Buying a property is probably the biggest decision anyone will ever make in their lives, aside from choosing their life partner. It requires strong financial standing, and to a certain extent, knowledge of the property market.
However, many are faced with indecision when it comes to purchasing their first property. If you are one of those, find out here if you are ready to buy a property. Otherwise, if you are unshakeably sure of your decision, read on to find out what is the first step you should take.
Understand Your Current Financial Standing and What You Can Afford
With the increasing cost of living in Malaysia, the first step a property buyer should take is to understand their own finances. Within the year 2016 itself, petrol prices increased 3 times, and within the first quarter of 2017, petrol prices took another significant hike.
In lieu of the price hike and weaker Ringgit, consumer goods have been increasing in price noticeably. Hence without strong financial standing, property buyers without a comfortable margin of savings after paying their monthly mortgage loan will find themselves struggling.
So before you decide to buy a property, the most important thing to do is to find out what you can afford. To do this, you will need to find out your nett income. Visit this website, enter your salary and bonus (if applicable) and they will auto calculate your nett income for you.
Once you get your nett income, minus all your deductibles such as car and education loans, meal expenses and so forth, and then minus another 10% from your total nett income for savings and see how much you are left with – and that will be approximately how much you can afford to pay for your new home.
So for example if your nett income is RM3,000 per month, first deduct 10% which will be RM300 as your savings, and then minus off all your other deductibles. Otherwise, you can download PropertyGuru’s simplified pre-created expense calculator here: http://bit.ly/2kaPVyu
The Next Step
Once you find out how much you can afford to pay monthly, you can now look for a home realistic to your budget. First, visit the PropertyGuru Mortgage Calculator here.
Depending on how much is the total amount you can afford to pay monthly for your mortgage instalment, enter a rough amount into the “Loan Amount”. Do note that the maximum Loan Amount from the banks are only 90%, so if you aim to buy an RM500,000 property the loan amount should be RM450,000.
Next, use the slider to change it to the estimated interest rate which is usually between a range of 4.55% and 4.85%, depending on how low your bank is willing to go. The last step is to use the slider for Loan Term to adjust the number of years you wish to pay the loan for.
The dynamic graph on the right will now indicate your estimated monthly repayment. If it is too high, lower your Loan Amount until the monthly amount fits your budget.
Now that you have your estimated property budget, you will be able to gauge what type of home you can afford, and contrary to popular believe, there is a home for every income range.
Next up in the Property Buyers’ Guides will be how to clean up your Financial Records – the most important factor in you obtaining your mortgage loan.
Diane Foo Eu Lynn, Senior Content Specialist at PropertyGuru, wrote this story. To contact her about this or other stories email diane@propertyguru.com.my
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