How to buy a home in 7 steps in Malaysia
Buying a house will probably be the biggest purchase of your life. Making the leap to be a homeowner is an exciting yet daunting experience. The process can be overwhelming if you don’t know what to do. To help you get started, we’ll explore how you can buy a home in 7 steps in Malaysia.
- Check your budget
Before you do anything else, work out if you can afford a house in the first place. In Malaysia, the standard costs are:
– Earnest deposit 2% of the SPA price
– Down payment: 10% of the SPA price (or balance 7%)
– Legal Fees: approximately 0.4% depending on SPA price
– Valuation fee (if required): around 0.3% of the property value
– Bank processing fee: RM50 – RM200
On top of that, most financial experts recommend that your monthly loan instalments (including taxes, fees and insurance) should not exceed one-third of your household income.
Finally, you need to consider costs for disbursement fees, fluctuating interest rates, renovation, new furniture and appliances.
- Verify your loan eligibility
Check with the banks how much you are allowed to borrow. They will require you to submit a copy of your IC, latest EA form, recent three months payslip and banking transactions. They will use this information to check your financial situation and determine how much they can lend you.
However, keep in mind that just because the banks are willing to loan you a certain amount, doesn’t mean you can afford it. It ultimately comes down to your budget but having that pre-approved home loan will give you an idea on the price range of properties that you should be viewing. It also boosts sellers’ confidence that you have the financial resources to make a purchase.
- Engage a real estate agent
A real estate agent is a valuable partner to have when you are buying a home. The best part is you don’t have to pay a cent because they are getting their commission from the seller. They are privy to information on houses and locations which are not commonly known to the public. You will benefit from their knowledge of the area, negotiation skills and guidance throughout the home buying process.
- Start house hunting
By this time, you should have an idea of the location, price range and type of home to buy. Narrowing down your search to an ideal neighbourhood will make it easier to choose a home. Then decide what are the essential-must-haves and non-essential-but-nice-to-have things for you. If you’re having trouble here, speak to your real estate agent about it. After all, it’s their job to help you make the right choice.
Once you have a few potentials, your real estate agent will arrange for a viewing. Take your time here. View as many houses as you need until you find The One. Scrutinize each house carefully and take note of things like structural defects, leaking roof, how busy the street is, etc. To avoid getting confused at this stage, bring someone you trust for a second opinion, take photos and notes of every house you visit.
- Make an offer
Once you have decided on a house, discuss with your real estate agent and make an offer on the property to the seller based on the local market condition and the asking price. The seller will either accept, reject or propose a counter-offer.
A counter-offer is quite a common scenario and your real estate agent will have the expertise to conduct a negotiation. For example, if a seller is asking for RM 500,000 but the property valuation is just RM 400,000 then you should consider that a 90% loan will come up to RM 360,000 only. Are you going to fork out the remaining money or offer a lower price? When negotiating, it is also important to look beyond the offer price and consider different terms as well like waiving contingencies or raising the earnest money. It is up to you and the seller to decide what will make you both walk away feeling satisfied.
- Closing the deal
When there is a final agreement on the purchase price, you will enter the closing process of home buying. In Malaysia, this can take between 3 – 5 months and you’ll need to complete a series of steps as such:
– Hire a lawyer to draft the SPA and loan agreement. Get someone who has your best interests at heart. If you’re buying directly from a developer, they may offer “free legal services”. Remember that they are acting on behalf of the developer who is paying their fees.
– Apply for a loan. After reviewing all the banks, pick the one with the lowest interest rates, the most reasonable fees, the highest loan amount it offers you and the best service. The bank will also order a valuation of your property.
-If you have a contingency clause, conduct a home inspection and request for repairs.
-Sign the Letter of Offer and pay earnest deposit of 2% – 3%. This money will be held in escrow while the rest of the loose ends are tied up.
– Sign the SPA and pay the down payment balance. This happens between 2 – 3 weeks after signing the Letter of Offer. During this time also, your lawyer will do the appropriate title searches.
– Sign the loan agreement and other documents. Depending on the circumstances of your sale, you may have to get an insurance policy, Deed of Mutual Covenant and the Memorandum of Transfer.—
– Payment of balance purchase price. At this point, your lawyer will ensure all the remaining payments and documents are in order before the balance purchase price is transferred to the seller’s lawyer. Keep track of the progress so that you won’t be penalised with late payment charges which is three months after the SPA date.
- Get ready to move in
The vacant property and the keys must be handed to you within the timeframe stipulated in the SPA. Before accepting the keys, request for utility receipts that show all the outstanding bills have been paid. Once the keys are in your hand, you can start planning for renovations and finally, a housewarming party.