Guide for first time home buyer

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With the local property market providing some of the best in real estate – attractive prices, competitive rates, avant-garde architecture and design – one would often see long queues at prime property development launches. And if you are not among those first in the line, you will have to make do with the odd lots left.

Notably, young professionals under 35 will find it easier to own or invest a property given the construction of more affordable homes and the government’s My First Home Scheme, which provides 100 percent financing.

FIABCI president Ir Yeow Thit Sang noted that property prices ten years ago were very affordable, such that property buyers between the ages of 28 and 38 can place a down payment with their parents’ help.

“Today, prices are two to three times more than what it was in 2003, and the percentage of young buyers has dipped some 20 percent as salaries don’t commensurate with property costs,” he said.

“These young buyers are also going for new developments. They’re price conscious, particular about location, and purchase within their means. Affordability is THE priority in the young buyer’s minds,” he added.

 

My First Home Scheme

Tailored for first-time home buyers, My First Home Scheme provides 100 percent financing, so there is no need for 10 percent down payment. Home buyers under this scheme also pay normal interest rates of the respective banks.

Who is eligible under the scheme?

• Malaysian citizens

• First time home-buyers

• Individuals or couples (husband & wife or siblings) up to age 35 years

• Private sector employees only (including couples)

• Monthly income not exceeding RM5,000 for individuals or combined monthly income of RM10,000 for couples (based on gross maximum income of RM5,000/month per individual)

• Individuals/couples with minimum employment of over 6 months with same employer

• Repayment of total financial obligation must not be more than 60% of the net monthly income or maximum financing limit of the participating bank, whichever is lower.

 

Eligible property

• Residential properties in Malaysia

• Minimum property value of RM100,000 and maximum of RM400,000

• Completed properties or those under development

• The home must be occupied by buyer and not for investment purposes

• For leasehold properties, with a minimum of 60 years remaining

 

Financing requirements

• Tenure for repayment not exceeding 40 years, subject to borrower’s age not exceeding 65 years at the end of financing tenure

• Amortizing facility only (no redraw features)

• Installments payable via monthly salary deduction of standing instruction

• Compulsory Fire Insurance/Takaful

 

How EPF help first-time buyers acquire a home

EPF allows its members to withdraw their savings in Account II to fund the home acquisition. The funds are typically used as a down payment, reduce/redeem housing loan, to pay monthly loan instalments or if one is going for My First Home Scheme which does not require down payment, the EPF money is used to cover other charges such as strata titles, legal fees, etc.

 

Who is eligible?

• Malaysian citizen

• A Malaysian citizen who have withdrawn your savings under Leaving The Country Withdrawal before 1 August 1995 and then choose to re-EPF

• Non-Malaysian citizens who became a member before August 1, 1998 or getting a Permanent Resident (PR)

• Member has not attained 55 years of age on the date the application is received by EPF

• Members have at least 500.00 in Account II

 

What are the conditions?

• Buying a house (bungalow / terrace / detached / apartment / condo / studio apartment / service apartment / townhouse / SOHO or shop with residential units.

• Home purchase financing through:

(i) Housing loan from any institution as follows: –

– Financial institutions licensed under the Banking and Financial Institutions

Act 1989 (BAFIA)

– Central Government/State or other government financial agencies

– Employer members

– Co-operation / collaboration company licensed (approved by the

Co-operative Commission of Malaysia).

– Licensed insurance company approved by Bank Negara Malaysia

– Lenders approved by the Board;

(ii) Cash

• Members who have signed a Sale and Purchase Agreement shall not exceed three (3) years from the date the application is received by the EPF.

• Members who have not made withdrawals or those who have withdrawn to buy a first home and have to sell or dispose of ownership, and then buy a second home. Proof of sale / disposal of first home ownership is required.

• Members who want to buy a house that has been acquired on hire purchase from the parties approved by the Board.

• Members who buy land to build a home on it as a package (the date of the land purchase and the date of the start of the construction must be within 6 months)

How much can an individual home buyer withdraw?

• The amount difference between the price of the home and total loan plus 10% of the home price

• The full amount of Account II

• The amount to be withdrawn must not be less than RM500.00

 

How much can a home buyer couple withdraw?

• The amount difference between the price of the home and total loan plus 10% of the home price

• The full amount of Account II from both accounts but based on the maximum amount that is allowed to be withdrawn

• The amount to be withdrawn must not be less than RM500.00

 

How much can a home buyer withdraw if applying for 100% loan?

• 10% of the home price

• The full amount of Account II (if amount is not less than RM500.00)

How much can a home buyer withdraw with no home loan?

• Amount of the home price plus 10% of the home price

• The full amount of Account II (not less than RM500.00)

(Information retrieved from KWSP website. For more information such as the required documents, please visit http://www.kwsp.gov.my)

 

Things to do before buying a property

• Take time looking around at available properties

• Shop for the best mortgage loans and packages

• Pre-check your income, credit, and assets to know your credit score, or the amount of loan that you handle

• Make a realistic budget on your monthly instalments

• Have a long term plan on paying your home loan instalments

• Read and understand the fine print prior to signing the dotted line

Things to look out for when viewing property

• Check the quality of buildings and get a feel of the area

• Check the surroundings while anticipating the changes likely to happen

• Check the roof, ceiling and walls and watch out for water marks, leaks.

• Check the floor for damages caused by water and the doors and windows for rotten wood and cracks in glass surfaces.

• Keep an eye out for termites and other pests particularly in wooden areas.

• Test electrical outlets.

• For renovated areas, request from the seller a copy of the local town council’s approval for the renovation works.

 

To Buy or To Rent

There will come a time in your adult life when you will have to make one of your biggest financial decisions. That is, to buy a home or to rent one. There are many variables to consider when it comes to choosing between buying a home and renting one. Be it owning a home or renting a place, each has its own advantages as well as disadvantages associated with them. While having a permanent roof over your head is definitely a good idea, mortgage financing has since become difficult especially with today’s home prices. On the other hand, renting a home allows you the freedom to uproot easily should the neighbourhood is not as desired.

We have put together some factors for you to consider for both buying and renting options, breaking down the pros and cons for each option.

Top 5 considerations for buying 1st property

Rent

  • PROS
  1. Low Level of Commitment

Renting gives you the flexibility of changing your living space and environment every now and then. You can move any time, before or after your lease expires, with the former option requiring the forfeit of your deposit.

  1. Low Maintenance

Renting a home is certainly a cheaper choice, more so if you are sharing the rental with other people. Besides, property taxes and maintenance fees will be the least of your worries as it is your landlord’s responsibility, not yours.

  1. Lower cost upfront

Tenants usually pay a security deposit of two to three months’ gross rental and another half a month of rent as utility deposit. Rent is usually paid one month in advance.

 

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  • CONS
  1. Limited Décor Flexibility

Landlords usually limit the extent to which cosmetic alterations can be done to your rental home. Landlords generally try to refrain from doing extra work into making the rental home rentable again as most turnover rate of new tenants is high.

  1. No Equity

Your rental home only provides you with a place to live hence you do not get to build equity. Your monthly rent payments are not an equitable long-term investment and thus will not provide you with an asset to sell when you are ready to move.

  1. Instability

Rental home is for you to stay on a temporary basis only and the landlord has the capacity to remove you with a 30-day notice, should he intend to sell or take back the house.

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Buy

  • PROS
  1. Pride of Ownership

Perceived as the number one reason why everyone aspires to own a home, home ownership provides you and your family a sense of stability and security. It is an achievement after all. Additionally, as opposed to rental homes, you are allowed to do anything you deem fit to your home.

  1. Potential Appreciation

Although largely unpredictable, real estate has consistently appreciated over the years. Therefore owning a home is like making an investment in your future.

  1. Gain Privacy

You are the owner of your home, so no owners will come knocking on your door to check on you and the house. Thus you have nothing to worry about with your newfound independence in your own property.

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  • CONS
  1. Hefty Down Payment

One of the first steps to owning a home is to pay a substantial amount of down payment, which is at least 10% in cash.

  1. Less Mobility

As a homeowner, you will most probably need to sell your current home first before being able to buy a new one, which subsequently results in a longer delay in moving homes or environment.

  1. High Maintenance

You will be responsible for all the upkeep of your home, in which maintenance works might include inexpensive repairs to costly repairs.

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Top 5 Considerations for Buying Your First Property

 

 

Top 5 considerations for buying 1st property

Buying a home is a huge commitment, so make sure you are ready before making that big leap. Evaluate to see if you have the capabilities, or the need to purchase a home. Check out mortgage calculators to see how much are your monthly loan repayments. As a general rule of thumb, monthly loan repayments should not exceed 1/3 of your monthly income.

Why do you buy a property?

People buy properties for many different reasons. These reasons will influence the type of property that would be suitable for you. For example, a studio apartment would be ideal for a single working adult who wants to have a place of his own. However, a bigger apartment would be more suited for a newly married couple.

If you have just welcomed your first child, then you might want to opt for a landed residential property with more space for your child to play and grow. Then, there are also investors who seek out specific properties to fulfil their investment goals. Whatever your reason may be, it is crucial to find a property that suits your unique lifestyle and needs.

Who can buy a property?

In Malaysia, as long as you are a citizen aged 21 years old and above, you can purchase any property in the country. However, there are certain properties which are only reserved for Bumiputeras.

How to find a property?

There are several channels to find properties for sale. You can browse through the classified sections in the local newspapers. This medium is also a good source to find newly launched properties in the market.

Another option is online property portals. Some of these internet property portals such asPropertyGuru allow you to customise your search according to location, type, price, and size, which makes it much easier to find the property you want. Alternatively, you can also hire a property agent to do the legwork for you.

Picking the right place

Location is the key to finding the perfect property. Ideally, your house should not be too far from your work place. This would help you cut down on travel time and expenses. For those who depend on public transportation, finding a house near a train station or bus stop would be great.

You also need to consider the amenities in the area. Is it near shop lots, eateries or clinics? Young working adults might want a place in town where the popular entertainment spots are mostly located. For families with children, you may want your home to be near some reputable schools. It is also good to check that the neighbourhood you pick is safe and has a good reputation.

You would want a property that will increase in price, and the factors stated above will definitely help with the appreciation in value of your home. Another notable factor is to see if there are any on-going or upcoming developments in the surrounding area of the property you intend to purchase. Based on the fundamentals of supply and demand, an over-supply of houses will cause slower appreciation in prices. Hence, be sure to do research on developments surrounding your property area that can potentially affect the price of your home.

When to buy?

Like all major decisions in life, you would want to plan ahead before purchasing a property. If you are buying a newly launched house, it will take at least two years to complete. Buying an existing house would mean you can move in almost immediately but you might also need some time for repairs or renovation. The waiting period must be factored in to determine the timing of your purchase.

Then, there is also the age factor. Most financial institutions only offer a housing loan tenor of up to 35 years or a maximum age of 65 years old for the borrower. Based on this calculation, it is best to buy your first property before the age of 30 so that you can benefit from the maximum loan tenure.

The content of this website is made available for informational purposes only. This website does not provide specific legal or investment advice.