Report says, buying a house in Malaysia is something that most of us young people are struggling to achieve!
Have you ever had to choose whether to buy a house or a car first?
I did own a car first before buying a house as I needed a car more than a house but the idea of owning a house is something huge and something that makes us proud.
However, is a House a Need or a Want?
Regardless, property is something always good investing your income in which is why today we are going to dive into the topic, How to buy a house in Malaysia?
1. Do a Throughout Research on Types of Loans Package Available.
A traditional housing loan in Malaysia requires you pay a fixed amount each month for the entire tenure of the house loan. For example, if the property is RM 300,000 and you signed a contract for 30 years you RM 833 each month back to the borrowers.
Whereas, if you take a flexi-loan with pre-approved loan limit you can repay when you can.
In general, longer loan tenures result in lower monthly loan repayments that eventually results in higher total interest costs. Shorter loan tenures usually mean a lower interest in total but a higher monthly repayment.
There are hundreds of different loan packages in the market so do not be spoilt because at the end of the day, you would not want to take a loan that is not suitable and which will cost more than expected.
Here are some of the helpful schemes and loans available for all young Malaysians that will aid you in owning your first home:
PR1MA: Open to all Malaysians aged 21and above, with a monthly household income between RM2,500 to RM7,500. It also comes with a rent-to-own (RTO) scheme and a step-up financing option.
Maybank Houzkey: Also a TOR scheme for medium range properties.
Rumah Selangorku Programme: For those living in Selangor, you can check this out.
MyDeposit Scheme: This is a government scheme for lower and middle-income earners with a household income of RM10,000 and below.
2. Go For The Best but Not Necessary the Lowest Interest Rate.
Interest rate is a fee that you are charged for borrowing money, expressed as a percentage of the total amount of the loan.
In Malaysia is interest rate is adjacent Base Rate(BR), a rate decided by banks and lenders to how much to charge for various products they offer.
In Malaysia, home loans are normally quoted as a percentage above or below the BR. This means, if the BR increases or decreases by a certain amount, the interest rates also increase or decrease by the same amount.
Hence, what might be seen as a good deal sometimes can cost more in certain situations. For instance, If you planning to re-sell the house in the next five years do not go to a bank with lock-in package between 3-5%. You should opt for a higher interest rate that does not have this clause as you will save more.
Do your homework forehand, so you save the most on interest you pay later.
Click in the link below for a list of all the current interest rate of Malaysian banks in 2018:
3. Go To The Bank That Offers A Loan That Suits Your Needs.
The bank to you a borrow money from is very important because you will be dealing with them for a regular basis for a long term of 20-30 years at least!
5 THINGS TO CONSIDER BEFORE CHOOSING THE BANK IS SUITABLE FOR YOU!
1. Length of the loan- In Malaysia, most banks offers loan maximum to 30 years or when the borrower reaches 65 years of age.
2. Interest rate- As discussed earlier, go for the rate that best fits you.
3. Effective Lending Rate( ELR)- Is the rate of interest you are paying on top of the borrowed amount.
4. Loans Packages- Malaysian banks loan fall into 3 primary categories: term, flexible and semi-flexible loans.
5. The Lock in period- Is the minimum number of years the borrower is expected to follow the terms of the loan agreement.
4. Include the Ancillary Costs Along With the Upfront Cost in Your Budget.
Upfront cost is the down payment price, which is 10% of the total purchase price or the difference between the loan amount and the purchase price.
In Malaysia, most banks offer up to 90% of the property’s price for your first two residential properties.
If you receive that 90%, you need 10% cash to pay for the rest of the property’s price.
Say you’re targeting to buy a condo in Cheras for approximately RM400,000, you must have a minimum RM40,000 to pay upfront, be it from your savings or money from your parents or siblings.
Ancillary costs are better known as those hidden fees you’ll be surprised to know must also be borne when making that first home purchase.
Here is a general list of the extra charges you need to pay to own a home:
5. Gauge The Maximum Property Price Within Your Budget.
Calculate how much you can pay per month before borrowing a loan. DO NOT INVEST IN SOMETHING WAY BEYOND YOUR BUDGET!
It’s best to ensure that the overall total of monthly installments on ALL your outstanding loans such car loan, PTPTN n, etc including your prospective home loan does not exceed 70% of your net income.
Malaysian Financial experts recommended to not allocate more than a ⅓ of your total income to pay off your home loan. Which means you should have a general income of around RM5,000 per month to afford a RM400,000 home.
Malaysian banks generally allow you to hold loans of up to 80% of your income should you maintain a relatively good credit score, so the option to increase your monthly installment to shorten your loan term is possible.
The numbers can be more intimidating than you may know. With each passing day, they continue to increase with the property market continuously growing.