What Is DSR and How to Calculate It for a Home Loan

When a bank assesses a home loan application, one of the first numbers it looks at is your DSR. If your DSR is too high, the bank may offer less than you need, or not approve the application. The good news is that DSR is easy to work out yourself, and there are clear ways to lower it before you apply.

Estimates only. General information, not financial advice. Decisions are subject to the bank or LPPSA.

What DSR is

DSR (debt service ratio) is the share of your monthly net income that goes to paying all your debts. Bank Negara Malaysia defines it as the portion of a borrower’s monthly net income (gross income minus tax and other statutory deductions) that is used to pay the borrower’s total debt obligations.

DSR = (total monthly debt commitments ÷ monthly net income) × 100%

The higher your DSR, the less money is left for other spending and savings. That is why Bank Negara requires banks to make sure your income after statutory deductions, spending on necessities and all other obligations can meet the loan repayments.

1. Work out net income Gross income minus EPF, SOCSO, EIS and PCB.
2. List commitments Every monthly instalment, including credit cards and BNPL.
3. Add the new instalment The estimated instalment on the home you want to finance.
4. Divide Total commitments ÷ net income × 100%.

Commitments that count in DSR

According to CIMB Bank’s guide, the commitments counted are the obligations recorded in your CCRIS report. Bank Negara adds that DSR in Malaysia takes into account loans from banks and from non-banks.

Daily spending such as food, bills and transport is not included in DSR. But banks still assess it through another measure called net disposable income (NDI), explained below.

Gross or net income?

Bank Negara’s Financial Stability Review (first half of 2024) states that in Malaysia DSR is computed on net income, while in countries such as the UK and Singapore it is computed on gross income. This matters because the same DSR gives a different loan amount depending on the basis.

• Banks: net income. According to RinggitPlus, income that can count includes basic salary, fixed allowances, regular overtime, consistent commission, rental income and side-business income, if documented. Each bank assesses it in its own way.
• LPPSA: net income is basic pay plus the fixed allowances LPPSA counts, minus mandatory deductions. The total debt cap is 80% of net income.
• SJKP (a guarantee for buyers with irregular income): total repayments on all loans no more than 65% of monthly gross income.

Bank DSR limits, as reported

Banks in Malaysia do not publish their DSR limits, and the limits differ between banks and between applicants. What you can refer to is general guidance:

Our eligibility calculator assumes 60% for net income below RM5,000 and 70% for RM5,000 and above. That is an assumption based on common practice, not any bank’s limit.

Example: working out DSR step by step

How the RM1,867 instalment is worked out is explained in the monthly home loan instalment formula.

Beyond DSR: net disposable income (NDI)

Bank Negara states that financial institutions use NDI alongside DSR in affordability assessments. NDI is monthly net income minus total monthly loan repayments, which is the money left for living expenses. Minimum NDI levels differ between banks and may differ by product, income, risk profile, location and marital status. For its analysis, BNM used RM1,000 as a representative NDI threshold, selected from the range financial institutions use.

In Aisyah’s example, NDI after the home loan is RM4,900 − RM2,867 = RM2,033. An applicant with dependants may be assessed against a higher NDI threshold.

How to lower your DSR before you apply

• Clear small debts first. CIMB suggests settling credit cards and personal loans. In Aisyah's example, clearing her credit card and BNPL (RM200 a month) lowers her DSR after the home loan from 58.5% to 54.4%. Settling the car loan as well brings it to 41.2%.
• Hold off on new debt. CIMB suggests holding off on BNPL or new car instalments for 3 to 6 months before a major loan application.
• Document all regular income. Stable, documented fixed allowances or side income raise the income counted.
• Consider a joint applicant. Incomes are combined, but so are both people's commitments.
• Choose a smaller loan. A bigger down payment or a home in a lower price range reduces the new instalment.
• Check the tenure. A longer tenure lowers the instalment, but it is limited by age and adds to the total interest.

If an earlier application was not approved, the MyKNP service, a collaboration between AKPK and Credit Guarantee Corporation (CGC), gives free financing advice. See also why home loan applications are rejected.

Common mistakes when working out DSR

• Using gross pay. As Aisyah’s example shows, DSR on gross pay looks much lower than the DSR a bank works out.
• Leaving out the new home instalment. Your DSR before the home loan is not the figure the bank assesses; it assesses your DSR after the new instalment is added.
• Forgetting small debts. Credit cards, BNPL and non-bank loans are recorded and counted too.
• Assuming all banks are the same. One bank may offer less than another for the same profile, because limits and methods differ.
• Taking a new loan after an early check. A new car or personal loan before applying raises your DSR and can change the outcome.

Next steps

DSR is one part of an eligibility check. For the full list, including CCRIS, the down payment and documents, read the first-home eligibility checklist. If you are a civil servant, LPPSA’s rules differ; see how to calculate LPPSA instalments. For private-sector workers, the Bank Loans page explains the terms in a letter of offer.

Make an estimate with the eligibility calculator; it shows whether DSR or the margin limits your amount. 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.