Are You Financially Ready For Your First Property?

Most people think that buying a property only involves a hefty amount of money for the downpayment, but did you know that you also need to consider the additional miscellaneous fees, obtaining and paying for a home loan, plus the health of the credit scores?
buying property in malaysia, buying a house, downpayment, stamp duty, CTOS score, ccris, ccris report, home loan, home loan malaysia

If you’re like most people, owning a property that you can call your own is one of the biggest life goals you could have.

But it’s also going to be one of the most expensive, and you really can’t just go and buy the first unit you see that catches your fancy!

There’s a lot of financial planning and research that needs to happen before you commit to buying a property in Malaysia.

Here are a few things that you should take note of when planning for your dream home.

 

1) The downpayment: Can you afford it?

Before you buy a property in Malaysia, you need to figure out if you can afford the downpayment.

buying property in malaysia, buying a house, downpayment, stamp duty, CTOS score, ccris, ccris report, home loan, home loan malaysia

The downpayment is usually 10% of the total purchase price of the property, or the difference between your loan amount and the purchase price. 

While you can get a home loan for the property that you want, most banks in Malaysia can only offer up to 90% of the property’s price.

If you get approval for that 90%, you’re going to need to come up with the remainder out of your own pockets to cover the rest.

For example, if you’re eyeing a condominium unit with a price tag of RM550,000, you’ll need a downpayment of RM55,000.

Home Loan Pre-Approval (HLPA)

Relevant Solution

Home Loan Pre-Approval (HLPA)

 

2) Additional miscellaneous fees

If this is your first time buying property in Malaysia, you need to know that purchasing one doesn’t just end at having enough money for the property itself.

buying property in malaysia, buying a house, downpayment, stamp duty, CTOS score, ccris, ccris report, home loan, home loan malaysia

There are actually additional fees and charges, which include:

  1. Fees for the transfer of the ownership title
  2. Legal fees for the Sale and Purchase Agreement (SPA)
  3. Legal disbursement fees for the SPA
  4. Legal fees for the loan agreement
  5. Legal disbursement fees for the Loan Facility Agreement
  6. Government tax on the legal agreements
  7. Bank processing fees for the loan

However, you might be glad to know that just last year, it was announced that that those buying a property in Malaysia for the first time will be exempted from stamp duty for the following:

  • Transfer of ownership title  
  • SPA
  • Loan agreement

 

3) Obtaining and paying off a home loan

In most cases, unless you have enough savings or assets to pay upfront for your property in full, you’re going to need a home loan from a bank.

When you take out a loan, you’ll need to pay it back, with interest. The current market rate for most standard home loans is 4.5% per annum.

buying property in malaysia, buying a house, downpayment, stamp duty, CTOS score, ccris, ccris report, home loan, home loan malaysia

If you need to compute how much your monthly instalments will be, you can make use of our home loan calculator to get the numbers. 

When planning how much to set aside for the instalments, the advice from financial experts is that you shouldn’t exceed one-third of your income.

For example, if you’re earning RM3,000 a month, it’s advisable that you keep your monthly home loan commitment to not more than RM1,000.

Note that your Debt Service Ratio (DSR) is one of the major factors that will determine whether your home loan gets approved or not.

PropertyGuru Tip
The lower your DSR, the better your chances. A good number to have is between 30% and 40%.

Your DSR will be calculated like this:

(Total monthly commitments + mortgage loan you’re applying for) / Net income

Want to receive greater assurance on securing a loan for your new home? Check out our Home Loan Pre-Approval (HLPA) here, with a 99.9% accuracy rate!

 

4) Check your credit score

Apart from your DSR, your credit score is extremely important when you want to apply for any kind of financial product from a bank.

buying property in malaysia, buying a house, downpayment, stamp duty, CTOS score, ccris, ccris report, home loan, home loan malaysia

At its core, your credit score is an indication of how healthy your finances are – banks don’t want to lend money to someone who will default on the loan. 

This score is calculated based on information taken from both CCRIS and CTOS

  • Payment History: How prompt you are with loan repayments, or whether you’ve missed any payments
  • Amount Owed: How many credit facilities you have and the amount owed
  • Credit History Length: How long you’ve had a credit facility (either a credit card or loan)
  • Credit Mix: What kinds of credit cards and loans you hold
  • New Credit: Whether you’ve been recently approved for new credit facilities

If you have a good credit score, most banks allow you to hold loans of up to 70% of your income. This gives you the option to have higher monthly instalments, which makes your loan term shorter.

You can also leverage that score to get better deals from banks, such as lower interest rates or more flexible payment periods.

One of the easiest ways to bring up your credit scores is to make sure you pay all your bills on time. 

 

To those who are still confused about the two types of credit scores there are, you can read all about CCRIS and how to get your CCRIS report here, or alternatively, you can also check out this simple guide to the CTOS score and how you can improve it.

Read Next

Get expert advice for every question you can think of!

Explore AskGuru and gain exclusive access to thousands of answers from our expert and agent community. 💬⭐👍

Feedback