Buying a new house is an exciting journey to embark on. At the same time, it can feel like a minefield to navigate, especially for first-timers. There is a multitude of things to consider. However, we are here to make it easier for you with this guide on do’s and don’ts when purchasing a home.
1. Research, research, research!
As a first step towards buying a home, you will need to find out what you want from a property.
Are you buying a house as an investment for rental or staying in? From there, decide what characteristics are essential to you and list out the must-haves and nice haves.
Some questions you might want to consider are the type of property, neighbourhood, and facilities provided. These questions can provide a solid base for you to start your search.
2. Set a proper budget
The most important thing to determine is your budget. Essentially, you need to know how much you can afford monthly and the upfront amount needed to purchase a property.
Multiple payments revolve around buying a house, with quite a few of them being upfront payments that you need to make. We list them as follows:
The down payment for a property is usually fixed at a minimum of 10%. Subsequently, the amount will depend on how much the bank is willing to provide a loan for; if they only provide a loan for 80%, for example, you will then need to put a down payment of 20%.
As Malaysians with EPF, you have the option to utilise funds in your EPF Account 2 to help fund the down payment.
Sale and Purchase Agreement (SPA, SNP or S&P) Fees
The Sale & Purchase Agreement is a document that encompasses the blueprint of the property you are buying. It will be charged according to price tiers based on the price of the property itself.
Loan Agreement Legal Fees
Legal Fees, aka Lawyer Fees, are charged for the lawyers creating the legal documents. These fees are also charged based on a price tier according to the amount of facility granted by the bank.
As these documents need to be submitted to the governing body, you will also be looking at 0.5% of the total loan amount Stamp Duty charges.
Additionally, there is a 6% government tax on the fees and reimbursement that will be charged.
Stamp Duty on Memorandum of Transfer (MOT)
Finally, upon completion of the development, you will need to pay the Memorandum of Transfer fees to transfer the property ownership to you.
This fee is also charged based on a price tier according to the price of the property.
3. Take advantage of government schemes
If you are a first-time house buyer, there are multiple government schemes you could make use of. The various initiatives cover salary ranges from between RM2, 500.00 a month to up to RM10, 000.00. A brief overview of some of the government schemes are as below:
4. Understand the location
You must understand the features that will benefit you when you are purchasing your new house. Bear in mind that investment property and an own-stay property should have different requirements.
For example, if you are buying a house as an investment, you may want to be near office buildings or educational institutions to increase your property value. For your own stay, you might not want to be in such a busy area.
Consider the safety of the area and proximity to amenities, i.e. shopping malls, clinics, places of worship, and location accessibility.
5. Take advantage of PENJANA
There are various incentives in the National Economic Recovery Plan (PENJANA) that provide financial assistance or relief to home buyers.
The Home Ownership Campaign (HOC) reintroduction provides a stamp duty exemption for the purchase of residential homes between RM300,000 and RM2,500,000. Exemption for the instrument of transfer is to a maximum of RM1,000,000 of the home price. As for the stamp duty exemption, it is applicable for loan agreements with Sales and Purchase Agreements signed between June 1, 2020, to May 31, 2021.
Usually, there is a 70% margin financing limit applicable for third housing loans for houses priced at RM600,000 and above. Under a PENJANA initiative, this margin will be uplifted during the period of HOC.
6. Conduct a full inspection
Even with the current restrictions, never agree to purchase a property you have not seen for yourself. If anything, you should wait until it is possible to do so and then conduct a full inspection.
The following are things you should look out for:
Surrounding area – Take note of any undesirable things such as sewerage or perhaps even multiple long-term constructions that may create noise pollution. Also, try to visit during peak hours so you can ascertain the traffic conditions of the area.
Neighbourhood – Especially important if you are purchasing your home for your own stay, take a look around the neighbourhood and your neighbours (if any) to assess your comfort level.
View – If this is important to you, best conduct your inspection in the daytime and take a good look at anything that can be easily missed at night. For example, many people do not like any graveyards in sight, so it is best to check this out first.
Maintenance – Check how clean the property and how it is being maintained.
Physical condition – Take down notes on any damages or defects to the building. Be sure to check the property for any cracks and leakage.
7. Do not rush
One of the ongoing effects of COVID-19 is declining property prices. Many jumped at the opportunity to purchase houses at this stage. However, buying a property is never something you should rush into.
If you neglect to conduct due diligence “in the interest of time”, you will likely overlook important details, which may cause you to be at a loss. Do not get pressured into purchasing a house. Most times, there will be a similar or better deal in future.
At the same time, do not be too quick to dismiss a property due to small details. Remember, you can always repair or renovate a property if there is a minor feature you do not like.
8. Do not change jobs
Stability is important when you are trying to buy a new house. When you apply for loans, banks are looking at the stability of your income. Changing your job at this stage may affect your loan approval or percentage as they can no longer see the fixed pattern. This is even more so if you decide to start a new business on your own, or take a job in a different field.
9. Do not get behind on payments
Many loans require at least a one-year on-time payment for all your bills in order for you to be approved. Getting behind on payments when you are planning a house purchase is a huge no-no. It will drop your credit score and put your loan in jeopardy.
10. Do not co-sign another loan
Co-signing another loan is essentially you adding one more debt to your list. Although you may think you are just a co-signer, it means that you are liable for this debt as well. It will be added to your overall profile and may affect your own loan.
Are You Ready to Buy a House?
One of the best things you can do is to get a lawyer to help you through this entire process. While there are no laws in Malaysia legally enforcing you to employ a lawyer for your house purchase process, a lawyer specialising in conveyancing will be able to guide you through legalities accurately.
That, coupled with all the basics covered, you will be well on your way to make your house purchase!
Note: This article does not constitute legal advice to any specific case. The facts and circumstances of each and every case will differ and, therefore, will require specific legal advice. Feel free to contact us for complimentary legal consultation.