Are You Financially Ready To Buy A House In Malaysia?
For aspiring Malaysian home owners, here are 3 things to determine if you’re financially ready to undertake this life-changing endeavour:
1. Do you have enough for the upfront costs?
Most banks offer home loans of up to 90% of the property’s price (margin of financing) for your first 2 residential properties. So you’ll need to prepare a 10% down payment to cover the rest of the price.
2. Do you have extra cash for miscellaneous fees and charges?
Buying a home takes more than just the deposit and the loan. It also involves a list of other charges that include:
| Stamp duty for the transfer of ownership title (also known as a memorandum of transfer or MOT) | Stamp duty Fee 1% : For First RM100,000 Stamp duty Fee 2% : next RM 400,000 Stamp duty Fee 3% : next RM 500,000 Stamp duty Fee 4% : on subsequent amount |
|---|---|
| Sale & Purchase Agreement (SPA) legal fees | For The First RM500,000.00 – 1.0% (Subject to a minimum fee of RM500.00) For The Next RM500,000.00 – 0.80% For The Next RM2,000,000.00 – 0.70% For The Next RM2,000,000.00 – 0.60% For The Next RM2,500,000.00 – 0.50% |
| Stamping for SPA | Less than RM100 |
| SPA legal disbursement fee | Ranging between RM 1000 – RM 1500 |
| Loan agreement legal fees | For The First RM500,000.00 – 1.0% (Subject to a minimum fee of RM500.00) For The Next RM500,000.00 – 0.80% For The Next RM2,000,000.00 – 0.70% For The Next RM2,000,000.00 – 0.60% For The Next RM2,500,000.00 – 0.50% |
| Stamp duty for loan agreement | 0.5% of loan amount |
| Loan Facility Agreement legal disbursement fee | Ranging between RM 1000 – RM 1500 |
| Valuation Fees for Completed Properties | First 100,000 – 0.25% Residue up to RM 2 Mil – 0.20% |
| Government tax on legal agreements | 6% of total lawyer fees |
| Bank processing fee for loan | RM50 to RM300 |
*Note: The percentages are based on recommended numbers and industry averages. Actual figures may differ.
Here’s what your major initial costs could look like:
| Purchase price | Down payment (10%) | SPA legal fees | Stamp duty on MOT | Loan agreement legal fees | Stamp duty for loan agreement | Total |
|---|---|---|---|---|---|---|
| RM300k | RM30,000 | RM3,000 | RM5,000 | RM3,000 | RM1,500 | RM42,500 |
| RM400k | RM40,000 | RM4,000 | RM7,000 | RM4,000 | RM2,000 | RM57,000 |
| RM500k | RM50,000 | RM5,000 | RM9,000 | RM5,000 | RM2,500 | RM71,500 |
| RM600k | RM60,000 | RM5,800 | RM12,000 | RM5,800 | RM3,000 | RM86,600 |
| RM700k | RM70,000 | RM6,600 | RM15,000 | RM6,600 | RM3,500 | RM101,700 |
Home Ownership Campaign (HOC)
Home Ownership Campaign (HOC) 2019 is a Government initiative whereby Malaysian house-buyers will be exempted from stamp duties for purchase of residential units made between January to December 2019.
Subject to Stamp Duty (Exemption) (No. 2) Order 2019 gazetted vide P.U. (A) 81 on 19 March 2019 and Stamp Duty (Exemption) (No. 3) Order 2019 gazetted vide P.U. (A) 82 on 19 March 2019, stamp duty exemptions are given for residential properties which are sold during the period between 1 January 2019 to 31 December 2019.
The stamp duty exemption is applicable to the following in relation to the purchase of residential property by an individual Malaysian citizen:
Instruments of Transfer
| House Price | Stamp Duty (1 January 2019 - 31 December 2019 |
|---|---|
| First RM100,000 | Exempted |
| RM100,001 - RM500,000 | Exempted |
| RM500,001 - RM1,000,000 | Exempted |
| RM1,000,001 - RM2,500,000 | 3% |
Instruments on Securing Loans
| House Price | Stamp Duty (1 January 2019 - 31 December 2019 |
|---|---|
| Up to RM2,500,000 | Exempted |
3. Can you afford the monthly instalment?
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 (based on 4.5% interest rate, 35-year tenure)
| Purchase price | Down payment (10%) | Monthly instalment |
|---|---|---|
| RM300,000 | RM30,000 | RM1,278 |
| RM400,000 | RM40,000 | RM1,704 |
| RM500,000 | RM50,000 | RM2,130 |
| RM600,000 | RM60,000 | RM2,556 |
| RM700,000 | RM70,000 | RM2,982 |
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 RM6,390 per month to afford an RM500,000 home.
Start off by using Hong Leong Bank’s home loan calculator, you can easily calculate your loan eligibility and your monthly repayment!
Taking the leap to become a home owner is a major financial milestone. Find out available schemes to help you own your home.
For more ways to DuitSmart and get in better financial shape, go to www.hlb.com.my/duitsmart
This article is brought to you by Hong Leong Bank in partnership with iMoney.my.
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