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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Malaysia ranked 19th in the world’s most investor-friendly

Jun 17, 2014

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Malaysia has moved up five spots in a survey from The Economist Intelligence Unit that identifies the most business-friendly cities and countries around the world.

Kuala Lumpur is now ranked 19th in the Business Environment Rankings report – up from 24th place in the previous report.

Singapore remained top for the second consecutive report, followed by Switzerland and Hong Kong in second and third place respectively. Thailand’s ranking also increased – from 38th to 34th place.

Asia is a diverse region, the report noted, and there are large differences between the overall scores and global rankings of its top four countries (Singapore, Hong Kong, Australia and New Zealand) and its poorest performers (Bangladesh and Pakistan, in 69th and 74th place respectively, out of the 82 countries ranked).

The gap reflects the widely varying levels of economic development and political stability between these countries, alongside sharp differences in the underlying structure shaping laws and regulations of foreign investment.

Asia’s best performers have several factors in common: a favourable policy environment – particularly for finance and foreign investment – with competition policies that encompass international best practice. Despite tensions in some countries over immigration from poorer neighbours, migration of skilled labour within Asia will remain relatively unimpeded and overall labour market conditions will continue to compare extremely favourably to other regions, with companies able to expand or reduce their workforce with ease, as well as benefitting from freedom to set wages and hire foreign nationals.

Infrastructure remains a relative weak point for Asia, with only Singapore ranking among the world’s top 10 in this category (compared with other areas of the business environment, faring relatively poorly, in 7th place). Australia, Japan and New Zealand trail in joint 14th place, with Hong Kong coming in at 18th.

While some of the region’s infrastructure is excellent, particularly in telecoms and air transport, other areas require investment to improve distribution networks and utilities provision, as well as lower office rents.

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It is designed to reflect the main criteria used by companies to formulate their global business strategies, and is based not only on historical conditions but also on expectations about conditions prevailing over the next five years.

 

Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg

 

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