Statutory Guidelines

MY DEPOSIT

 

RESEARCH MAKES THE DIFFERENCE

Investing in a property doesn’t come cheap but the return is often good if do it right. You need to do a lot of research and this can be in the form or combination of reading, attending seminars and workshops, as well as learning from other more experienced investors and homebuyers. 

 

UNDERSTAND THE PRICE VARIANCE

House prices are different from one location to another, and are also dependent on other factors like type of property, sentiments, supply and demand, etc.

 

PLAN YOUR EXPENDITURE

As a guide your monthly commitments on paying installments for your house, car and other payments should not exceed 1/3 of your gross monthly household income. The Base Lending Rate (BLR) is currently 6.60% (Source: http://www.blr.my/). The length of a loan can range anytime up to 45 years.

 

DECIDE ON THE BUDGET

Decide on the initial budget that you are prepared to spend for your property. When deciding on a budget, it’s not just about paying the price of the property but also bear in mind some related fees and duties that will incur when you apply for a housing loan.

  • Down payment - The proportion of the purchase price not covered by financing (banks will typically lend 80-90% of the purchase price)
  • Legal fees: 1% for the first RM100,000, 0.5% for the next RM4,900,000
  • Property stamp duty: 1% for the first RM100,000, 2% for the next RM400,000
  • Loan agreement stamp duty: 0.5% of loan amount transfer
  • Disbursement fees include fees for registration of charge, land search and bankruptcy search (RM300-700 in Wilayah Persekutuan and Selangor)
  • Processing fee: one-time fee charged by the financial institution for loan processing (RM50-1,000)

 

IS YOUR DOWN PAYMENT AND FUNDS SUFFICIENT?

You need to put a down payment of 10% of your intended property's price for the purchase of your first home. However, this may vary from time to time and also from one bank to another.

Processing your loan application may also incur associated costs such as professional fees and government charges which you have to bear. Note that these fees and charges are subject to change in the future. Therefore, you should always seek advice from your loan officer with regard to the fees and charges.

 

ASCERTAIN THE TYPE OF PROPERTY

Houses in Malaysia are mostly landed and non-landed property. Landed property include detached, semi-detached and link houses, while non-landed property include condominiums, apartments or flats. For future consideration, it is worth noting that landed properties tend to appreciate more than non-landed properties, while non-landed properties tend to give higher rental returns instead.

Another important point is choosing between a freehold or leasehold property. Freehold properties tend to appreciate more and are easier to sell. However, if you wish to buy a property which you want to stay in for many years, then a leasehold property is suitable as you will be getting a better house for the same amount of money.

 

KNOW THE LOCATION OF THE PROPERTY

Knowing where you want to buy your property is crucial. This criteria depends primarily on the key priorities of your life. Newly developed areas may differ from established townships in terms of amenities, safety and facilities. No matter what your priorities are, you may want to consider the following before buying your property:

  • Proximity and access to work
  • Proximity and access to schools
  • Proximity and access to public transportation and infrastructure (e.g. LRT, MRT, Monorail)
  • Proximity and access to main roads and highways
  • Amenities including shopping, leisure, F&B, religious facilities, parks, medical, lifestyle, etc.
  • Safety and security
  • Prestige and potential for capital appreciation

 

DETERMINE THE RIGHT PROPERTY SIZE

Make a checklist of your requirements. Be realistic, especially in terms of you budget and needs - they need to match nicely:

  • Land area
  • Built up area
  • Size of living room
  • Number of bedrooms (do you require a bedroom on the ground floor?)
  • Number of bathrooms
  • Reception rooms
  • Size of kitchen

 

CONSIDER THE INTEREST RATES OFFERED

Now that you have determine your available funds, budget and the type / size of property, as well as the location that you want, the next important thing is to find out all other equally crucial financial matters related to your property purchase, for example the interest rates. Most banks offer interest rates that vary from one another. Therefore, you should carefully scrutinise the rates offered as well as the period of the offer. Look beyond the initial interest rate as in some instances, you may be paying more interest in the future. It is also good to check with the bank if the rate is a fixed or floating rate.

 

OF BLR, BR, OPR & SRR

Effective 2 January 2015, the Base Lending Rate (BLR) structure was replaced with a new Base Rate (BR) system. Under BR, which will now serve as the main reference rate for new retail floating rate loans, banks in Malaysia can determine their interest rate based on a formula set by the central bank.

Under the previous BLR, the rate was set by Bank Negara Malaysia (BNM) based on how much it costs to lend money to other financial institutions. Meanwhile, the cost to borrow money was determined by the Overnight Policy Rate (OPR) set by central bank.

With the new BR, interest rates are determined by the banks’ benchmark cost of funds and Statutory Reserve Requirement (SRR). Other components of loan pricing such as borrower credit risk, liquidity risk premium, operating costs and profit margin will be reflected in a spread in the new BR framework.

 

YOU HAVE OTIONS FOR FLEXIBLE LOAN REPAYMENTS

Banks offer a variety of flexible loan repayments to suit your financial standing. You can speak to your bank officer about the following loan repayments:

  • Graduated payment scheme

This scheme allows lower instalment payments at the beginning of the loan and will gradually increase over time. If you wish to allocate more funds for other purposes, this is the scheme you may consider taking.

  • Prepayment flexibility

Some banks allow you to make prepayments or extra payments so you can save considerable interest charges on condition that you make prompt monthly repayments.

  • Partial prepayment of the outstanding loan

Some borrowers find it useful to shorten the loan tenure by making partial prepayments with surplus savings or annual bonus. This effectively reduces interest charges if prepayments are made during the early years of the loan tenure.

 

KEEP ALL YOUR IMPORTANT DOCUMENTS HANDY

When applying for a housing loan, prepare the following documents for the loan process:

  • A copy of your identity card or passport
  • Your latest 3 months' salary slip
  • Your latest income tax return form (form J) or EA form
  • Sale and Purchase Agreement/deposit or booking receipt/letter of offer from the housing developer
  • A copy of the land title (if any)
  • Latest bank statements (compulsory in the absence of salary slips and/or Form J/EA Form) dating back six month/savings passbook/fixed deposits
  • Valuation report for completed houses

 

If you are self-employed, you will need to provide in addition to the above your:   

  • Business registration documents
  • Latest financial statements
  • Other supporting documents required by the banking institution

 

LOOK INTO FIRST-TIME HOMEBUYER SCHEMES

Check if you are eligible for the various home buying schemes such as My First Home, 1Malaysia Housing Programme (PR1MA), MyDeposit, etc. For more info, visit http://sprn.kpkt.gov.my/sprn/

 

APPOINT A PROPERTY AGENT

This is an alternative if your hunt for a property hits a roadblock, or if you believe that a seasoned professional in the field is more likely to help you find your dream home based on your budget and requirements albeit at a certain fee. Make sure though that the agents you engage are licensed, reliable, trusted and with proven track records. Tell them your requirements such as preferred locations, home type, unit size, loan tenure, land tenure and estimated budget.