What Are The Upfront Costs Of Buying A Home In Malaysia?

Update on Stamp Duty and RPGT Exemptions

Several short-term economic stimulus initiatives have been launched by the government to provide incentives to the real estate market in response to the Covid-19 pandemic.

PENJANA economic recovery plan
As part of the Homeownership Campaign (HOC)
– Property Transfer Stamp Duty Exemption and Loan Agreement for Homes priced between RM300,000 and RM2.5 million from June 1, 2020 to May 31, 2021.
– Real estate gains tax exemption (RPGT) for Malaysians who transfer up to three properties from June 1, 2020 to December 31, 2021.

Budget 2021
Promote home ownership for first-time buyers
– The exemption from stamp duty on transfer instruments and the loan contract for first-time buyers is extended until December 31, 2025.
– The stamp duty limit for the first dwelling house is also increased up to RM500,000, effective from January 1, 2021 to December 31, 2025.

Owning a home that you can truly call your own is the ultimate dream for almost everyone. But with house prices escalating and loan repayments spanning 30 years or more, buying and financing a home isn’t all about saying “I like it” and signing on. the dotted line. This is something that should be done with a lot of common sense and caution.

For any aspiring Malaysian who is actively considering buying a home with a loan, here are three things to determine if you are financially ready to take on this life-changing endeavor:

In Malaysia, most banks offer up to 90% of the property price (cash flow) for your first two residential properties. If you receive this 90%, you must prepare a 10% deposit to cover the remainder of the price of the property.

Suppose you are planning to buy a condo in Cheras which will cost RM400,000. You must have a minimum of RM40,000 for the deposit, whether it is from your savings or money from your parents or siblings.

First-time homebuyers might not know it, but buying and financing a home takes more than a deposit and a loan. It also involves various costs and charges which include:

  1. Stamp duty for transfer of ownership (also known as transfer memorandum or MOT) = 1% for the first 100,000 RM; 2% on the next 400,000 RM, and 3% on the next amount
  2. Legal costs of the sales and purchase contract (SPA) = 1% for the first RM500,000, 0.8% for the next RM500,000 and 0.5% to 0.7% for the next amount
  3. Stamping for SPA = Less than RM100
  4. SPA legal disbursement costs = A few hundred ringgit
  5. Legal costs of the loan agreement = 1% for the first RM500,000 (of the loan amount), 0.8% for the next RM500,000 and 0.5% to 0.7% for the next amount
  6. Stamp duty for loan agreement = 0.5% of the loan amount
  7. Legal disbursement costs of the loan facility agreement = A few hundred ringgit
  8. Property transfer fees = A few hundred ringgit
  9. Government tax on legal agreements = 6% of total attorney fees
  10. Bank processing fees for the loan = RM50 to RM200

* Note: Percentages are based on recommended figures and industry averages. Actual figures may differ.

Here’s what your top upfront costs might look like:

Purchase priceDeposit (10%)SPA legal feesStamp duty on the MOTLegal costs of the loan agreementStamp duty for loan agreementTotal
RM300k30,000 RM3,000 RM5,000 RM2,700 RMRM1350RM42,050
RM400k40,000 RM4,000 RM7,000 RMRM3 600RM 1,800RM56,400
RM500k50,000 RM5,000 RM9,000 RM4,500 RMRM2 25070,750 RM
RM600k60,000 RM5,800 RM12,000 RMRM5,3202,700 RM85,820 RM
RM700k70,000 RMRM6,60015,000 RMRM6,040RM3 150RM100,790
RM800kRM80,0007,400 RM18,000 RMRM6,760RM3 600115,760 RM

Unless you have the financial capacity to buy a property with cash up front, you will need to get a loan from a bank or financial institution to help pay for your home.

Based on the current market rate of 4.5% interest per year for a standard home loan and a down payment of 10%, this is how much you pay in monthly installments:

Mortgage loan payable in monthly installments (interest rate 4.5%, tenure period of 35 years)

Purchase priceDeposit (10%)Monthly payment
300,000 RM30,000 RMRM 1,278
400,000 RM40,000 RMRM1,704
500,000 RM50,000 RMRM2,130
600,000 RM60,000 RMRM 2,556
700,000 RM70,000 RMRM 2,982
800,000 RMRM80,000RM3,407

You can also use iMoney’s home loan calculator to automatically estimate your monthly payments.

As most financial experts recommend that you do not allocate more than a third of your total income to pay off your mortgage, this means that you or your household should have an income of at least RM6,390 per month for you. allow a house of 500,000 RM. .

Note that Malaysian banks usually allow you to hold loans (including car loans, personal loans, etc.) of up to 70% of your income if you have a relatively good credit rating, so you can always choose to ” increase your monthly payment and shorten the term of your loan. But make sure you’ve done the math and understood the financial implications before committing!

Saving tens of thousands of dollars to buy a home is no small feat. If you need help, consider the following diagrams:

1. My First Home Scheme / Skim Rumah Pertamaku

This scheme allows home buyers to obtain 100% financing from financial institutions, allowing them to become home owners without having to pay a 10% deposit.

Eligibility: For properties between RM100,000 and RM400,000; buyer must be 35 years of age and under with income not exceeding RM 5,000 per month.

2. MyHome

This program offers grants of up to RM 30,000 per dwelling.

Eligibility: for properties between RM80,000 and RM300,000; the homebuyer must be a first-time buyer with a family income between RM3,000 and RM6,000

3. BSN MyHome (youth housing program)

This program is designed to help young people become their first home owners. Under this program, there is 100% exemption from stamp duty on transfer of ownership and installation documents for a property price of up to RM300,000. The government will also help homeowners manage their monthly payments by providing RM200 per month for the first two years.

Eligibility: for properties between RM 100,000 and RM 500,000; buyer must be a first-time buyer with household income not exceeding RM 10,000 per month

4. Rumah Selangorku

This program aims to provide affordable housing to middle income earners in Selangor State.

Eligibility: for properties between RM42,000 and RM250,000; the homebuyer does not already own a property in Selangor and has a family income of no more than RM 10,000 per month

5. Residensi Wilayah

This program aims to provide affordable housing to middle-income earners who work and stay in Wilayah Persekutuan.

Eligibility: For properties between RM52,000 and RM300,000; the buyer must stay and work in Wilayah Persekutuan and have a monthly income of less than RM 10,000

All hope is not lost.

For starters, you can consider looking for properties with free SPA and loan agreements to save Ringgit thousands in legal fees. This should be relatively straightforward as most new real estate projects typically absorb the costs of legal agreements for home buyers.

To reduce the down payment required to buy a home, actively seek out properties with low down payments. Many developers are now offering competitive early bird or “easy entry” sales packages that include discounts of between 2% and even 10% of the price of the property.

Ultimately, buying a home is a serious life decision that shouldn’t be taken lightly. While owning a home in an upscale neighborhood is always nice, you should always consider your financial situation when it comes to buying a property, so that you don’t get overloaded for the next several decades. Hopefully this article will serve as a general guide for all Malaysians who are considering buying a home now.

With our mortgage calculator, you can easily calculate your loan interest and your monthly repayment!

This article first appeared on February 27, 2013, and has been updated for freshness, accuracy and completeness.

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Jothi Venkat

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