If you’re like most people, owning a property that you can call your own is one of the biggest life goals you could have.
But it’s also going to be one of the most expensive, and you really can’t just go and buy the first unit you see that catches your fancy!
There’s a lot of financial planning and research that needs to happen before you commit to buying a property in Malaysia.
Here are a few things that you should take note of when planning for your dream home.
The down payment: Can you afford it?
Before you buy a property in Malaysia, you need to figure out if you can afford the down payment.
The down payment is usually 10% of the total purchase price of the property, or the difference between your loan amount and the purchase price.
While you can get a home loan for the property that you want, most banks in Malaysia can only offer up to 90% of the property’s price.
If you get approval for that 90%, you’re going to need to come up with the remainder out of your own pockets to cover the rest.
For example, if you’re eyeing a condominium unit with a price tag of RM550,000, you’ll need a down payment of RM55,000.
Estimate the monthly home loan repayments for your dream home with the PropertyGuru Home Loan Calculator. It’s easy to use and gives you a clear view on how much housing loan is needed.
Additional miscellaneous fees
If this is your first time buying property in Malaysia, you need to know that purchasing one doesn’t just end at having enough money for the property itself.
There are actually additional fees and charges, which include:
- Fees for the transfer of the ownership title
- Legal fees for the Sale and Purchase Agreement (SPA)
- Legal disbursement fees for the SPA
- Legal fees for the loan agreement
- Legal disbursement fees for the Loan Facility Agreement
- Government tax on the legal agreements
- Bank processing fees for the loan
However, you might be glad to know that just last year, it was announced that that those buying a property in Malaysia for the first time will be exempted from stamp duty for the following:
- Transfer of ownership title
- SPA
- Loan agreement
Obtaining and paying off a home loan
In most cases, unless you have enough savings or assets to pay upfront for your property in full, you’re going to need a home loan from a bank.
When you take out a loan, you’ll need to pay it back, with interest. The current market rate for most standard home loans is 4.5% per annum.
If you need to compute how much your monthly instalments will be, you can make use of our home loan calculator to get the numbers.
When planning how much to set aside for the instalments, the advice from financial experts is that you shouldn’t exceed one-third of your income.
For example, if you’re earning RM3,000 a month, it’s advisable that you keep your monthly home loan commitment to not more than RM1,000.
Note that your Debt Service Ratio (DSR) is one of the major factors that will determine whether your home loan gets approved or not.
Your DSR will be calculated like this:
(TOTAL MONTHLY COMMITMENTS + MORTGAGE LOAN YOU’RE APPLYING FOR) / NET INCOME
Check your credit score
Apart from your DSR, your credit score is extremely important when you want to apply for any kind of financial product from a bank.
At its core, your credit score is an indication of how healthy your finances are – banks don’t want to lend money to someone who will default on the loan.
This score is calculated based on information taken from both CCRIS and CTOS.
- Payment History: How prompt you are with loan repayments, or whether you’ve missed any payments
- Amount Owed: How many credit facilities you have and the amount owed
- Credit History Length: How long you’ve had a credit facility (either a credit card or loan)
- Credit Mix: What kinds of credit cards and loans you hold
- New Credit: Whether you’ve been recently approved for new credit facilities
If you have a good credit score, most banks allow you to hold loans of up to 70% of your income. This gives you the option to have higher monthly instalments, which makes your loan term shorter.
You can also leverage that score to get better deals from banks, such as lower interest rates or more flexible payment periods.
One of the easiest ways to bring up your credit scores is to make sure you pay all your bills on time.
By PropertyGuru
