Purchasing your first house can be exciting, but there are many things to be considered before starting your home-buying process. Before you begin your house hunting journey, read this article to get a checklist that every first-time home buyer should know.
Edited and updated by Anis Shakirah binti Mohd Muslimin
This article was first published in August 2019 and has been updated for freshness, accuracy and comprehensiveness.
Out of all the big-ticket purchases you will make in life, buying your first home may be the most daunting of them all. Anyone who has been through it will tell you that it is a process that requires substantial financial commitment, and one wrong move could be damaging.
Whether you are looking to ditch the landlord for a mortgage, buying for the sake of investment or dream of living independently, here are the six things you need to know before buying your first property.
P. S.: We will focus on other factors in part 2 and 3.
1. Figure out why you want to buy a house - what's your purpose?
There are so many different questions you will have to ask yourself before deciding to buy a house.
Are you buying for your stay or as an investment?
How many people will be staying in it?
How far will you need to travel for your daily commute?
What kind of neighbourhood would you prefer: somewhere chilled and laid back or one that is more vibrant with a bustling vibe?
Once you have determined what sort of home suits your purpose, you will be more focused on where to look and more importantly, what to avoid - the process of buying a property starts even before you decide to buy the property.
Don’t make the mistake of buying without a goal. Determine what your long-term goals are and how homeownership fits into this goal. Perhaps you are tired of the rent payments, and prefer to transform them into mortgage payments? Or maybe you enjoy the idea of owning a home and want to be your own landlord? Maybe you see buying a home as good investment? Figure out what your homeownership goals are to get a better sense of what direction you’d like to take in your homeownership journey.
You could do additional research on the housing market in Malaysia by reading up online, talking to property agents, real estate investors, other homebuyers, your family and friends. The external opinion is helpful because they can give you a neutral perspective on the topic.
No pressure: If you are not financially capable of purchasing a home right now - you can always consider delaying your plans for a few months.
2. Figure out if you have the money to buy a house
Assess your financial health. Before going into the actual planning, do a serious audit of your financial health. Just like other big purchases in life - the price of a property is more than the sticker price. You’ll need to consider both the purchase and ongoing expenses of a home. Make an honest assessment of your finances to see whether you are ready to take this big step, or if you need more time to build up your wealth first.
Generally, you will need enough savings to buy a home because you need money for emergency savings and down payment. Buying a house shouldn’t be up for consideration - yet - if you don’t have enough money for your down payment and at least three to six months of living expenses for your emergency savings.
Will you have enough to spend after deducting your mortgage? Factor in other costs such as food, utilities, car loan and maintenance, entertainment, regular savings, retirement savings, and other miscellaneous items. On top of your 10% down payment, a mortgage payment typically costs a minimum of RM1,000.
Finally, check your credit score, because your credit score is what stands between you and the bank’s decision to approve that loan that you just applied for. If you need a quick refresher, a credit score is a sort of financial report card, and it contains financial information such as outstanding credit, loans, credit card and loan application history, payment history etc. In short, that piece of report carries a summary of all your financial activities throughout your life. Not having a good credit score is bad news for you because that means you either: don’t get your loan approved or your loan interest is sky-high - either way is unfavourable.
When planning the overall cost of your new home, don’t just factor in how big a loan to take and don’t limit it to your monthly payment, because the total cost includes the interest you’ll pay over time. Other considerations include homeowner insurance, maintenance cost, and quit rent.
In Malaysia, quit-rent, or land tax is imposed on occupants of freehold or leased land in place of services to a higher landowning authority, which is usually the government. Your quit rent rate will depend on the type of property. Finally, before you can decide on a budget, you’ll need to find out what the average house prices are in where you plan to live.
3. What type of house suits your needs best?
In Malaysia, there are several residential property types to choose from, with the common ones being apartments, condominiums, bungalows, semi-Ds and terraces. Newer types of properties in the housing market include Loft, SoHo, SoVo, among others. Bottom line: there’s a lot of kinds of houses to consider.
But which do you know works best for you? Each type has its pros and cons, so it depends on your goals and budget.
For some families, having a slightly spacious kitchen is a requirement for them.
4. What features do you want your ideal home to have?
Though you should retain some flexibility and adhere to a fixed budget when choosing your ideal features, it’s fair to want to have your purchase fit both your needs and wants.
Work out a checklist that includes specific items like size of property and neighbourhood, desires and must-haves, and smaller needs like bedroom colour wall, kitchen top, and bathroom layout, for example.
It’s also during this process that you realise that cheap items don’t always equate to good value, and that financing, aka the process of securing a loan, can be a tedious and tiring process.
With that said, some people realise that they might need to compromise on their wants versus needs after getting priced out of the homes or features that they had initially envisioned. It’s best to find a middle-ground.
5. Compare the interest rates from different lenders
In Malaysia, this step typically comes after you have viewed and accepted a house offer. However, it doesn't hurt to do your own preliminary research or ask around for the typical interest rates of different lenders.
Some banks offer great incentive programmes to aid potential Malaysian homeowners. For example, Maybank’s HouzKEY, from what we found, may offer up 2.3% interest rates for selected houses. We recently wrote about the Rent-To-Own Scheme in Malaysia, a programme that gives buyers the option to buy the house they are renting.
Lenders will typically assess your loan eligibility by looking at your total debt, your monthly income, and how long you've been at your current job.
6. Who will help guide you through the purchase?
A competent real estate agent could be the determining factor when closing a deal – at least that’s what we found out from the folks we talked to.
A good real estate agent will make sure the process is as smooth as possible for you and will help you locate homes that are within your needs and price range; they will also meet with you to view those homes.
These professionals will also help you negotiate the best price, make an offer, get a loan, and complete the paperwork.
To avoid any potential pitfalls make sure you work with a good real estate agent with a credible background.
Five incentives for first-time home buyers in Malaysia
Bonus: Aside from the conventional home loans, we listed down various government initiatives to help first-time home buyers turn the dream of owning their own home into a reality.
1. Projek Perumahan 1Malaysia (PR1MA)
This initiative is open to Malaysian citizens, at least 21 years of age (at time of application) who are either individuals or have a family (husband and wife) with a combined household monthly income of RM2,500 to RM15,000. You also need to register for an account with PR1MA on their website and then cast your ballot. A balloting process will be conducted and if you’re successful you can then select your preferred financing option.
Following the increase of income eligibility, the moratorium period where buyers of PR1MA homes are not allowed to sell their units within a given time have been reduced from 10 years to five years..
This initiative plans to provide affordable housing with a starting price of RM198,000, however, home units located within Klang Valley will start at RM255,000.
In terms of financing, there’s the PR1MA HOPE Home Assistance Programme, which offers financial solutions either through the end financing, Rent-To-Own scheme or The Care by PR1MA scheme.
Check out the full deets here.
2. MYHOME scheme
This scheme provides a subsidy of RM30,000 for first-time homeowners to buy a low or medium cost property. To be eligible you need to be a Malaysian citizen, 18-years-old or above, a first-time homebuyer with a salary between RM3,000 to RM6,000. The table below illustrates how the subsidisation works as well as the property price range that is allowed for properties in Kuala Lumpur.
You can apply for the scheme online through the MyHome scheme website or you can also get the form at the Kementerian Perumahan dan Kerajaan Tempatan (KPKT) office in Putrajaya.
3. My First Home Scheme
This scheme assists young adults with a gross income not exceeding RM5,000 a month or RM10,000 a month for joint applicants. Applicants also need to be 40 years old or below and a 10-year moratorium would also apply, so buyers are not allowed to re-sell or transfer ownership of the property except to immediate family members.
Additionally, the property value you’re planning to purchase needs to be between RM100,000 – RM500,000. The scheme allows young adults to get up to 100% financing which means they won’t have to come up with the 10% down payment.
The scheme is for those working in the private sector and applications can be done at any branch of participating banks. For a list of participating banks, check here.
4. Youth Housing Scheme
This partnership between BSN and the government is a special scheme for married youths aged between 25 to 40 years old with a household income not exceeding RM10,000 per month.
BSN bank will provide loans of up to RM500,000 with financing tenure up to 35 years for married youths who are first-time homebuyers. Applicants must be a BSN GIRO or GIROI account holder.
Additionally, the government will also give 50% of stamp duty exemption for the loan agreement. Successful applicants will be eligible for 100% loan amount of the purchase price with an additional 5% of the purchase price to finance for insurance (MRTA). The government will also provide RM200 monthly aid for the first 2 years to ease the financial burden of buyers.
However the scheme is only on a ‘first come first served’ basis as it is limited to 20,000 buyers or for two years, whichever comes first. To apply for the scheme download the application form here then submit it to any BSN bank branches.
5. Rumah Selangorku
These are for the folks who are looking to buy a home within the vicinity of Selangor. The Rumah Selangorku scheme is an effort from the Lembaga Perumahan dan Hartanah Selangor to help Malaysian aged 18 years old or above earning between RM3,000 to RM10,000 to own their first home.
Properties available range from low cost to medium cost not exceeding RM250,000, making it ideal for entry-level homeowners as well as young working adults who are looking to own a house in Selangor. Applications can be made online at their website.
For more tips on how to buy your first home in Malaysia, check out this handy CompareHero.my guide before you embark on purchasing your first home. Happy house hunting!
Buying a property is a major financial investment. This article is the first chapter of a special three-part mini-series within #PropertyHacks. Follow these tips and tricks to make the most out of your investment. Stay tuned for more content!