered six months ago.
Hence, the date of registration of the business will be considered very important to the bank as it justifies the sustainability of the business. If the business has just been registered before the application, it can be considered too new to apply for a loan.
The same goes for a change of business nature – some businesses might not last long or might have changed the business nature, like venturing from trading to servicing, etc.
This change is allowed by Suruhanjaya Syarikat Malaysia (SSM), and by doing this, the length of employment will be gained. Plus, it won’t seem like you’ve been job-hopping around from many companies.
Another benefit of registering your business is when it comes to making an impression on your clients. Having a registered business boosts your client’s confidence in dealing with you, and it appears more professional too.
2) Bank statements
Your bank statements will be one of the most important documents to be considered by the bank as these are the documents that show the actual business (read: profits and ka-ching!) generated.
For Sdn Bhd and partnerships, a company account is an absolute must. On the other hand, for sole proprietors, a personal bank statement is acceptable, but it’s advisable to open a separate company account, purely for business purposes.
Having a company account with the bank marks the start of a beautiful relationship with them, and you can use their banking facilities conveniently.
Not only that, but it’ll give the banks more access and confidence in you (their existing customer), so you can increase your chances of getting that housing loan approved!
One thing to bear in mind: Always remember that bank statements are the best documents to record or show proof of your income and revenue.
Be it trading, an incoming sale-stream, or providing a service to clients who pay the fees – these should all be recorded clearly in your bank statements for transparency.
3) Book-keeping invoices, bills, receipts, etc
We know you don’t like it, but you reallyyy need to do this to help your housing loan application go through!
It’s important to stay on your book-keeping game and keep track of all your vouchers, bills, invoices, and receipts issued. This will be the source of income banks will use to cross-check with your bank statements.
In your book-keeping, you should note down key details like what kind of services or goods were involved, who your clients were, and how much you were paid.
In certain businesses, a term agreement or contract would be useful too, to show your business dealings with every client.
4) A dedicated workspace
Certain jobs may require you to have a dedicated workspace, whether at home or in another location, and it would definitely help with your loan application.
Having some photographs of the following (as solid proof) will show the bank that your business is indeed real and legitimate:
- A laptop and legitimate documents on a desk
- A storage area where goods are kept
- A vehicle for business use (better if it has your company’s logo on it)
- Tools and/or machinery
- Raw materials
The more proper your workspace setup is, the more convincing it is. That doesn’t mean you have to go all out and purchase work tables, chairs, and stationary, though.
Just make sure the space is neat and tidy to showcase your business in a professional light. and in a good manner.
5) Business profile
Profiling is very important for banks to know what your business is, and oftentimes, social media pages are enough to serve as advertisements and an introduction to your business.
You don’t need a professionally-designed business profile complete with your company’s corporate website, structure, motto, and vision, but an official Facebook page or simple website will be enough.
Other than that, you can consider a LinkedIn profile if you provide professional services, or an Instagram page if you sell home-made goods.
If you want to, you can do-up a short business profile with a few pages to explain the business’ background and the types of services/goods that are being traded or sold.
Not only will it help your part-time job or side business appear more legitimate, but it’s also good for the business, and most certainly will help when it comes to applying for a loan.
6) Income tax
As soon as you start working and begin earning a steady income, one thing you need to do yearly is to declare your income tax, even if you’re a freelancer.
This is the best way to prove your income and it’s compulsory, so don’t think about escaping it unless you want to risk a fine and imprisonment!
According to Lembaga Hasil Dalam Negeri (LHDN), an individual who earns more than RM34,000 (after EPF deduction) of annual employment income can be taxed. If that’s you, make sure to start filing your taxes!
For freelancers who do not have a registered business, you will need to file your taxes using Form BE. However, if you have a registered business of your own, you will need to file it under Form B instead.
When you file your income taxes, don’t forget to take advantage of the government’s tax reliefs to reduce your income tax payment.
Once you’ve submitted your filing for the year, keep a copy of it should you need to present it for your loan application.
Last but not least, your savings! When it comes to freelancing or the other jobs mentioned above, there’s always a degree of uncertainty in regards to the income stream.
Will you receive the same amount every month? Frankly, it’s quite hard to say so, unless you have a very steady flow of work.
From the banks’ perspective, savings are the best way to justify and show your steady stream of income, which leads to your accumulated savings. If you aren’t able to show your savings record, it’ll be hard to justify the stability of your business.
Ultimately, it all boils down to what you have in the bank and whether your records have been proven stable enough for them to give you the mortgage loan you’ve applied for.
If your financials are not very healthy and a few sections seem shady, they may think better of it and reject your application.
Applying for a mortgage loan doesn’t seem that difficult after all, does it? Regardless of your nature of employment, there are virtually no barriers to obtaining a loan – all it takes is some proper planning!
So, make sure you’re well-equipped with all you need to know about home loans in Malaysia.
Time for your home ownership dreams to come true, best of luck!
Expert insights contributed by Travis Tiu. You can reach out to him for your financial needs at +60 12-686 1202 or firstname.lastname@example.org
We are an established loan consultancy, assisting our clients in their best interest to secure various types of bank financing for both individuals and/or companies, be it property financing or business/company application. We have been in this industry for more than 10 years, and have been helping many of our clients solve their issues with bank financing. Feel free to contact us if you have any query regarding loan matters.
Disclaimer: The information is provided for general information only. PropertyGuru International (Malaysia) Sdn Bhd makes no representations or warranties in relation to the information, including but not limited to any representation or warranty as to the fitness for any particular purpose of the information to the fullest extent permitted by law. While every effort has been made to ensure that the information provided in this article is accurate, reliable, and complete as of the time of writing, the information provided in this article should not be relied upon to make any financial, investment, real estate or legal decisions. Additionally, the information should not substitute advice from a trained professional who can take into account your personal facts and circumstances, and we accept no liability if you use the information to form decisions.