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Stamp duty and legal fees calculation for SPA when buying a house in Malaysia

Despite what many people think, the cost involved when buying a house is not limited to the 10% down payment. Find out the 7 other costs homebuyers need to consider when owning a house including stamp duty fees, legal fees for the SPA and loan agreement as well as property valuation fees.

Hunting for a dream home is an experience that a first-time home buyer is not likely to forget. However, you might overlook certain critical elements in calculating the total expenditure of acquiring your home as many buyers are likely to focus only on the biggest expenditure involved – the property’s 10% down payment or deposit. You might be further enticed by promotions, discounts and rebates by developers. 

However, there are other important costs in the home purchasing process that you need to factor in, especially towards the end of the transaction. These are variable, third-party fees that are often referred to as closing costs. Ignore them and you may risk financial setbacks and disappointment in realising your dreams of owning a home.

Below are a few significant closing costs that you need to include in your property budget planning: 

 

1. Stamp duty fees

An unavoidable cost in real estate purchases, stamp duty is the tax placed on your property documents during the sale or transfer of the property – as specified under the First Schedule of Stamp Duty Act 1949. The sale or transfer of properties in Malaysia which are chargeable with stamp duty must be stamped within 30 days from the date of the execution (property transaction). The tax includes:

  • stamp duty on the Sale and Purchase Agreements (SPA) of your property – this costs only RM10
  • stamp duty on the instruments of transfer – Memorandum of Transfer (MOT) or Deed of Assignment (DOA)The stamp duty is calculated based on a tiered system as shown in the table below.
  • stamp duty on your loan agreement – a flat rate of 0.5% of the total loan. 

Latest stamp duty fees on the MOT or DOA 

Price TierStamp Duty (% of property price)
First RM100,0001%
Next RM400,000 (RM101,000 – RM500,000)2%
The following amount up to RM1 million (RM500,001 – RM 1 million)3%
Thereafter (> RM1 million)4%

How is stamp duty calculated in Malaysia?

For instance, when purchasing a property which costs RM750,000, you will have to pay a total of:

{(First RM100,000 X 1%) + (Next RM400,000 X 2%) + (Remaining RM250,000 X 3%) } + 0.5% of loan amount (90% of RM750,000) + RM10 for stamp duty on SPA
= {RM1,000 + RM8,000 + RM7,500} + 0.5% X (RM675,000) + RM10
= RM16,500 + RM3,375 + RM10
=RM19,885

Payment of stamp duty for MOT

The Memorandum of Transfer or MOT has to be signed by a new property owner (strata or individual ownership) to transfer ownership of the property from the developer or old owner, for secondary or subsale properties. For an MOT to be valid, the document must be stamped and adjudicated at the Inland Revenue Board and stamp duty paid accordingly. This stamp duty will usually be paid by a law firm appointed by the homebuyer.

Payment of stamp duty can be now done online on the LHDN official website through the Stamp Assessment And Payment System or STAMPS.

Stamp Duty Exemptions in 2024

1) Stamp duty exemption for first time homebuyers

During the recent tabling of Budget 2024, the government announced that it first-homebuyers who purchase residential properties worth between RM500,001 to RM 1 million will enjoy a 75% stamp duty exemption up to 31 December 2023. This stamp duty holiday was increased from the 50% exemption announced in July 2022, under the Keluarga Malaysia Home Ownership Initiative or i-MILIKI.

Besides that, it was announced in end of 2020 that a full stamp duty exemption will be given to both instruments of transfer and loan agreement for the purchase of a first home worth not more than RM500,000 – the home can either be a new-launch or a subsale property:

To receive this exemption, the following criteria must be met:

  • This exemption will be for a SPA that is completed between 1 January 2021 to 31 December 2025.
  • It is only applicable to residential properties, excluding SOHO/SOFO/SOVO types, as well as serviced residences built for commercial use.
  • First-time homebuyers must be Malaysian citizens.
  • The buyer must not already own a residential property; if he/she has inherited a property or was given one (no matter if it’s an individual or joint ownership), then he/she is no longer eligible.
  • The exemption is given at 2 stages of transfer, i.e. from the property developer to a qualifying financial institution/bank, and from the bank to the Malaysian citizen.

2) Stamp duty exemption for property transfer between family members

For the transfer of property by way of love and affection between parents and children, grandparents and grandchildren – Stamp duty on the instruments of transfer of property will be fully exempted, limited to the first RM1 million of the property’s value.

The remaining balance of the property’s value is subject to the existing stamp duty tier and a 50% remission is provided on the stamp duty imposed. This exemption applies for instruments of transfers executed from 1 April 2023 and is only applicable for Malaysian citizens.

3) Stamp duty exemption on abandoned housing projects

A stamp duty exemption also applies to instruments executed by a rescuing contractor or property developer on or after 1 January 2013 but not later than 31 December 2025. This is described as a contractor or a developer who is appointed or approved by the Minister of Housing and Local Government to carry on rehabilitation works for an abandoned project.

The instruments are loan agreements approved by the approved financier and instruments of transfer for the purpose of transferring a revived residential property in relation to the abandoned project.
 

2. Legal fees

lawyer-property-malays

Unless you have a legal background and possess some of the required expertise and knowledge, you are most likely to engage in legal assistance for your real estate purchase. Your appointed solicitor will prepare all the necessary documents and contracts to facilitate the transfer of the property.

The legal fees for preparation of the Sale and Purchase Agreement are calculated as a percentage of the purchase price, varying from 0.25% up to 1% depending on the value of the homes.

How are legal fees calculated in Malaysia?

The legal fee rates in Malaysia are as below:

PRICE TIERLEGAL FEE (% of property price)
First RM500,0001%
Next 500,000 (RM500,001 – RM 1 million)0.8%
Following RM2,000,000 (RM1,000,001 – RM 3 million)0.7%
Next RM2,000,000 (RM3,000,001 – RM 5 million)0.6%
Thereafter (> RM 5 million)0.5%

Say for instance you are purchasing a residential property which costs RM750,000, you will have to pay a total of:

(First RM500,000 X 1%) + (Next RM250,000 X 0.8%) 
= RM5,000 + RM2,000 
= RM7,000 

Note that some developers may absorb the legal fees but you will always need to pay the stamp duty yourself as a buyer. Find out what a lawyer can do for you when buying a house in Malaysia.

 3. Real Property Gains Tax (RPGT)

rpgt-new-2019-malaysia

Beyond owning your own residential property, a first-time homebuyer should also look ahead to the possibility of eventually selling the property in the future.

This might be for a number of reasons – you might want to upgrade, leave the area for a new job, find a home better suited to your preference or just sell it to profit from capital growth when the market is booming. Regardless, disposing your home to a new buyer will entail paying real property gains tax (RPGT). RPGT is a form of Capital Gains Tax in Malaysia levied by the Inland Revenue (LHDN) and is chargeable upon profit made from the sale of your land or real property.

Having some knowledge of RPGT could help you sell your property at the right time and save you a lot of money! 

RPGT exemption in 2022 and 2023

Under the recent Budget 2022, Finance Minister Tengku Zafrul announced that the government will no longer impose Real Property Gains Tax or RPGT for residential property disposals by individuals comprising Malaysian citizens and permanent residents starting from the sixth year. This means that the RPGT rate for property disposals in the 6th year and subsequent years of property ownership is to be reduced to 0%, effective from 1 Jan 2022.

RPGT rates effective from January 1, 2022

RPGT RatesIndividuals (Citizens & PRs)Individuals (Non- Citizens & Foreigners)Companies
Disposal in 1st year30%30%30%
Disposal in 2nd year30%30%30%
Disposal in 3rd year30%30%30%
Disposal in 4th year20%30%20%
Disposal in 5th year15%30%15%
Disposal in 6th year & beyond0% (Reduced from 5%)10%10%

Those who dispose of their home after less than 3 years will be still charged 30% RPGT; 20% in year 4 and 15% in year 5. 

Bear in mind that there are other RPGT exemptions for the following conditions:

  • An exemption of 10% of profits or RM10,000 per transaction for Malaysian citizens and permanent residents (whichever is higher) for these 2 scenarios:

1. If an asset is transferred as a gift by a donor who is a Malaysian citizen and the acquirers are either husband and wife, parent and children or grandparents and grandchildren. This exemption is not applicable for transfers between siblings.
2. Once-in-a-lifetime exemption on the chargeable gain on disposal of 1 private residence by a Malaysian citizen or Permanent Resident (PR).

  • Homeowners who own low or medium-cost housing priced below RM200,000 are exempted from RPGT when disposing of their property.

4. Property agent fees

real estate agent house

If you engage property or real estate agents, especially in securing residential property in the secondary market, their fees will be an additional cost on top of the price you pay for your home. Although most buyers nowadays are aware of this, there are some who do not factor agent fees into the total cost. This could be a setback, especially if you are on a tight budget.

The maximum fee chargeable on services provided by agents on the sale of any land and building is normally 3%, although many brokers and agents charge less than that on a case-to-case basis.

As a buyer, make sure that you negotiate and confirm your estate agent fees before officially engaging them to represent you in any property transactions. This will help when calculating your total cost in advance.

5. Property valuation fees

Unless you’re paying for the property in cash, you’re likely to be looking for a housing loan from banks to fund the purchase. Financial institutions will usually require a valuation of the property before approving the loan amount, and most banks will charge a fee for these valuations.

How are valuation fees calculated?

Similar to the legal fees, the valuation fee for real estate is usually borne by the buyer and is calculated as a percentage of the purchase price.

For first RM100,000.00 =0.25%
Next residue up to RM2 million = 0.2%
Next residue up to RM7 million = 0.167%
Next residue up to RM15 million = 0.125%
Next residue up to RM50 million = 0.10%

Factors which determine your property valuation

Understanding the factors which make a property more (or less) valuable will help to assist purchasing/investment decisions. Usually, a residential property’s valuation is impacted by the following:

Location

The value of a property is generally higher the nearer it is to the city centre.  On the flip side, if the home is within the vicinity of something undesirable such as a cemetery, power stations or a waste disposal area – that could bring down the property’s value.

Accessibility and amenities

The value of a property is generally increased if it is near major highways, public transit nodes such as the MRT and LRT, and conveniences such as clinics and private hospitals, educational institutions, banks and shopping malls, as well as international or private schools.

Maintenance and renovations

This would apply for subsale properties – Valuers will take into account maintenance and renovation works done which enhance the livability and aesthetic value of the property.

Quality of construction

A building that is made of high-quality materials might hold together longer before having any issues, thus these will be valued higher. Homes that were constructed over a decade ago can still fetch a premium price due to the quality of the building materials, workmanship and structural design.

MORE: Is buying a home near the MRT3 circle line a smart move?

6. Home insurance 

MRTA or MLTA?

Most banks will require buyers to purchase insurance on their homes as part of the housing loan package to protect the value of the property. The common option includes:

Mortgage Reducing Term Assurance (MRTA)

MRTA is the most popular and economical option for property loan borrowers and is usually packaged as an option when applying for a home loan at a bank. It is a single premium group term life insurance that pays your outstanding home loan in event of your death or total permanent disability (TPD).

The costs of MRTA are dependent on the age of the borrower (usually the older the borrower, the higher the MRTA) and the total mortgage on the property (usually estimated at 3% to 5% of the total mortgage).

Mortgage Level Term Assurance (MLTA)

MLTA offers repayment of your outstanding home loan as well as a guaranteed cash value back at the end of the scheme. This cash benefit will help keep your family afloat in the event of your death or total permanent disability (TPD). Unlike the MRTA, anyone can be a beneficiary for an MLTA, the policy-holder can nominate any family member to receive the pay-out should something happen to him or her.

An MLTA’s sum assured remains constant or level throughout the policy’s tenure period. The most important thing about this mortgage insurance is that the insurance proceeds are credit-proof and will not be frozen.

Term Life insurance

This is the oldest and most common life insurance which offers your family (beneficiary) a lump sum payment (sum assured) in event of your death or TDP during your policy tenure (similar to MLTA).

However, the premium structure is akin to the MRTA but is more flexible as you and your loved ones will be protected as long as you pay the premium and it can be terminated at any point in time. Policy-holders can also extend the coverage by adding critical illness into the condition in return for a slightly higher premium.

READ: MLTA vs MRTA: Which mortgage life insurance to pick

7. Home renovations

For example, after you have completed the purchase of the house, you might want to change wall colours, doors, floorings, windows, fences, roofing, rooms and other elements of the house to suit your preferences. These could easily add up to your total costs, depending on whether the renovations involved are major or minor.

Here’s a tip: Most experts recommend not spending more than 10% of your home value on renovations. Check out our simple guide on how much does a home renovation cost in Malaysia?

Understanding the Importance of Vacant Possession in Property Transactions

When it comes to real property transactions, the word “Vacant Possession” is frequently used in contracts and agreements. While it may appear simple, its significance cannot be emphasized. Vacant possession is an important term in real estate transactions, and both buyers and sellers must fully comprehend it. In this entry, we’ll take a closer look at what vacant possession is and why it is important.

What does Vacant Possession mean? According to Lexisnexis.co.uk, Vacant Possession can be defined as:

“Property sold with vacant possession must be empty of existing tenants or other occupiers (whether or not occupation is authorized), and all goods and rubbish (subject to the de minimis rule) that substantially prevent or interfere with the enjoyment of a substantial part of the property on or before completion.”

Vacant possession, in the context of property transactions, means that the property must be physically empty and available for the new owner to take immediate possession upon the completion of the sale. In simpler terms, when you purchase a house or a property with vacant possession, you should expect the property to be completely devoid of any occupants or belongings, ensuring a clean slate for your occupancy.

While vacant possession is the norm, there can be exceptions, particularly in cases of tenanted properties or commercial real estate. These exceptions should be clearly defined in the sales contract, ensuring that both parties are aware of the property’s status at the time of purchase.

Understanding the importance of vacant possession is crucial for anyone involved in property transactions, whether as a buyer or seller. It ensures a smooth and legally compliant transfer of ownership while providing peace of mind and a clean slate for the new property owner. When buying or selling a property, always clarify the terms of vacant possession in the contract to avoid potential disputes or misunderstandings down the road. The knowledge of vacant possession is important because it ensures that property transactions proceed smoothly, legally, and to the satisfaction of both buyers and sellers. It helps clarify rights, responsibilities, and expectations, reducing the potential for disputes and complications in real estate transactions.

A Guide to Landed vs High-Rise Properties

Finding the right residential property can be a daunting task – there are so many factors to consider. As to whether a landed or non-landed property is better, this is often a matter of personal preference. We have compiled a list of advantages of both property types to help you make a decision.

Hand holding magnifying glass and looking at house model, house selection, real estate concept.

The Advantages of Landed Living:

  • Bigger Living Space

In general, a landed property is more spacious, usually have a reasonable amount of yards around them. Making landed properties the better choice. Especially for people with a bigger family.

It provides the much-needed space and ground to grow a garden! Something that individuals with green thumbs would definitely appreciate.

  • Enjoy total freedom

Living in high-rise homes usually comes with a set of limitations such as strict rules against the keeping of pets, no shoes and plant outside, not allowed to display and placement of any item in common area, or else will be fined? Not to worry. Your house, your rules. You don’t need to deal with regulations and house rules, if you’re staying in landed property.

  • No limitation on exterior design

You can’t change the exterior facade or extend your space as per your wish in a high-rise building. Even with permitted renovation work, you will be subjected to the rules and regulation of the management. Exterior (such as wall & gate color) required to be consistent among all units. However, you have complete control in creating or renovate your landed dream home, be it interior or external design. 

For those that have a growing family and are looking for a long-term home, then landed property is the best way to go.

  • Privacy 

Unlike high rise living where you have more neighbours due to higher density. Landed living allowed you to keep comfortable distance with your neighbour. 

  • Convenience

High-rise properties have numerous floors, and because of this, elevators are installed for easier flow of movement. This usually leads to residents waiting for extended periods of time while the elevator goes down to their floor. In addition, it also takes some time to go to the parking area due to the distance. This takes more time and effort when transporting groceries or supplies home.

In contrast, if you’re staying landed house, you can park your car right Infront your doorstep, easy access to the car porch. And, you don’t need to take the elevator to pick up heavy groceries and parcel, especially when you’re in a hurry.

  • Zero maintenance fee 

With the added amenities in high-rise buildings, you will have to pay the maintenance fees regularly irrespective of what services you use.

In contrast, no maintenance fees, no sinking fund if you’re living in landed house. In other words, more disposable income which you can spend or invest in.

The Advantages of High Rise Living:

  • Facilities & Amenities

Planning for healthy activities, but don’t want to take risk which may stuck in traffic jam? Looking for car park at gym room or shopping mall could be frustrated too.

Condos and apartments usually feature a wide range of facilities. Hence, condo living could be hassle free, which you could enjoy facilities and amenities including gym room, swimming pool, futsal court, badminton court, movie rooms, playground, multifunction room and etc. just within the vicinity. In an affluent neighbourhood or city centre, it is also more affordable than living in a landed property.

Cheaper to buy-in. If you are a first-time homebuyer who’s looking for something more affordable and probably wants to enjoy all of the facilities, then high-raised condos are the ones to pick.

  • Socializing 

As you will be sharing all the amenities with your neighbours, it is a great way to meet people who are interested in the same things you are. Highrise development with ‘lifestyle convenience’ in mind to cater to community living.

  • Security

When it comes to ensuring peace of mind for you and your loved ones, high-rise developments are generally safer as they are equipped with multi-tiered security system that includes CCTV, secured access card, secured parking lots, perimeter patrol, and a guard entrance.

  • Great views

You also have a bird’s eye view of the city, skyline, greeneries, sunrise and sunset. The higher you go, the better the views. This is something that ground-dwellers will never experience.

  • Worry no more on maintenance

Do not having to monitor and carry out maintenance activities. The management office or Joint Management Body (JMB) will settle things out for you.

With great space comes great responsibility – you will be footing the bill for repairs, maintenance, and other upkeep. Moreover, if you have a large garden, consider lawn care and mowing fees too.

Purchasing A Home: Available Schemes

“If you are in the process of actually buying a house, dreams about this can be your subconscious processing these actions in your waking life.”

When purchasing a home, it is important to evaluate your household’s monthly income. This will assist you in determining whether or not you can afford the house you desire. 

Buying a house is a major step in the life of any individual, but for first time homebuyers it can feel like a 100% obstacle. The housing market can be confusing, especially if you are not sure where to start. But, with the right information, it is possible! 

You may get to start your journey of homeownership now. 

The first step is to determine your budget. Congratulations if you have saved enough money for a down payment. You are now prepared to begin looking at properties and applying for financing. If not, there are government programmes that may help you in getting a mortgage even if you do not have excellent credit or the required down payment.  Many banks in Malaysia offer special programs designed specifically with first-time buyers in mind-so don’t be afraid to ask! 

Second, make sure you know your credit score. You may go for a free credit score check. If you find some errors on your report, you can dispute them by contacting the company and let them know what is incorrect. 

Third, find out what kind of loans that are available to you and how much money you would need to qualify for each one. 

Fourth, be prepared with documentation. This includes proof of income (such as pay slips), bank statements, proof of residence (utility bill) and copies of any other documents related. 

If you have a monthly household income of RM3,000 to RM4,999, the Malaysian government has a housing scheme that allows you to buy your first property. The scheme also requires a high credit score, which means you must have a track record of making on-time payments.

Assuming that you meet the requirements, you can purchase your first home in Malaysia with a 10% down payment (RM30,000). The government will provide you with an interest-free loan for up to 15 years at 4% each year. 

The Malaysian Government has several housing schemes for low-income households. These include: 

MyHome Program Perumahan Rakyat by Bank Simpanan Nasional (BSN)

Rent-to-Own (RTO) Scheme 

Bank Negara Malaysia’s (BNM) RM1 Billion “Fund for Affordable Homes”

Youth Transit Housing (MyTransit) by KPKT

Home Ownership Campaign (HOC)

Four Main Guides & Tips On How To Buy Property In Malaysia

If you are looking for some property buying tips, then you have come to the right place.

Though this may not be your typical Malaysia property buying guide, there is no harm in understanding what you are getting yourself into before you buy a property, especially if it is your first time.

We understand that although it is a wonderful milestone to be able to buy your first property, it can also be quite scary as it is such a big and life-changing decision to make.

So, here are four factors to consider before buying property in Malaysia:

Tip 1: Reaffirm Your Decisions Before Choosing Any Property Development or Developer

If you are new to real estate and property, you may be wondering where to start and how to buy property in Malaysia.

However, before you dabble in real estate and begin searching for the best property to buy in Malaysia, you must first establish why it is that you want to buy property.

Is it because you want to invest in properties to gain some returns as a side or passive income?

Or are you looking to buy a property to call home?

Whatever your reasons are, know that there are other forms of investments as well as alternatives to buying a home such as renting, which might be a better option depending on your means.

Do bear in mind that buying a property in Malaysia does come with risks, just like any other form of investment.

So, make sure to think long and hard about buying a property to prevent yourself from making a decision that you might later regret because you did not weigh your options.

Tip 2: Do Not Buy Without Essential Guide or Investigation in Malaysia’s Property Market

If you are only interested in knowing how to buy property in Malaysia because everyone you know is doing it, then you might want to reconsider.

This is especially if you are not into Malaysia’s property market or have no interest in real estate.

This is because you will need to understand the market by doing thorough research and information gathering before you decide to buy a property.
This includes knowing the different types of properties available in the market and what they offer, how the location of the property plays a huge role as well as the incurring costs that you will need to bear when you purchase a property.

So, before knowing how to buy property, just be aware and be sure of what you are seeking in a property and whether it is something you can commit to.

Tip 3: To Buy The Best Property In Malaysia, Location Is Everything

In every property guide to buying the best property in Malaysia, location will always be one of the biggest factors to look out for.

This is especially crucial if you are buying property for you to call home and settle down in for the long term.

When you ask what is the best property to buy in Malaysia, there is no definite answer.

It is quite subjective as different people will have different preferences and needs such as living in a lively neighbourhood or a quiet residential area.

However, location plays a major role when choosing and buying a property, especially when you are considering the distance from your workplace, schools, hospitals and other essential amenities.

Besides that, the best property to buy in Malaysia is generally one that is accessible and is a considerably good distance from other neighbouring townships.

LBS Bina is known for building and designing high-quality property and housing for today’s thriving communities.

To learn more about our available property and housing projects, check out LBS Bina’s website now!

Tip 4: Maintaining a Strict Eye on Your Finances Is Vital in Property Buying

Before you decide on buying a property, take into account all of your personal expenses beforehand.

This includes your monthly and yearly subscriptions, bills, car loans and food allowances.

Then, consider the ongoing expenditures of a house purchase, the necessary renovation as well as furnishing costs once you buy a property.

Having your finances in order and being disciplined about it is definitely something to take seriously once you decide to commit to owning a house.

Tips to Purchase a House for First-Time Home Buyers in Malaysia

You are finally reaching another milestone in your life and now, you are ready to buy your first home!

Being a first-time home buyer is definitely an exciting experience but at the same time, buying your 1st house can also be a nerve-wracking journey, especially if you do not know where to start.

So, if you are a first-time home buyer in Malaysia, here are some tips that might be useful before you make that leap to buying your 1st home:

Decide on a Budget for Your 1st Home in Malaysia

One of the most crucial things you need to do as a first-time home buyer is to know and decide on the budget you are comfortable with for your 1st house.

You might also do your own research to find out which housing price range is the best match for your current income as you surely want to buy a house that you can afford.

Today, there are a few useful online tools such as a home loan and duty stamp calculator that can help you find out the loan amount you need to buy your 1st home.

Another thing that you need to take note of is that a downpayment of 10% of the property cost is necessary when buying a new house.

Compare the Costs of Properties Before Buying Your First Home

As a first-time home buyer, it is easy to get caught up in the whirlwind of excitement when you are finally buying your first house.

However, it is important to remember that it takes a lot of patience and to never act too hastily when you are house hunting.

In order to make smarter choices, it is best to browse the market and compare the pricing of houses available for sale first to find the best deal.

So, never settle for the first house that catches your eye and make a payment for it right away, which is the no.1 mistake of many first-time home buyers in Malaysia today.

Having negotiating skills can also be useful in this case as it might be able to help you get a better price and rebate incentives for your dream home.

Obtain Funding as a First-Time Home Buyer in Malaysia

Another important tip for a first-time home buyer in Malaysia is to first obtain the funding you need to buy your first house.

By securing your finance, you will then be able to find the type and price of a property that best fits your budget.

The bank will assist in evaluating your credit score to help determine whether you are a viable candidate to repay the loaned amount.

Apart from that, the bank will also look at your Debt Service Ratio (DSR) score to find out your eligibility for a housing loan.

So, the better your credit score, the higher your chances are of getting your loan approved by the bank.

First Home Scheme Program for First Home Buyers in Malaysia

You can also check out the first home scheme, which is a program for first-time homebuyers.

Malaysia’s first home scheme offers eligible applicants the chance to obtain loan financing up to 110% of the price of a property, which is something that all first-time home buyers should take advantage of.

Consider Your Options Before Buying Your First Home

Now that you understand that buying your first house as a first-time home buyer has its pressures, you might begin to weigh other alternatives.

However, once you have all the required details and know what it is exactly you are looking for in a first home, the home of your dreams is within your reach.

Though choosing your ideal 1st home is a subjective decision and varies from one individual to another, there will definitely be a house that is sure to meet all your needs as well as your budget.

Here at LBS, we are known for building not only affordable homes but also high-quality houses that are beautifully designed for today’s thriving communities.

To learn more about our housing projects, check out LBS Bina’s website now!

The Blind Spots (Or Hidden Costs) When Buying A Home In Malaysia

The Blind Spots (Or Hidden Costs) When Buying A Home In Malaysia

Is one of your new year resolutions for 2023 purchasing a house of your own? Pretty confident that you’ve done the math? We hate to be your party-pooper, but as much as we are proud of you making that leap in life, we believe that you need to be made aware of homeownership costs that may have fallen under your radar. So, we have listed down different hidden costs that we wish we knew when purchasing our first property:

1. Upfront costs & legal fees

By now, you should be made known that our banks can provide financial assistance of up to 90% of the property’s price for your first two residential properties. For those purchasing your first one, the Rumah IDAMAN should be in your list! With the 90% covered for, we will still need to set aside a 10% down payment to cover the remaining property’s price. For instance, the Rumah IDAMAN has a starting price of RM250,000, and so, the down payment in this case will be RM25,000.

The following are the items you need to find out the cost of and are dependent on your property price:

Sale & Purchase Agreement (SPA)

This consists of legal fees, stamp duty and legal disbursement fees.

Loan agreement

This comprises of legal fees, stamp duty and legal disbursement fees.

Transfer of ownership better known as memorandum of transfer (MOT)

Tax on legal agreements

These are expenditures that need to be paid there and then, so it is an absolute must to have the said sum at hand upon making the decision to purchase a home.

 

2. Home Insurance

To be fair, home insurance is a topic that deserves its very own article no thanks to the sheer amount of information that you need to get your hands on, so we will only be covering on this topic very briefly here.

Similar to having insurance for your health is equally important as getting a health insurance to protect yourself against unforeseeable events. Buying a home is also a form of investment and just like any other investments, you will want to have proper protection in place to cover your property.

Here are some common home insurance policies that you should know about;

Basic fire insurance: Loss or damage of the house and/or its contents due to fire, lightning, and/or explosion.

Houseowner insurance: Similar to Basic Fire Policy, with extended coverage such as floods, burst pipes, natural disasters, and theft for residential properties.

Householder insurance: Similar to Houseowner Policy, with extended coverage on fatal injuries caused by the insured items.

3. Utility charges

To ensure that your future home is ready-to-stay you will need certain basic utilities and services, such as:

  • Electricity – Tenaga Nasional Berhad (TNB)
  • Water
  • Indah Water – Sewerage
  • Internet connection

 

4. Maintenance fee and sinking funds

If the home that you are eyeing for holds a strata title, such as high-rise units where you share common public facilities like the swimming pool and the gym, you have to set aside some cash for monthly maintenance fees, which will be used for regular upkeeping of the shared facilities and services, including security and garbage disposal.

You will also need to set aside money for sinking funds. The fee is collected by your residential Joint Management Body (JMB) and will be used for expenses such as building repair works. We’ve covered this topic more extensively on our previous topic here. 

 

5. Makeover, Renovation, & Aftercare

Regardless the condition of the property you intend to purchase, you need to consider both the immediate costs for personalizing it to your liking and the maintenance of it.

Of course, with a larger property, comes a larger price tag for furnishings. So, perhaps, bigger may or may not be necessarily better, it all boils down to your needs.

Do allocate certain amount for renovation, but for LBS Bina homebuyers and homeowners, you are in luck, as LBS has officially launched the LBS Bina Home Makeover with Goodnitecampaign. In this campaign lucky LBS homeowners will win themselves a home makeover for a part of your home that you desire, from the Living to Bedroom area worth a total of RM25,000 each!

Should you be buying a subsale property that also includes furniture as part of the package, make sure you are okay with everything that comes with it, because should that particular piece of furniture happen to become an eyesore down the road, it will cost you some cash to hire someone to move it away later on.

All these lingos might be overwhelming, but what’s most important is not to be afraid from these expenditures but to be aware that they exist. Treat all of the above more as a checklist and tick it off every time you’ve gotten a proper understanding of each expenditure.

With every item checked off your list, your finances will definitely be more well-structured. A very important element of a dream home is to have a homeownership experience that is free from expenses that will take you off guard and we hope for those of you who’ve read till this point, you will achieve just that and we wish you the very best on your homeownership journey!

Property Maintenance Fee in Malaysia

Owners of strata property in Malaysia are required to pay a monthly property maintenance fee. These funds are utilised for the upkeep of common areas in the property. We will also find out why owners have to pay maintenance fees and how it is calculated.

When the term ‘strata’ was first introduced in Malaysia via the Strata Title Act 1985, strata property consisted of mostly high-rise residential and commercial units – including flats, apartments, condominiums, serviced apartments, Small Office Home Office (SOHO), Small Office Flexible Office (SOFO) and Small office Versatile Office (SOVO). The Act was later modified to include some landed properties where the development has shared facilities and amenities, such as gated and guarded communities.

In an effort to provide clearer and more stringent provisions on the management of stratified properties in Malaysia, the government implemented the Strata Management Act (SMA) 2013 in 2015. 

What is maintenance fee in Malaysia?

Facilities and common areas within a strata property such as a condominium block are jointly owned by all unit owners. Therefore, owners have to collectively pay a maintenance fee, also known as a service charge, to manage and maintain the property and its facilities.

In Malaysia, homeowners are required by law under SMA 2013 to pay these monthly fees. These fees are collected and managed by the Joint Management Body or JMB before the issuance of strata titles and by the Management Corporation or MC after strata titles have been issued.

What do maintenance fees cover?

The maintenance fee is mainly used to cover recurring costs of managing and maintaining the property including:

  • The hiring of security guards
  • Property management and administration staff
  • Electricity and water for common areas such as lifts, car parks, swimming pools and gyms
  • Cleaning services
  • Landscaping services
  • Servicing of lifts and escalators
  • Minor repair works on common property

Imagine a high-rise condominium with many units – if the owners do not pay their condo maintenance fees on time, how would these bills get paid and who will manage and guard their property?

Besides maintenance fees, owners also need to pay a monthly sinking fund. Calculated at 10% of the maintenance fees, these monies will be put into a reserve fund for emergencies such as damage caused by flood and major works such as painting the building exterior.

How are condo maintenance fees calculated?

The main factor that determines a property’s maintenance fees is the total expenditure for running and maintaining the property. Prior to the SMA 2013, contributions to the sinking fund and monthly maintenance service charges payable by strata owners were calculated based on the built-up size or per square feet (PSF). SMA now calls for share unit to be used instead as a basis for calculating these two charges – rather than simply the floor size of the unit owned.

The formula for calculating Maintenance fee to be paid: Operating expenditure ÷ Total share units in condo development 

So what is a share unit? Under SMA 2013, a property developer is required to file a Schedule of Parcels with the Commissioner of Building (COB) before selling any parcel in a development.

Schedule of Parcels is essentially a ‘floor plan’ that shows the overview and floor measurements of the parcels in a development. In the case of a phased development, the schedule must showcase the proposed allocation of the provisional share units among the new parcels in the provisional block. It will include all the parcels with dimensions, areas, share units, all accessory parcels and common properties.

Share units are the numbers assigned to each parcel by the developer’s licensed land surveyor that will determine maintenance charges, sinking fund and voting rights of each owner. Share units are calculated based on area, usage, size and location of the accessory parcel using the formula prescribed under the relevant strata title rules of each state.

In the calculation of share units, a different weightage is assigned based on the facilities that are enjoyed by the parcel. For example, a parcel with walk-up stairs will have a different weightage than a parcel with air-conditioned lifts.

What is the range of typical property maintenance fees in Malaysia?

The expenditure for managing and maintaining a property varies depending on the following factors:

  • Level of services: Owners, JMB and MC of a building need to decide on an “acceptable” level of service. For example, the number of guards on each shift or the number of times the corridors is swept.
  • Type of facilities: The more sophisticated the facilities, the higher the maintenance fees
  • Size and type of common area: A swimming pool with elaborate landscaping will cost more to maintain than a small park with a walking path
  • The density of the development: The cost is divided among units so owners in a high-density property will end up paying less. For example, Condo A has 100 units and Condo B has 50 units with similar facilities and built on similar land sizes. Both condos will have similar expenditures. However, owners of Condo A will end up paying less because the cost is shared between 100 owners while Condo B shares the cost between only 50 owners.

According to Henry Butcher Malaysia Managing Director Low Hon Keong, the rate of maintenance fees mostly depends on the type of facilities and the density of the development.

The average rate of maintenance fees in the Klang Valley is between 25 to 50 cents per square foot. Properties in prime areas like KLCC or Bukit Bintang incur higher fees because of its location.

“Most of the properties in these areas are high-end projects with sophisticated features like high-speed or personal lifts, advanced security and nice landscaping. These advanced facilities cost more to maintain., hence why the maintenance fees are higher. They could be paying an average of 50 cents per square foot,” said Low.

He said that maintenance fees were not necessarily lower in smaller cities or towns.

A property in Melaka might in fact have a higher maintenance fee than a similar unit in Kuala Lumpur because there are fewer units in total, so the cost is shared between fewer owners.

Security accounts for a big portion of incurred costs in managing high-rise residential buildings while in landed strata properties, the cost of landscaping is quite significant. Unlike regular landed properties, the local council is only responsible for waste collection in landed strata properties – cleaning, landscaping and maintenance of common areas are taken care of by the property management of strata schemes.

The average maintenance fees of landed strata property in Malaysia are:

  • RM1,000 to RM1,500 for bungalows
  • RM600 to RM1,000 for semi-detached houses
  • Below RM500 for terrace houses

Can you negotiate your maintenance fees?

Technically, you can’t negotiate the maintenance fees. The management fees are decided by the JMB or MC during their Annual General Meetings (AGM). The only way for the rates to change is to raise this issue during an AGM and get the majority of owners to agree and vote for it. Therefore, it is important for homeowners to attend their AGMs so that they won’t be surprised by any changes in rates.

However, if you find that the services provided are not reflective of the maintenance fees charged, you can question the management. Unit owners have the right to view the statement of accounts and can make a request to the JMB to do so for a fee not exceeding RM50. To find out if the people elected to represent owners in your strata property are responsible, read Is your strata property being managed by the right JMB or MC?

Who pays the maintenance fees for rental properties?

By law, it is the landlord (homeowner) who pays the maintenance fees. Any special arrangement for payment of maintenance fees, where the tenant pays it on behalf of the landlord as part of the rental fees, needs to be reflected in the tenancy agreement. If the landlord fails to pay the maintenance fees, the tenant can take legal action or decide to terminate the rental agreement.

Strata residents must be aware of their responsibilities and obligations as well as strive to take charge in order to protect the very investment that they live in. Find out what happens when you don’t pay your outstanding condominium fees.

Housing loan checklist: Non-standard documents you need to know

Applying for a housing loan is a lengthier process for a self-employed or freelancer in Malaysia. However, it doesn’t necessarily mean it’s difficult, especially when you have all the non-standard documents ready!

When it comes to personal finance, most freelancers in Malaysia might begrudge their civil servant friends and families. We all know how easy it is for them to get a loan. For those of us without regular employment, filling our taxes, getting insurance, and applying for a home loan is a much lengthier process. However, being a lengthier process doesn’t necessarily mean it’s difficult. If you are well-prepared and have all the non-standard documents ready, you are well on your way to owning your first home.

Can I Get A Home Loan Without Property Documents

It is impossible to get a housing loan without proof of income as your income stability and repayment capability isn’t guaranteed. If you are a civil servant, regular-employed, or salaried person, preparing the documents required for a home loan application is fairly easy. However, someone who is self-employed may not have the same basic documents.

Here are a few examples of jobs that fall under the self-employed category:

  • Hawkers, daily wage workers, online traders
  • Gig economy workers (Grab, Foodpanda, Lalamove)
  • Personal tutors
  • Event organisers
  • Freelancers (photographers, designers, writers, fitness trainers, etc.)
  • Authors
  • Musicians
  • Small entrepreneurs

When you fall under the category above, you can still get a home loan. However, the self-employed documents for a home loan are slightly different.

What documents are required for home loan approval

Below are the standard documents a person needs to submit to ensure a smooth housing loan application process:

  • Payslips
    One of the most important documents in proving a person’s home loan.
  • Employees’ Provident Fund (EPF) statements
    A great way to prove the level and stability of your income.
  • Bank statements
    Proof that you are indeed being paid your salary.
  • Copy of MyKad
    Required for almost any housing loan application as a Malaysian citizen.

As you might see, a self-employed person might have problems providing the first two documents on the list above. This is why a housing loan for the self-employed in Malaysia requires some non-standard documents for approval.

Housing Loan Documents Checklist Malaysia: 7 Non-Standard Documents Required For Home Loan Application

Unlike salaried people, self-employed do not have a regular payslip. Banks will review your financial stability before approving your housing loan application. As a self-employed person, banks may perceive your income as ‘unpredictable’ when it to comes to committing to the monthly repayments. However, here are 7 non-standard documents you can provide to prove your income and financial health:

1. Business registration

This is an important document to have, even if your business is small or you are a one-person freelancer. Having a registered business boosts your client’s confidence in dealing with you, and it appears more professional too. Furthermore, the date of registration will be considered very important to the bank. It will justify the sustainability of the business.

2. Business profile

This is important so that banks can identify the nature of your business. Even a simple website or official Facebook, Instagram, or LinkedIn page will be sufficient.

3. Financial records of past years’ income, tax return statement, balance sheet

You have a higher chance of getting your housing loan application approved if you can provide an organised financial record of previous years’ income, tax return, profit and loss statement, and balance sheet.

Here’s a simple checklist of what you can do:

  • Make sure that your business is registered with the Companies Commission Of Malaysia/ Suruhanjaya Syarikat Malaysia (SSM)
  • Keep all statements, documents, and licenses related to your business
  • Label all folders according to the latest dates or assessment year. This will make it easier for you to provide your proof of income when asked by the bank.
4. Income tax statements

A lot of the self-employed or freelancers in Malaysia may not declare their earnings to the Inland Revenue Board of Malaysia (IRBM) or LHDN. However, having the last three years of your income tax statements on record goes a long way in helping you get your home loan approved.

If you are required to pay income tax, it normally means your annual earning exceeds RM34,000 (after EPF deduction) or you earn income from a business (through gains or business profits). This is the sort of income stability that banks prefer to see.

5. Bank statements

For regular-employed applicants, bank statements serve as proof that they are indeed being paid their salary. For those who are self-employed or are freelancers in Malaysia, bank statements show that actual business income and profit are generated.

6. Savings

From the banks’ perspective, savings are the best way to justify and show your steady stream of income, which leads to your accumulated savings. If you aren’t able to show your savings record, it’ll be hard to justify the stability of your business.

7. Credit score report

Banks or financial institutions in Malaysia have their method of evaluating your credit score. As credit score indicates a consumer’s credit risk, banks will refer to two popular credit reports, CCRIS and CTOS to assist their evaluation. A good credit score will make you a more attractive candidate for a loan. With a good credit score, you can even get better home loan interest rates and even quicker loan approval.

Other Tricks That Can Help You Get A Home Loan 

The following can also help you get housing loan approval:

1. Get a guarantor

A credible guarantor must be someone who has a strong financial background. It can be anyone; your family members, relatives, and even close friends. This person will be evaluated based on his or her income stability, employment background, as well as a credit score to minimise your risks and liabilities as a self-employed person.

2. Apply for a home loan with banks that lend to self-employed borrowers

Banks are very ‘picky’ when approving an application. Before applying for a housing loan, take your time to research banks that approve loans for self-employed individuals and find out the interest rate on house loans for each bank. Here are some of the banks that offer home financing for self-employed applicants:

  • CIMB Property Financing
  • Bank Rakyat Home Financing-I
  • HSBC Ideal Home Plan
3. Housing Credit Guarantee Scheme (HCGC)

During the tabling of Budget 2022, the Government has allocated RM2 billion under the Housing Credit Guarantee Scheme (HCGC). This was to help those without proof of fixed income. The Government is cognisant of the challenges facing gig workers, small business owners, and farmers in getting a housing loan.

In reality, many of these individuals have the capacity of repaying their loans but without documents proving of fixed income, the process of applying for a home loan is difficult. This initiative will not only benefit potential house buyers but also accelerate the growth of the local property market. So far, BSN MyHome (Program Perumahan Rakyat) 2021 is one of the housing schemes.

Housing loan: How to apply as a first-time homebuyer in Malaysia

Looking to apply for a home loan in Malaysia? Here we’ve prepared a comprehensive and step-by-step guide on applying for housing loan in Malaysia. From understanding property and finance jargon, house loan calculator to learning about interest rate and credit score, we’ve compiled it all for you. 

Dreaming of a place you can call your own? Surely you’ve compiled Pinterest boards on how your future home will look like, the colour of its walls, and the choices of interior design? But before all that, how do you even secure a mortgage for your dream home?

Let’s face it, dreams don’t come cheap. Unless you’re a millionaire or have a trust fund, chances are you’re going to need a home loan. Applying for your first one may seem daunting, but don’t worry. We’re here to guide you with a comprehensive guide on how to apply for housing loan in Malaysia and turn your dreams into reality.

This guide will be categorised into four parts: Before ApplyingActually Applying for itAfter Applying, and some extras tips to help you secure your loan.

A. What to do before applying for a home loan?

First things first, if you’ve already found your dream home, you’ll want to know the maximum amount you can borrow based on your income and existing debts. If you haven’t chosen a place yet, it’s a good idea to first figure out a mortgage range with monthly repayments you can afford.

Our  house loan calculator will be able to do these for you.

How much you can borrow is basically known as the Loan-to-Value (LTV) ratio or the margin of finance. In Malaysia, it’s quite common to get around a 90% LTV for residential mortgage or home loans. There’s even a “Malaysia My First Home Scheme” (Malaysia Rumah Pertamaku) that gives qualifying first-time homebuyers a 100% LTV, meaning they can get a full loan.

Keep in mind that your LTV is affected by several criteria, like whether you are buying for investment, if you have more than one existing house loan, and so on. Aside from financing the property, it’s good to keep in mind that banks also sometimes allow up to 5% of additional margin of finance on the loan to finance things like valuation costs by the borrower, i.e. you.

What is a mortgage?

The mortgage you take from a bank is the total amount you’ve received to finance your home (also known as the principal amount) plus the total interest payable. Each month, part of your monthly payment will go towards paying off the principal, while the other goes towards interest on the loan. Interest is what the bank charges for lending you money.

What are the different types of housing loans in Malaysia?

That’s right, there are multiple types of property loans. Each home financing package or plan is different and has different benefits. You’ll want to pick one that best fits your unique financial needs.

1. Basic Term Loan:

A simple and basic that isn’t as flexible as other loans. This basically means you won’t be able to reduce the loan period, thus the loan interest, by making advance payments.

2. Semi-Flexi Loan:

As its name suggests, this loan is more flexible if you want to save money in the long run. If, for example, you came into some extra cash and wanted to pay more in a certain month (thus reducing your loan period and your loan interest).

3. Full-Flexi Loan:

Similar in nature to Semi-Flexi Loans, but with the added benefit of being able to withdraw any advance payments at any time with no extra charges. This flexibility is known as an overdraft facility which is definitely worth looking into as it has its pros and cons.

4. Islamic Home Loan:

Looking for Shariah-compliant financing? There are a few types, but unlike the above three conventional loans, an Islamic home loan works on the basis of interest-free transactions, following the Murabahah concept under Shariah Principles.

5. Fixed Rate Loan:

As its name suggests, this one has a fixed interest rate throughout the whole loan tenure. If you’re worried about floating rates, then this is a good option for you.

Get more details on all these types of home loans here.

What is the housing loan interest rate in Malaysia?

Most loans have variable interest rates and the interest rate is tied to the Base Rate (BR) of banks. The lower the interest rate, the better it is for you. Some packages offer fixed interest rates that don’t depend on the BR (see Fixed Rate Loan above).

Base Rates or BR is basically an internally-derived interest rate that the bank refers to before deciding on the interest rate to apply to your home loan amount. It’s conceived based on how much it will cost the bank to lend you the money.

With Islamic Loans, instead of interest rates (Riba), there are profit rates. The bank buys something on the borrower’s behalf and sells it back to the borrower at a profit. The idea behind this is financial justice, with the aim of creating a balance for the net a profit or loss between the lender and the beneficiary.

Read more: What to know about Base Rate (BR), Base Lending Rate (BLR) & Spread Rate when selecting a home loan?

  • A copy of the purchaser’s identity card
  • A copy of the title
  • A copy of the SPA
  • The latest assessment receipt
  • The quit rent receipt
  • The assessment receipt
  • Other relevant documents
What is Overnight Polic Rate (OPR) and how does it affect your property loan?

What’s an OPR? The Overnight Policy Rate is the rate a borrower bank has to pay to a lending bank for the funds borrowed. This can affect the BR. 

Bank Negara Malaysia (BNM) cut the OPR in January 2020 from 3% to 2.75%, and more recently to 1.75% due to COVID-19 outbreak. This is good news for borrowers because the lower cost of borrowing for banks lead to cheaper home loans for consumers. In short, borrowers will benefit from either lower monthly instalment payments or shorter loan tenure. 

So what are the new lending rates in 2020? Major banks like Maybank, Public Bank Bhd, RHB Bank Bhd, CIMB Bank Bhd and OCBC Bank has reduced their BLR and BR by 50 basis point in May 2020.

If you want to find out more about how OPR affect your home loan, click on this to read more.

*Update: As of 6 July 2022, Bank Negara Malaysia (BNM) had increased the Overnight Policy Rate (OPR) by 25 basis points to 2.25 per cent from 2.00 per cent (11 May 2022).

What is a credit score and how to check it?

You’ve probably heard of this term, but what exactly is it? To put it simply, a credit score is what banks use to appraise the credibility of your loan application, including home loans and credit cards. The higher your score, the better your chance of getting a loan. But how do you calculate credit score? Unfortunately, there’s no fixed formula to this as different credit agencies have their own ways to assess every individual’s credit score. However, there are a few factors that these credit companies look into:

  • payment history
  • credit mix and loan amounts owed
  • length of credit history
  • new credit applications in the past 12 months
  • legal track record

In order for your credit to be scored, you need to build a credit history — a record of your debt payment. When applying for loans, banks want to be able to see that you are responsible when it comes to paying back your debt and one easy way of building a credit history is by having a credit card. Your credit history will then be compiled into a credit report and these reports will define your financial health, which helps banks to decide if you’re good at managing your finances and if they should approve or reject your loan application. 

In Malaysia, most financial institutions will refer to both the Bank Negara’s Central Credit Reference Information System (CCRIS) and the CTOS Data Systems Sdn Bhd (CTOS). Central Credit Reference Information System (CCRIS) under Bank Negara records your personal credit rating based on your credit history, that is, your outstanding loan/financing amounts in the past 12 months. This means making sure all your loan repayments (personal loans, car loans, credit card payments, etc.) are always on time, up to date, and within the right amounts. And then there’s CTOS, a privately-owned agency that archives a person’s or company’s entire credit history (unlike CCRIS which reports your credit score over a 12-month duration). Check in on your CTOS credit score every once in a while as it has the added benefit of alerting you in case of fraud or any errors in payment.

WANT TO LEARN MORE ABOUT CREDIT SCORE? 
🧐 Low credit score? Here’s how you can fix it 
✅ Learn what a CTOS is and how it affects your home loan

How much can I borrow for a home loan in Malaysia?

If you’re wondering how you’re supposed to know this, we’ve got you covered. Simply calculate your Debt Service Ratio (DSR). DSR basically shows you your repayment capability based on your income and is a key factor that banks use to determine your borrowing power. Your DSR is calculated like this:

Total monthly commitment ÷ Net monthly income × 100 = DSR

For example, if your total monthly commitments (loan/financing and credit card debts) is RM2,300 and your nett income after deducting from EPF, SOCSO, and taxes is RM3,500, your DSR is RM2300 ÷ RM3500 = 0.657 or 65.7%.

Different banks have different thresholds for DSR. Generally, if you go over a certain percentage like 70%, this means you have too many commitments and the income criteria for the bank to give you a loan cannot be met because they believe you won’t be able to keep up with all your monthly repayments.

B. What happens during the loan application process?

You’ve got the basics down and ensured that you have a good credit history. You also roughly know how much you’re eligible to borrow. Now all that’s left is to choose a bank. 

Which bank is best for housing loan in Malaysia?

While it would be great if you could walk into any bank and get exactly what you needed on the spot, it’s just not possible. When it comes to banks, it’s not a “one size fits all” situation.

The bank you choose is dependent on the type of loan you feel is best for you. And “the best” is subjective; look at the different rates, packages, terms and conditions. This is a long-term commitment, so you’ll want to look into who gives you the best service.

One advice we can give is don’t be afraid to shop around. Research the different loan packages. Make appointments and speak with different mortgage bankers or loan officers. Find one you’re comfortable with and one who is experienced and takes the time to understand your unique financial needs.

Then, together, you can confirm the type of loan you want and submit your documents as part of your application.

What are the documents required when applying for housing loan?

The last thing you want is to walk into the bank empty-handed. When applying for a property loan, there are a few documents that you need to prepare prior to your meeting:

  • The property booking form
  • Identification documents (copy of your IC/Passport)
  • Salary slips (up to 6 months)
  • Bank and EPF statements
  • Income tax receipt/tax form

Read more about these steps here and here where we detail the main scenarios that often lead to a loan rejection.

C. What happens after you have submitted a loan application?

Now what? Easy. If your loan has been approved, celebrate! But not too much and not too expensive, because you’re now in debt. But you’ve secured your property and that’s definitely a cause for celebration.

What if my home loan was rejected?

There, there. It’s not the end of the world. Oftentimes, it’s not you — it’s the bank. Perhaps your DSR was higher than that specific bank’s maximum allowable DSR. It could also be that something went wrong with your documentation. 

Nevertheless, not getting that bank loan approval can set you back approximately three to six months from applying for another. If you’ve calculated your DSR (see above) and gotten a low enough value, you should be fine. However, different banks have different thresholds so that calculation is just an estimate.

But not to worry — we’ve got four handy tips to help you out with your next application. 

If you want to go in with an increased chance of a home loan approval and without doubts or worry, check out our home loan eligibility calculator to increase your chances of getting your mortgage approved. 

In the meantime, check your home loan eligibility using LoanCare and find out if you be able to secure a mortgage from up to 17 banks across Malaysia.

Should I pay off my home loan early?  

We’re loving the proactiveness here. It’s great that you’re thinking of this. Having less monthly instalments is a compelling goal, but sometimes, it’s not the best financial decision. An example is if your bank imposes penalties for settling your mortgage before your lock-in-period expires. Another reason would be if you’re covered under a mortgage insurance and want to retain this financial buffer.

So, when is it a good idea? When you’ve done the math and you’re sure that you’ll be saving on your loan interest payments. An early settlement a few years before your loan tenure of 35 years could result in thousands saved!

How do I pay off my home loan early?

We’re glad you asked. There are a few ways you can do so:

  • Refinancing to a shorter-term loan.
  • Make a few small, additional payments throughout the year.
  • Make a large capital repayment.

Each way has its pros and cons. Get more advice on each one, as well as further explanation on whether you should pay off your home loan early here.

D. How to improve your chance of getting a mortgage

Before we send you off on your merry way to start your home loan application, here are a few handpicked tips that we feel could be quite helpful depending on your predicament or needs.

How do I pay off my home loan early?

Thinking of getting a home with a significant other? An attractive prospect! This means you’d be able to get a larger loan (equating to a dream home on the higher, grander end). You can do this with two or more people and all the joint loaners will need to be between the ages of 18 and 60 while applying.

However, there are some stumbling blocks and pitfalls awaiting this path. Read through our list of four things to consider before applying for a joint loan – there are even tips on how to bolster one’s borrowing profile if your spouse, friend, or relative is self-employed.

Can a foreigner apply for a housing loan in Malaysia?

Malaysia is a melting pot of people from all over the world! It’s no surprise that we have expatriates looking to buy property here, whether to retire or embark on a new journey. Foreigners can legally buy property in Malaysia, but there are some criteria regarding the types of property you can buy. This is just the country’s way of ensuring expat buyers don’t buy up the cheaper real estate meant for locals. Each state sets a minimum price; for example in Kuala Lumpur, the minimum price threshold is RM1 million. Overhang properties (properties in the market where supply outstrips demand, usually new projects like luxury condos) are set at RM600,000.

Now, how easy it is to get a loan in Malaysia will largely depend on your personal situation. Many foreigners are here as part of the Malaysia My Second Home (MM2H) programme*. If you have this, there shouldn’t be any problems with applying for the various loans mentioned in this guide as the programme is well established and government-backed.

If you’re not under the MM2H programme, then your ability to get a loan from a Malaysian institution will depend on what type of property you want, your current financial situation, as well as how much of a deposit you are able to give. A good real estate agent will be able to help you out as well as Mortgage Officers in banks.

*Do note though that the MM2H programme has been temporarily suspended to allow the Ministry of Tourism, Arts and Culture (MOTAC) and related agencies to “comprehensively review and re-evaluate the MM2H program since its inception in 2002. The suspension is in line with the Government’s decision not to allow foreigners to enter Malaysia following the outbreak of COVID-19” – but we hope to welcome you soon. 

How does Covid-19 affect home loans?

With the economic impact of the pandemic and the various movement control orders (MCO), Bank Negara Malaysia (BNM) has made quite a few changes. From moratoriums on home financing repayments to reductions in base rates (BR) and new lending rates by Malaysian banks, read all about it here.

Seeing how Malaysia banks have started tightening their lending policy, it might be a bit more difficult to secure a housing loan in the future. Don’t worry though, if you have a strong credit rating, your chances of getting one is still high.

To make things easier for you during this unprecedented time, consider getting an experienced banker when submitting loans. He or she will be able to give you the best advice and increase your chances for loan approval.  

Our parting advice is, if you’re at a loss or if you need more guidance – fret not. A good real estate agent will be a reliable source of help. Most times, these are professionals who understand that not everyone speaks that property lingo. Remember, there are no dumb questions, so ask away. In the meantime, build up your credit score, learn about the different types of property loan, research on the current housing loan interest rate and check your home loan eligibility using house loan calculator to increase your chances of securing a loan.

DID YOU KNOW…

💸 Aside from home loan, you can utilise EPF withdrawal money to purchase a house
💳 There are a few important rules you have to follow to get your home loan approved
👍  What is home loan refinancing? Here’s our comprehensive guide