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1) Do you have enough for the upfront costs?
In Malaysia, most banks offer up to 90% of the property’s price (margin of financing) for your first two residential properties. If you receive that 90%, you need 10% cash to pay for the rest of the property’s price.
Say you’re targeting to buy a condo in Cheras for approximately RM400,000, you must have a minimum RM40,000 to pay upfront, be it from your savings or money from your parents, siblings or partner.
2) Do you have extra cash for miscellaneous fees and charges?
First-time home buyers may not know it; but buying and financing a home takes more than just the deposit and the loan, it also involves miscellaneous fees and charges that include, among others:
1. Stamp duty for transfer of ownership title (also known as memorandum of transfer or MOT)
2. Sale & Purchase Agreement (SPA) legal fees & disbursement fee
3. Loan Agreement (LA) legal fees & disbursement fee
4. Stamping for LA
5. GST 6%
To put things into perspective, a home valued at RM400,000 with 90% margin of financing comes close to about RM20,000 in fees and charges – which will have to be borne by you, the buyer.
Unless you have the financial muscle to buy a property with cash upfront (in which case, this article probably wouldn’t apply to you), you’ll need to secure a loan from a bank or a financial institution to help pay for your home.
Based on the current market rate of 4.2% to 4.4% p.a. interest for a standard home loan, you will need to pay a minimum of RM1,760 per month over the next 30 years for a 90% loan to finance a RM400,000 home. To quickly calculate the monthly installments charged by banks of Malaysia for a home loan of any value, you can use online calculators.
As most financial experts recommend that you allocate no more than one-third of your total income to pay off your home loan, this means you or your household should have an income of at least RM5,280 per month to afford the RM400,000 home.
Take note that Malaysian banks generally allow you to hold loans (including commitment for car loan, personal loan etc) of up to 80% of your income if you have a relatively good credit score, so you can always choose to increase your monthly installment and shorten your loan term. But make sure you’ve done the math and understood the financial implications before you commit!