How much money do you need to buy a house in Malaysia?
Here’s something they should teach in college but don’t: how much money do you need to buy a house in Malaysia? Many first-time homebuyers sign on the dotted line when they feel they can afford the monthly loan payments without being aware that that is just the tip of the housing costs iceberg. This can seriously jeopardise their financial stability. As a Malaysian aspiring to buy a house, here are the costs you need to know about to determine if you are financially ready to make that commitment.
- Earnest deposit
Also known as the booking fee, this is 2% – 3% of the property price and is paid when you sign the Letter of Offer. The money will be held in escrow until the time to transfer it to the seller when the sale goes through. If it doesn’t, this money will either be refunded or forfeited, depending on the terms in the Sales & Purchase Agreement (SPA).
- Down payment
In Malaysia, the down payment is typically (but not always), 10% of the property price as most banks offer loans up to 90% of the property price for your first two residential properties. This will be paid in cash to the seller. If you have already paid the earnest money, you just need to top up the amount to complete the total down payment value when you sign the SPA.
Miscellaneous fees and charges
- Legal fees, stamp duty and disbursement fees
You need to engage a lawyer to prepare the SPA, loan agreement and handle the mountain of paperwork that comes with buying a house. The fees for the SPA follow a scale rate which on average is 3% – 4% of the purchase price in the SPA. The fees for the loan agreement also follow a scale rate and averages on 2% – 3% of the loan amount.
- Valuation fees
If you are buying a sub-sale property, the bank will require a property valuation report before you can apply for a loan. The cost for this report is around 0.3% of the property value.
- Memorandum of Transfer stamp duty
After the SPA is signed, the lawyer will make sure that the seller has fulfilled all their obligations including paying any outstanding bills before applying to transfer the property from the seller to you. This will cost you around a few hundred Ringgit.
- Mortgage insurance
It’s not compulsory to get a mortgage insurance but think of it as a life insurance on your loan. It offers peace of mind and helps to settle the outstanding loan if a death, illness or disability happens. The premium amount depends on your loan tenure, monthly instalment amount and your age.
Other extra costs
We’ve all heard of someone who bought a house and then later discovered defects that cost a fortune to repair. Often it is because home inspection is not a standard practice in Malaysia and the buyer relies on his untrained eye to assess the property. It will cost a few hundred Ringgit to perform a professional home inspection and can be done before or after buying the house.
There are two kinds of taxes you need to pay when you become a homeowner in Malaysia: the cukai pintu and the cukai tanah. The cukai pintu is paid twice a year to the local authority for the upkeep of public infrastructure within its jurisdiction. The cukai tanah is paid once a year to the relevant land office. The rates for each tax depend on the property type and location.
- Utility bills
These are monthly payments for your property utilities including electricity, water, sewage, internet and so on. If you are buying a sub-sale property, you can request the seller for a copy of the monthly bills to get an idea of the costs you will be dealing with.
- Insurance for your home
It’s not just people and vehicles that need insurance. Your home does too. Homes are vulnerable to robbery, natural disasters and vandalism. Most major insurance companies offer a range of packages so shop around before you decide on the coverage you want. The cost will depend on a variety of things like the value of the house, the insurance amount and so on.
- Renovation and moving in
The costs for renovations depend on how much your budget can stretch to meet your dreams. If your new house is completely bare, you’ll have to start from scratch to make it into a home. Even if you’ve bought a sub-sale property, the furnishings and fixtures may still require some updating. Then there are the costs of moving in. Are you going to hire professional movers? Are you going to do the pre-move clean by yourself or get a cleaning company to do it?
- Maintenance fee
Escalating crime rates in most urban areas have prompted house-buyers to purchase gated-and-guarded properties for an added sense of safety. These places also come with amenities like pools, gyms and parks which are shared by the residents. To maintain all these common areas, every owner has to pay a monthly maintenance fee to the Joint Management Body or Management Corporation. The amount for the maintenance fee is calculated per square feet.
So if you are looking to buy a home soon, please consider all the cost related to buying a home before you make the ultimate decision.