New home buyers: House buying guide in Malaysia
Here are the guide to purchase a house in Malaysia and things to consider throughout the purchasing process that can be beneficial especially for first time home buyer. The process of buying a house is very complicated and requires an adequate knowledge. In order to avoid any issue, you need to understand each process and procedures involved. Let’s take a closer look!
Choose your property criteria
Use this guide in deciding the best property for you:
Decide the range budget
It is recommended that your dream home should not cost more than 3 times your gross annual salary of your household income and you need to set aside for not more than one-third of your total monthly income to pay off your housing loan.
List up your desire areas factors
You need to list down what are the amenities & facilities that you need towards your daily life. For example, if you rely on public transport in your daily life, nearby public transportation hub should be one of the main important amenities for you while you might be needed nearby school amenities if you have children that are still schooling. In addition, finding the best neighbourhood that suits you and also to identify the living cost of the area may be good factors to consider in order for you to have a sustainable life living in your new home.
Choose your suitable type of home
Type of home includes bungalows, condominium, penthouse and etc. Depending on your compatibility, type of home are also important to narrow down your selection in the process of buying a home. In this case, the relevant type of house also depends on your budget, numbers of people who will be living in the house and house features that you expect from the house itself.
Choices of land title
Mainly, there are 3 types of land title in Malaysia which is Freehold, Leasehold and Malay / Bumiputra Reserve. The differences are as below:
Freehold: Property is held in perpetuity and can be easily transferred the property from one to another without any state & government consent.
Leasehold: There is the fixed period of usually 30, 60 and 99 years. These type of property would come with restrictions under the law for the extension of the lease.
Malay/Bumiputra Reserve: Malay/Bumi Reserved Land can only be owned and transacted among Malay/Bumis.
New Development or Sub-sale
You need to know that when you are buying a new property directly from the developer, it is considered as a new development while sub-sale is when you buy the house from the previous owner. You need to consider both of this differences because it has its own specialty such as in terms of price, loan, features and much more.
Number of bedrooms and size of the property
These criteria should be one of the main points for you especially when you will be living with more people in the house. As example, the more people who will be living in the house, the more bedrooms and bigger size that you needed.
Checking additional points such as good feng shui and prosperous point
These additional factors totally depend on you. As for some people, it is important to find a good feng shui point in order to create a good energy during your stay.
Look around to find your property
You should find your favorite property based on the guide below:
Online property portal match
There are many online property portals in Malaysia that can help you to find out which properties are matched with your home criteria. Based on this portal, you can filter out your criteria according to your specific location, price, and type of house. In this case, the results will help you to determine which current property development suits you well.
Contact with developers or real estate agent
For new development, it is better to contact directly with developers and for purchasing a sub-sale house you may contact with real estate agent. It is important to get as much information from them as they will give more property information including payment package that they provided.
View property showroom and sales gallery
After narrow down your house option, you can start doing a survey by viewing all your favorite property showroom and sales gallery. This is because, it is important for you to have a close look at the property location, home features, and facilities.
Determine on how much you can afford
Illustration of Monthly Installment:
In order to avoid any financial issue, you need to consider all of the cost as below:
Understand the upfront cost
Upfront cost or down payment are the balanced cost of the loan amount that you need to pay in advance. For example, for your first property purchase, the bank will usually offer you up to 90% of the property’s price which by means you need to pay 10% cash for the rest of your property’s price. This 10% will be your upfront cost.
Let say you are planning to buy a Condominium in Petaling Jaya for approximately RM600,000, you need to pay a minimum of RM60,000 down payment.
Afterall, upfront cost may be depends on the developer’s where there are some cases they may be issue 8% of down payment or even 0% down payment!
Verify monthly installment
In process of buying a house, it is important to justify whether are you afford to pay the monthly installment?
The current market showed that 4.2% to 4.4% per average interest for a standard home loan. This means that for a home loan of RM 400,000 over a period of 30 years, you will need to pay a minimum of RM 1,760 per month. As I have mentioned in the previous point, you need more than one-third of your total monthly income to pay off your monthly installment. However, you can reduce your monthly installment by place a higher down payment and apply for a longer loan duration.
Check out the scheme for first time home buyer
As property price has increased, affordability to buy a property is becoming more absurd especially for young adults generation. In order to address this matter, the government has offered first time home buyer scheme such as “Skim Rumah Pertamaku (SRP)”, PR1MA, and Youth Housing Scheme. This initiative plans provide affordable housing and obtain 100% financing home loan which covers 10% of down payment as well.
Go through property miscellaneous fees
When making a home purchase, get ready for the other one-time entry cost of buying a property.
Here are the general list of miscellaneous fees:
• Cost related to Sale & Purchase Agreement ( Legal Fees + Stamp Duty )
• Cost Related to Loan Agreement ( Legal Fees + Stamp Duty )
• Fee for transfer of ownership title
• Government Tax on Agreements
• Bank processing fee
Get your lawyer & loan
After you have found the right property, here are the guidelines for you in proceeding the purchasing process:
Get a lawyer
In sales and purchasing process, there will be a formal written agreement and you need to get a lawyer to draft and sign this contract. Also, you need a lawyer for your reference and consultant whereas this can help you to avoid any consequences occur. Nevertheless, if you are buying from the developer, many of them usually provide a free legal service by their own lawyers and you can save up on the legal fees cost.
Choose your type of home loan
In choosing a suitable type of home loan, you may want to check the average interest rate provided by the bank. You can do some research by visiting the selected bank and find the most attractive package and a low interest rate that suit your financial conditions. Here are the list type of home loan provided in Malaysia:
– Islamic home loans
– Regular home loans
– Flexi home loans
– Home loans for expats
Identify Margin of Financing
In order to find a suitable home loan, you need to know how much the bank will give you. This is important because the balanced amount not covered by home loan are required to pay by you. This can be shown as for RM400,000 house and your Margin of Financing is 80%, you will need to pay RM80,000 as the upfront cost while you can pay less if your Margin of Financing is 90%.
A lock-in period is the duration of time acquire a penalty if you choose to pay off your home loan in full before scheduled. It is usually counted from the first day the bank issues first payment to the developer. The period could be between 3 to 5 years and the penalty are starting from 2% until up to 5% from your original loan.
Close Deal Process
Before handover your new home, here are the final process of closing deals:
Sign agreement and other documents related
Once all the paperwork completed by your lawyer, you need to sign all of the agreements which include Letter of Offer and Sale and Purchase Agreement (SPA). During this period, balance payment of deposit is expected to be paid fully. Other documents that needed to be signed are loan agreement, stamp duty form, deed of assignment (if the title is not issued) and deed of mutual covenant (if the sub-divided title has been issued).
Delivery of vacant possession from the owner
After signed SPA, you need to wait within the number of days specified in the SPA to get your delivery of vacant possession. In order to complete your process to move in, you need to ensure that all the balance of purchase price has been paid and as for new home, developers need to obtain Certificate of Occupation (CFO) before letting the buyers move in. Finally, after such a long wait, you will receive delivery of vacant possession together with your new home keys.
Now you can pack up & ready to move in!
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