Thursday, August 26, 2021

First Step To Buying Your First Home

Buying your first home can be a scary experience, it would probably be your first, single most expensive purchase in your life, so far. It can be quite an overwhelming experience and for some, and the easy way out would be to opt to continue to rent or perhaps stay with your parents till they either force you out (like a baby eagle) or have run out of space with your growing family!

To help you get going, let’s look at the basics involved in the buying of your first home.

1.    Do your homework, lots of it!

Photo by Teona Swift from Pexels

Before you do anything else, spend some time talking to people, real estate agents, investors and fellow homebuyers. You’ll be surprised how much insight and tips they’ll be able to share with you.  

Read up on the housing market in Malaysia, prices may have been going up and down the last few years but there may be some advantages of purchasing a home this year or the coming years with some perks being offered by developers and the government. 

Join some property fairs and expos, which are currently being conducted online, find out about the Home Ownership Campaign and the offers developers are giving to purchasers.

Learn about land types and constraints attached. 

Read up about developers, their reputation, track record of completing their projects on time, the quality of their developments. Also check the list of blacklisted developers

Take all things into consideration and collate all your research – don’t get swayed by family or friends who tell you unsubstantiated trends or rumours about property trends.

Get clicking! Have a look at what’s available and make a list of areas, bookmarking properties that seem in line with your wants and needs

1.    Make lists.

The options for you as a first-time home owner can be mind-boggling so I would suggest you start with making lists. List everything that comes to mind for your home. It doesn’t have to be very realistic for a start, but it will help to put things into perspective and lend some clarity. 

Think about ..

i. What kind of home best suites your needs: a traditional single-family home, a duplex, a townhouse or a condominium? What are your ‘must haves’, it could be the neighbourhood you want to live in, the amenities you’d like to have close by to even they type of bathroom tiles you’d like!

ii. Where would you like to live…close to family, school, work, in a new township, access to highways, airport? How much time would you be prepared to spend on the road?

iii. Your lifestyle and the amenities that are important to that lifestyle. Would you want easy access to parks or other outdoor activities, commercial centres, food, etc.

iv. The age of the you want a brand new house still under construction or a sub-sale home. There are advantages and drawbacks of both types of homes, so making a list of them would definitely help you in your decision making.

a.    Chances are that you would get a better variety of sub-sales in your price range. It would more likely to be located within a matured neighbourhood, you would be able to walk around the area, chat to the (potential) neighbours, and enjoy the pleasure of exploring the unit itself. That chance to see the potential property with your own eyes, touch it with your own hands, and get to know the available amenities is an important part of getting the right fit for you. 

        b.    A sub-sale may require more repairs due to its age or you may decide you’d prefer a sub-sale that has already been renovated thus saving on major renovation costs.

       c.    However, new houses do come with a defect liability period where as sub-sale units do not. 

       d.    A newly constructed property would give you a free hand to have the layout of the property as you have dreamed it to be.

Since you’re quite possibly making the biggest purchase of your life, you deserve to have it fit both your needs and wants as closely it can.

2.    Let’s look at financing the purchase

Photo by Mikhail Nilov from Pexels

i. Find out how much you can borrow
a. Most financial experts recommend that you allocate no more than one-third of your total income to pay off your home loan i.e. if you have a total combined income (if you have a spouse) of RM9,000; the monthly instalment of your first home must not be more than RM3,000. 

b. Next, you will need to ensure that you have enough for the downpayment. This would typically be 10% of the home purchase with the balance of the property price financed via a bank loan. Hence, if your target home costs RM400,000, you will have to put down RM40,000 as the initial downpayment and the balance of $360,000 financed with a bank loan.

c. You would also want to make sure your finances are in order... that you are up to date on your credit card payments and other loan payments. These contribute to your credit score i.e. how responsible you are in paying back your debts. The higher the score the, the better credit rating and the better your chance of getting a loan.

d. Provide for other costs involved in the purchase such as legal fees, stamp duty ,6% government service tax to be charged on the real estate agent’s commission (if you’re using an agent) and so on. As a general rule, provide for another 10% for these costs. 

ii.  Understand how much you can actually afford
Just because you qualify for a loan that gets you a Balinese style villa in, Damansara Heights, doesn’t mean you can afford the monthly payments.
Based on the current market rate of 4.5% p.a. interest for a standard home loan and a 10% down payment, here’s how much you pay in monthly instalments :
Monthly instalment payable home loan (4.5% interest rate, 35-year tenure)
Source : Hong Leong Bank

Take note that Malaysian banks generally 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 score. Make sure you do the math and understand the financial implications before you commit!
Owning a home is more than the monthly loan payments though. There are other fees like maintenance fees, insurance, quit rent, assessment, utilities and so on.
And if you’re planning some renovations, remember that you’ll need to stash aside some money for this too, for the purchase of furniture, fittings and miscellaneous items. A good benchmark will be 10-15% of your property price.

Avoid being “house poor” – a common mistake made by first-time home buyers. They have the house of their dreams, everything looks good, but no money left for clothes, petrol, entertainment, holidays and even food.

3. Other financing options

Saving up tens of thousands of dollars to buy a home is no small feat. If you need help, look into the following affordable housing schemes:

i. My First Home Scheme / Skim Rumah Pertamaku
This scheme allows homebuyers to obtain 100% financing from financial institutions, enabling them to own a home without having to pay a 10% down payment.
Eligibility: For properties between RM100,000 and RM400,000; homebuyer must be 35 years old and below with an income not exceeding RM5,000 a month.

ii. MyHome
This scheme offers subsidies of up to RM30,000 per home.
Eligibility: For properties between RM80,000 and RM300,000; homebuyer must be a first-time buyer with a household income between RM3,000 and RM6,000.

iii. BSN MyHome (Youth Housing Scheme)
This scheme is designed to help youths own their first home. Under the scheme, there is a 100% of stamp duty exemption on the transfer of ownership and facility documents for property price up to RM300,000. The government will also help homeowners manage their monthly instalments by providing RM200 a month for the first two years.
Eligibility: For properties between RM100,000 and RM500,000; homebuyer must be a first-time buyer with a household income not exceeding RM10,000 a month.

iv. Rumah Selangorku
This scheme aims to provide affordable homes to middle-income earners in the state of Selangor. Eligibility: For properties between RM42,000 and RM250,000; homebuyer does not already have a property in Selangor, and has a household income not exceeding RM10,000 a month

v. Residensi Wilayah
This scheme aims to provide affordable homes to middle-income earners who work and stay in Wilayah Persekutuan.
Eligibility: For properties between RM52,000 and RM300,000; homebuyer must be staying and working in Wilayah Persekutuan and have a monthly income below RM10,000.

What If I don’t qualify for the above Housing Schemes?

All hope is not lost.
Look around for properties with free SPA and loan facility agreements to save thousands of Ringgit in legal fees. Currently, most new property projects absorb the costs of legal agreements for home buyers.
To cut down on the initial payment needed to buy a home, shop around for properties with low initial down payments. For newly-launched properties, many developers are offering rebates between 2%-5% while some only require you to pay the initial 1-2% booking fee (to register genuine interest), which then goes towards paying for the downpayment.

Ultimately, buying a home is a serious life decision that shouldn’t be taken lightly. Though owning a home in a posh area is always nice, always consider your financial position when it comes to buying property. You don’t want to end up being overly burdened for the next few decades. 
Happy house hunting!

Image by Schluesseldienst from Pixabay 

Thursday, July 8, 2021

Buying property? Higher or lower floor is better?

So now you and your partner are looking for property to build your lives together. Are both of you looking for a property that can fit your children in the future and maybe your parents too?

Considering many people stay in Kuala Lumpur or Petaling Jaya for their work, there are ample high rises of condominiums for you to choose from. Condominiums are the common sight in Klang Valley and most people choose to stay in condo due to security reasons. Landed property seems nice at one glance. Your children can play at the compound, you can park your car right in front, but actually there are more other expenses, security issue and maintenance to consider.


 Well, let us talk about common property most people are looking now, condominiums.