How to Calculate a Home Loan: Monthly Instalment Formula
Pasukan RumahHQ · Published 25 September 2026 · Updated 29 September 2026 · 8 min read
In brief
- Monthly instalment = P × r ÷ (1 − (1 + r)^−n). You need three numbers: the loan amount, the monthly rate and the number of months.
- The loan amount depends on the margin of finance; the rest is your down payment. Bank Negara caps the margin at 70% for a third housing loan.
- After working out the instalment, check your DSR: all monthly debt against net income. Every calculation here is an estimate only.
Before you see a bank, you can work out the two most important numbers yourself: the monthly instalment for a given loan, and how much loan you can afford. Both use the same monthly instalment formula. This guide focuses on that formula: it shows it plainly, then applies it step by step with examples. For DSR, read what DSR is and how to calculate it; for everything else before you buy, see the first-home eligibility checklist.
Estimates only. General information, not financial advice. Approval, rates and actual amounts are subject to the bank or LPPSA.
Want to calculate straight away?
Our eligibility calculator does every step below for bank loans and LPPSA, and shows which rule limits your amount. Open the eligibility calculator.
Five numbers you need
| Number | What it means | Where to get it |
|---|---|---|
| Home price | The SPA price or the valuation, whichever is lower | The developer and the bank's valuation report |
| Margin of finance | The share of the price the bank finances | The bank's offer; Bank Negara's cap for a third home |
| Rate | Annual interest or profit rate | The bank's offer (SBR plus spread) or LPPSA's fixed rate |
| Tenure | Number of years to repay | The 35-year limit and the bank's age limit |
| Income and commitments | Net income and all monthly debts | Payslips, EPF statement and CCRIS report |
Step 1: work out the loan amount and down payment
Loan amount = price × margin of finance. The rest of the price is your down payment.
Each bank sets its own margin for a first and second home. CIMB Bank, for example, advertises a margin of up to 95% inclusive of MRTA/MLTA, legal fees and valuation fees. For a third housing loan, Bank Negara caps the margin at 70%.
Example: the loan amount (hypothetical figures, estimate only)
Home price RM450,000. Assume a 90% margin.
Loan amount = RM450,000 × 90% = RM405,000. Down payment = RM450,000 − RM405,000 = RM45,000.
Besides the down payment, prepare money for stamp duty, legal fees and valuation. See costs of buying a new home and EPF withdrawal to buy a house.
Step 2: work out the monthly instalment with the formula
Home loans in Malaysia are usually calculated on a reducing balance. The monthly instalment uses this formula:
Monthly instalment = P × r ÷ (1 − (1 + r)−n)
- P = loan amount
- r = monthly rate = annual rate ÷ 12
- n = number of months = tenure (years) × 12
A full worked example: the instalment on RM405,000 at an assumed 4.3% over 35 years (about RM1,867 a month)
Example: the instalment on RM405,000 (estimate only)
Assume a rate of 4.3% a year (the same assumption as our calculator, as at 23 September 2026; actual rates differ by bank). Tenure 35 years.
r = 4.3% ÷ 12 = 0.003583. n = 35 × 12 = 420.
P × r = RM405,000 × 0.003583 = RM1,451.25.
(1 + r)−420 = 0.2226, so 1 − 0.2226 = 0.7774.
Instalment = RM1,451.25 ÷ 0.7774 ≈ RM1,867 a month.
You can do this in a spreadsheet: in Excel or Google Sheets, =PMT(4.3%/12, 420, -405000) gives the same answer.
Bank rates: SBR plus a spread
Since 1 August 2022, all banks use the Standardised Base Rate (SBR) as the reference rate for new retail floating-rate loans. The SBR is tied to Bank Negara’s Overnight Policy Rate (OPR): when the OPR changes, the SBR changes by the same amount. Your loan rate is the SBR plus a spread set by the bank. So the instalment on a floating-rate loan can rise or fall over the tenure.
| Scenario | Monthly instalment | Total paid over the tenure |
|---|---|---|
| 3.8%, 35 years | RM1,745 | About RM733,000 |
| 4.3%, 35 years | RM1,867 | About RM784,100 |
| 4.8%, 35 years | RM1,993 | About RM837,100 |
| 4.3%, 30 years | RM2,004 | About RM721,500 |
Notice: a rate rise of 0.5 percentage points adds about RM120 to RM130 a month. A shorter tenure raises the instalment but cuts the total interest.
Step 3: check the tenure you qualify for
Bank Negara states that the maximum housing loan tenure is 35 years. Banks also cap your age at the end of the loan. CIMB Bank, for example, offers up to 35 years or until age 70, whichever is earlier. So a 40-year-old applicant is usually limited to 30 years with a bank like that, and pays a higher instalment for the same amount.
Step 4: check your DSR
DSR (debt service ratio) is the total of all monthly debt instalments, including the new home instalment, divided by net income. Bank Negara requires banks to make sure your income after statutory deductions, spending on necessities and all other debts can meet the repayments. Each bank sets its own DSR limit; CIMB says most banks prefer a DSR below 60%.
Example: a DSR check (hypothetical figures, estimate only)
Aisyah's net income is RM4,900 a month. Existing commitments: car RM650, PTPTN RM150, credit card (minimum payment) RM120, BNPL RM80. Total RM1,000.
DSR now = RM1,000 ÷ RM4,900 = 20.4%.
Add the RM1,867 home instalment: DSR = RM2,867 ÷ RM4,900 = 58.5%. That is under 60%, but close. A bank with a lower limit may offer a smaller amount.
The full explanation, including what counts as a commitment and how to lower your DSR, is in what is DSR and how to calculate it.
Step 5: work out how much loan you qualify for (the other direction)
If you want to know the most you can afford, start from DSR:
- Room for an instalment = net income × DSR limit − existing commitments.
- Loan amount = room for an instalment × (1 − (1 + r)−n) ÷ r.
- Compare with price × margin. The lower of the two is your estimated eligibility.
- The bank's DSR limitAisyah's example: a 60% limit gives her RM1,940 of instalment room, which supports a loan of about RM420,000.
- Price × marginExample: RM450,000 × 90% = RM405,000; the RM45,000 left is the down payment.
- Tenure and the age limitA maximum of 35 years; CIMB caps it at age 70 at the end of the loan.
Hypothetical example: Aisyah's eligibility at a 60% and a 70% DSR limit, and after clearing her credit card and BNPL
Example: Aisyah's eligibility (estimate only)
Assume a DSR limit of 60% (an assumption for this example only): RM4,900 × 60% = RM2,940. Less commitments of RM1,000: room for an instalment RM1,940.
At 4.3% over 35 years, RM1,940 a month supports a loan of ≈ RM420,000. If the bank uses a 70% limit, the RM2,430 room supports ≈ RM527,000.
If Aisyah clears her credit card and BNPL (RM200 a month) before applying, her eligibility at a 60% limit rises to ≈ RM464,000.
Our calculator assumes a DSR limit of 60% for net income below RM5,000 and 70% for RM5,000 and above, based on common practice. Actual limits differ by bank and by your profile.
Bank or LPPSA: how the calculation differs
| Item | Bank loan | LPPSA (civil servants) |
|---|---|---|
| Rate | Usually floating: SBR plus spread | Fixed 4% up to RM750,000; 4.5% on the balance under the 2026 initiative |
| Affordability limit | A DSR limit set by each bank | Instalment no more than 60% (first financing) and total debt no more than 80% of net income |
| Income counted | Net income; the method differs by bank | Basic pay + counted fixed allowances − mandatory deductions |
| Tenure | Up to 35 years and the bank's age limit | Up to 420 months; EPF scheme to the end of service |
| Amount cap | Price × margin | Eligibility table by net income |
If you are a civil servant, read how to calculate LPPSA instalments and the LPPSA page. If you work in the private sector, see Bank Loans.
The steps in brief
- Loan amount Price × margin; the rest is the down payment.
- Instalment P × r ÷ (1 − (1 + r)^−n).
- Tenure Check the 35-year limit and the age limit.
- DSR Total monthly debt ÷ net income.
- Eligibility The lower of the DSR limit and price × margin.
Common mistakes
- Using gross pay. DSR is worked out on net income.
- Forgetting small commitments. Credit cards and BNPL count too.
- Assuming the rate stays the same. Floating-rate loans move with the SBR.
- Ignoring other costs. Financed insurance and fees raise the actual instalment.
- Treating the calculator as approval. It is an estimate only.
Next steps
Start with the first-home eligibility checklist for the full checklist, including CCRIS and documents. Then make an estimate with the eligibility calculator. RumahHQ Development Sdn Bhd is registered on the LPPSA, CIMB Bank and Maybank panels. When you register interest, ask for help checking your eligibility. Registering interest is free and non-binding. Estimates only; approval is subject to the bank or LPPSA.
Questions
What is the formula to calculate a home loan instalment?
Instalment = P × r ÷ (1 − (1 + r)^−n), where P is the loan amount, r is the annual rate divided by 12, and n is the number of months. The formula is for a reducing-balance loan and gives an estimate only.
Why does the instalment in my letter of offer differ from my calculation?
Usually because insurance premiums (MRTA/MLTA) or legal fees are financed in the loan, the actual rate differs from your assumption, or the tenure is shortened because of age. The bank's letter of offer is the figure that applies.
Is a home loan rate fixed for the whole tenure?
Most bank loans are floating. Since 1 August 2022, new retail floating-rate loans are priced on the Standardised Base Rate (SBR) plus a spread, and the SBR moves with Bank Negara's OPR. LPPSA charges a fixed rate.
What is the maximum home loan tenure?
Bank Negara states that the maximum housing loan tenure is 35 years. Banks also cap your age at the end of the loan; CIMB Bank, for example, offers up to 35 years or age 70, whichever is earlier.
What DSR do banks accept?
There is no single figure for every bank. Bank Negara requires banks to assess affordability after statutory deductions, spending on necessities and other debts, and each bank sets its own limit. CIMB says most banks prefer a DSR below 60%.
The calculator says I qualify. Will my loan definitely be approved?
No. A calculator is an estimate only. The bank or LPPSA assesses the full application, including your CCRIS record, income documents and the property valuation, before issuing a letter of offer.
Sources
(7)
- Bank Negara Malaysia, Responsible lending guidelines ensures borrowers' affordability (2016) — read 2026-09-25
- Bank Negara Malaysia, Measures in Promoting a Stable and Sustainable Property Market (2010) — read 2026-09-25
- CIMB Bank, Home Loan — read 2026-09-25
- Hong Leong Bank, Reference Rate (Standardised Base Rate) — read 2026-09-25
- CIMB Bank, How Much Debt Is Too Much? Understanding DSR in Malaysia — read 2026-09-25
- LPPSA, Garis Panduan Pembiayaan Perumahan LPPSA Bil.1/2026 — read 2026-09-25
- LPPSA, Inisiatif Baharu LPPSA 2026: Penambahbaikan Had Kelayakan Pembiayaan Perumahan — read 2026-09-25
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